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 March 31,
	2020		2019
WRITTEN
Direct	$	14,794,534	$	15,258,703
Reinsurance assumed		37,534		45,135
Reinsurance ceded		(2,377,544)		(2,835,043)
Net	$	12,454,524	$	12,468,795
EARNED
Direct	$	15,362,814	$	15,237,955
Reinsurance assumed		44,950		55,376
Reinsurance ceded		(2,393,775)		(2,847,417)
Net	$	13,013,989	$	12,445,914
LOSS AND SETTLEMENT EXPENSES INCURRED
Direct	$	8,761,679	$	14,716,353
Reinsurance assumed		26,518		46,306
Reinsurance ceded		(946,115)		(5,155,369)
Net	$	7,842,082	$	9,607,290