Reinsurance

12 Months Ended

Dec. 31, 2021

In the ordinary course of business, the Company cedes losses and LAE to other reinsurance companies. These arrangements reduce the net loss potential arising from large or catastrophic risks. Certain of these arrangements consist of excess of loss and catastrophe contracts, which protect against losses exceeding stipulated amounts. The ceding of risk through reinsurance does not relieve the Company from its obligations to policyholders. The Company remains liable with respect to losses and LAE ceded in the event that any reinsurer does not meet obligations assumed under the reinsurance agreements. The Company does not have any significant unsecured aggregate recoverable for losses, paid and unpaid including IBNR, loss adjustment expenses, and unearned premium with any individual reinsurer.

Through June 30, 2021, the Company had proportional reinsurance contracts which cover all of the Company's products and geographies, and transferred, or “ceded,” 75% of the premium to reinsurers ("Proportional Reinsurance Contracts"). In exchange, these reinsurers pay a ceding commission of 25% for every dollar ceded, in addition to funding all of the corresponding claims, or 75% of all claims. The Company opted to manage the remaining 25% of the business with alternative forms of reinsurance through non-proportional reinsurance contracts ("Non-Proportional Reinsurance Contracts").

A portion of the Company’s proportional reinsurance program expired on June 30, 2021. The Company renewed the majority of the expiring reinsurance contracts at terms that are very similar to the prior agreements. As the business continues to grow and diversify, and with stability in our insurance results, the Company decreased the overall share of proportional reinsurance from 75% of premium to 70%. In addition, the Company purchased a new reinsurance program to protect against catastrophe risk in the U.S that exceed $60 million in losses. Other non-proportional reinsurance contracts were renewed with terms similar to the expiring contracts.

The Company also had a multi-year Aggregate Excess of Loss Reinsurance Contract which expired on June 30, 2020, which covered against both catastrophe and non-catastrophe events, and provided excess of loss reinsurance on a per cohort basis excess of a cohort’s 50% Loss Ratio subject to an aggregate (i.e., a portfolio level) deductible of 10% of earned premium. A cohort as it relates to this reinsurance contract is a notional grouping of policyholders on the books of the Company. After a policy is bound, the new policyholder is asked to designate to which non-profit group he/she would prefer any charitable donation that the Company may make be contributed. All policyholders identifying the same non-profit group constitute one cohort.

Reinsurance recoverable

Amounts recoverable from reinsurers are recognized in a manner consistent with the claims liabilities associated with the reinsurance placement and presented on the balance sheet as reinsurance recoverable. Such balance as of December 31, 2021 and 2020 are presented in the table below ($ in millions).


	December 31,
	2021		2020
Reinsurance recoverable on paid losses	$	17.1	$	12.7
Ceded unpaid loss and LAE	72.7		36.3
Total reinsurance recoverable	$	89.8	$	49.0

To reduce credit exposure to reinsurance recoverable balances, the Company obtains letters of credit from certain reinsurers that are not authorized as reinsurers under U.S. state insurance regulations. In addition, under the terms of its reinsurance contracts, the Company may retain funds due to reinsurers as security for those recoverable balances. The Company has the following unsecured reinsurance recoverable balances from reinsurers at December 31, 2021 and 2020 with all but one having an A.M. Best rating of A (Excellent) or better ($ in millions):


AM Best Rating		December 31,
	Reinsurer	2021		2020
A+	Hannover Rueck SE	$	60.2	$	22.2
A	MAPFRE Re, Compania De Reaseguros S.A.	14.4		6.8
A+	Swiss Reinsurance America Corporation	12.4		5.8
NR	Lloyd’s Underwriter Syndicate no. 1084 CSL	4.4		3.0
A+	Arch Reinsurance Limited	2.4		2.7
A	Lloyd's Underwriter Syndicate no. 0033 HIS	0.8		1.6
NR	Lloyd's Underwriter Syndicate no. 2001 AML	0.7		1.2
A+	Munich Reinsurance America Inc	0.6		1.6
A	Lloyd's Underwriter Syndicate no. 2357 NCL	0.6		1.6
A	Hiscox Insurance Company (Bermuda) Ltd	0.5		1.2
A++	Tokio Marine & Nichido Fire Insurance Company Limited	—		3.9
		$	97.0	$	51.6
	Other reinsurers	3.3		5.1
		$	100.3	$	56.7

Premium written, earned and losses and LAE incurred

The impact of reinsurance treaties on the Company's consolidated financial statements is as follows ($ in millions):


	December 31,
	2021		2020		2019
Premium written:
Direct	$	375.7	$	214.4	$	115.8
Ceded	(273.4)		(171.7)		(11.2)
Net premium written	$	102.3	$	42.7	$	104.6

Premium earned:
Direct	$	292.0	$	158.7	$	75.5
Ceded	(215.0)		(81.4)		(11.7)
Net premium earned	$	77.0	$	77.3	$	63.8

Loss and LAE incurred:
Direct	$	264.1	$	113.4	$	59.7
Ceded	(192.2)		(58.7)		(13.9)
Net loss and LAE incurred	$	71.9	$	54.7	$	45.8