5. REINSURANCE

In the ordinary course of business, the Company assumes and cedes premiums and selected insured risks with other insurance companies, known as reinsurance. A large portion of the reinsurance is put into effect under contracts known as treaties and, in some instances, by negotiation on each individual risk (known as facultative reinsurance). In addition, there are several types of treaties including quota share, excess of loss and catastrophe reinsurance contracts that protect against losses over stipulated amounts arising from any one occurrence or event. The arrangements allow the Company to pursue greater diversification of business and serve to limit the maximum net loss to a single event, such as a catastrophe. Through the quantification of exposed policy limits in each region and the extensive use of computer-assisted modeling techniques, management monitors the concentration of risks exposed to catastrophic events.

Through the purchase of reinsurance, the Company also generally limits its net loss on any individual risk to a maximum of $1,000,000 for casualty business, $500,000 for property, and $500,000 for workers’ compensation, although certain treaties contain an annual aggregate deductible before reinsurance applies.

Premiums, written and earned, along with losses and settlement expenses incurred for the periods presented is summarized as follows:



	Three-Month Periods Ended September 30,
	2019		2018
WRITTEN
Direct	$	16,305,222	$	16,170,176
Reinsurance assumed		70,200		16,199
Reinsurance ceded		(2,410,170)		(2,988,813)
Net	$	13,965,252	$	13,197,562
EARNED
Direct	$	16,007,232	$	15,088,986
Reinsurance assumed		64,863		17,500
Reinsurance ceded		(2,392,349)		(2,968,796)
Net	$	13,679,746	$	12,137,690
LOSS AND SETTLEMENT EXPENSES INCURRED
Direct	$	13,034,216	$	10,513,847
Reinsurance assumed		36,297		36,653
Reinsurance ceded		(3,461,166)		(1,938,927)
Net	$	9,609,347	$	8,611,573



	Nine-Month Periods Ended September 30,
	2019		2018
WRITTEN
Direct	$	48,349,466	$	46,582,507
Reinsurance assumed		178,446		108,686
Reinsurance ceded		(7,730,458)		(8,379,524)
Net	$	40,797,454	$	38,311,669
EARNED
Direct	$	46,710,351	$	42,751,784
Reinsurance assumed		174,583		116,663
Reinsurance ceded		(7,665,052)		(7,948,742)
Net	$	39,219,882	$	34,919,705
LOSSES AND SETTLEMENT EXPENSES INCURRED
Direct	$	37,778,378	$	29,111,003
Reinsurance assumed		119,498		71,410
Reinsurance ceded		(9,780,507)		(4,784,404)
Net	$	28,117,369	$	24,398,009