Reinsurance

12 Months Ended

Dec. 31, 2021

During the periods presented, the Company used reinsurance contracts to protect itself from losses due to concentration of risk and to manage its operating leverage ratios. As of December 31, 2021, the Company has commuted all of its reinsurance agreements. Details regarding the commutation settlement agreements include the following:

•In February 2021, Metromile Insurance Company entered into a settlement agreement with Horseshoe Re Limited (“Horseshoe”) to commute the reinsurance agreements with effective dates beginning May 1, 2017, May 1, 2018,

and May 1, 2019. Pursuant to the agreement, Metromile Insurance Company paid approximately $9.0 million, net, for commutation of the underlying agreements.

•In June and July 2021, Metromile Insurance Company entered into settlement agreements with Horseshoe, Partner Reinsurance Company of the U.S. (“Partner”), Topsail Reinsurance SPC Ltd. (“Topsail”), The Cincinnati Insurance Company (“Cincinnati”) and Mapfre Re (“Mapfre”) to commute the reinsurance agreements between the parties with effective dates beginning May 1, 2017, May 1, 2018, May 1, 2019, and May 1, 2020. The commutations were effective April 30, 2021. Pursuant to the settlements, Metromile Insurance Company paid approximately $6.2 million, net, for commutation of the underlying agreements.

Prior to the above-mentioned reinsurance agreement commutations, the Company had several quota-share reinsurance agreements in place. For more detail on such agreements see below and refer to Reinsurance in the notes to the audited consolidated financial statements which are included in the Company’s Post-Effective Amendment No. 2 to Form S-1 filed with the SEC on August 27, 2021.

◦Effective May 1, 2017, two quota-share reinsurance agreements were entered into under which 85% of the Company’s premiums and losses related to its renewal business occurring May 1, 2017 through April 30, 2018 were ceded to two unaffiliated reinsurers.

◦Effective May 1, 2018, three quota-share reinsurance agreements were in place whereby 85% of the Company’s premiums and losses related to its second term renewal business occurring May 1, 2018 through April 30, 2019, but not covered by the earlier quota-share agreements, were ceded to three unaffiliated reinsurers.

◦Effective May 1, 2019, four quota-share reinsurance agreements were in place whereby 85% of the Company’s premiums and losses, subject to a loss corridor, related to its new and renewal business occurring May 1, 2019 through April 30, 2020, but not covered by the earlier quota-share agreements, were ceded to four unaffiliated reinsurers.

◦Effective May 1, 2020, five quota-share reinsurance agreements were in place whereby 85% of the Company’s premiums and losses, subject to a loss corridor for one agreement, related to its new and renewal business occurring May 1, 2020 through April 30, 2021, but not covered by the earlier quota-share agreements, were ceded to five unaffiliated reinsurers.

In addition, the Company received revenue from the reinsurers related to the acquisition costs incurred related to the ceded policies. The revenue was based on the number of policies newly ceded to the reinsurers. During the years ended December 31, 2021 and 2020 the Company received $4.7 million and $11.3 million, respectively, for acquisition costs from the reinsurers, pursuant to the existing reinsurance agreements. This revenue is recorded in other revenue on the consolidated statements of operations.

The insurance company was not relieved of its primary obligations to policyholders as a result of any reinsurance agreements. The credit risk associated with the Company’s reinsurance contracts was mitigated by using a diverse group of reinsurers and monitoring their financial strength ratings. The former reinsurance counterparties and their A.M. Best financial strength ratings are as follows: Mapfre (A), Cincinnati (A+), Partner (A+), Horseshoe (not rated), and Topsail (not rated). For reinsurance counterparties not rated, adequate levels of collateral were required either in the form of a letter of credit or funded trust account.

The effect of the Company’s reinsurance agreements on premiums, loss and LAE related to the insurance company for the years ended December 31, 2021 and December 31, 2020 is as follows (in thousands):


	December 31, 2021
	Premium Written		Premium Earned		Unearned Premium		Losses and LAE Incurred		Loss and LAE Reserves
Direct	$	110,719	$	111,063	$	15,726	$	102,991	$	73,438
Ceded	(19,411)		(33,080)		—		(14,701)		—
Net	$	91,308	$	77,983	$	15,726	$	88,290	$	73,438


	December 31, 2020
	Premium Written		Premium Earned		Unearned Premium		Losses and LAE Incurred		Loss and LAE Reserves
Direct	$	100,611	$	99,712	$	16,070	$	74,943	$	57,093
Ceded	(85,504)		(84,740)		(13,668)		(54,010)		(33,941)
Net	$	15,107	$	14,972	$	2,402	$	20,933	$	23,152