Reinsurance

3 Months Ended

Mar. 31, 2023

Reinsurance

Reinsurance

10. Reinsurance

2023 Program:

The Company’s third-party quota share reinsurance program is split into three separate placements to maximize coverage and cost efficiency. The 2023 Coastal Program covers the Company’s business in certain Texas coastal regions and the Houston metropolitan area and is placed at 42.05% of subject property and casualty losses (“P&C losses”), as well as all business in South Carolina which is placed at 7.3% of P&C losses. The 2023 Core Program, which covers the portion of the Company’s business not in the Coastal Program, is placed at 49.5% of P&C losses of the Company’s remaining business in Texas and 48.0% of P&C losses of the Company’s business in other states. In addition, the Combined Program covers all the Company’s business and is placed at 5% of P&C losses. All programs are effective for

the period January 1, 2023 through December 31, 2023 or March 31, 2024, and are subject to certain limits and exclusions, which vary by participating reinsurer.

Property catastrophe excess of loss treaties which were in effect through March 31, 2023, developed over five layers and limited the Company’s net retention to $4 million per occurrence and provided coverage up to a net loss of $440 million. The Company also places reinstatement premium protection to cover any reinstatement premiums due on the first three layers.

The effects of reinsurance on premiums written and earned for the three months ended March 31, 2023, and 2022 were as follows:

	Three Months Ended March 31,
	2023				2022
	Written		Earned		Written		Earned
Direct premiums	$	96,873	$	114,824	$	87,123	$	84,318
Ceded premiums		2,266		(74,674)		(60,636)		(71,727)
Net premiums	$	99,139	$	40,150	$	26,487	$	12,591

The Company’s 2023 third-party quota share program was placed at a reduced ceding percentage as compared to the 2022 program, which resulted in a portfolio transfer and less ceded written premiums in the three months ended March 31, 2023.

The effects of reinsurance on incurred losses and loss adjustment expense (“LAE”) for the three months ended March 31, 2023, and 2022 were as follows:

	Three Months Ended March 31,
	2023		2022
Direct losses and LAE	$	90,015	$	68,221
Ceded losses and LAE		(47,156)		(54,946)
Net losses and LAE	$	42,859	$	13,275

The detail of reinsurance balances due is as follows:

	March 31, 2023		December 31, 2022
Ceded unearned premium	$	169,360	$	203,157
Losses and LAE reserve		74,043		76,999
Reinsurance recoverable		49,281		18,765
Other		91		139
Reinsurance balance due	$	292,775	$	299,060