Reinsurance

12 Months Ended

Dec. 31, 2024

Effective December 31, 2021, the Company entered into a quota share reinsurance treaty for its personal lines business, which primarily consists of homeowners’ and dwelling fire policies, covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). Upon the expiration of the 2021/2023 Treaty on January 1, 2023, the Company entered into a new 30% quota share reinsurance treaty for its personal lines business, covering the period from January 1, 2023 through January 1, 2024 ("2023/2024 Treaty”). Upon the expiration of the 2023/2024 Treaty on January 1, 2024, the Company entered into a new 27% quota share reinsurance treaty for its personal lines business, covering the period from January 1, 2024 through January 1, 2025 (“2024/2025 Treaty”). Upon the expiration of the 2024/2025 Treaty on January 1, 2025, the Company entered into a new 16% quota share reinsurance treaty for its personal lines business, covering the period from January 1, 2025 through January 1, 2026 (“2025/2026 Treaty”). See Note 20- Subsequent Events, Reinsurance.

The Company’s excess of loss and catastrophe reinsurance treaties expired on June 30, 2024 and the Company entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2024. Effective January 1, 2023, the Company entered into an underlying excess of loss reinsurance treaty (“Underlying XOL Treaty”) covering the period from January 1, 2023 through January 1, 2024. The treaty provided 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the treaty. Effective January 1, 2024, the Underlying XOL Treaty was renewed covering the period from January 1, 2024 through January 1, 2025. Effective January 1, 2025, the Underlying XOL Treaty was renewed covering the period from January 1, 2025 through June 30, 2025. For the period October 1, 2024 through April 30, 2025, the Company purchased catastrophe reinsurance which will provide coverage for winter storm losses to the extent of 71% of $4,500,000 in excess of $5,500,000. Material terms for reinsurance treaties in effect for the treaty years shown below are as follows:


	Treaty Period
	2025/2026 Treaty						2024/2025 Treaty						2023/2024 Treaty
Line of Business	July 1, 2025 to January 1, 2026			January 1, 2025 to June 30, 2025			July 1, 2024 to January 1, 2025			January 1, 2024 to June 30, 2024			July 1, 2023 to January 1, 2024			January 1, 2023 to June 30, 2023

Personal Lines:
Homeowners, dwelling fire and canine legal liability
Quota share treaty:
Percent ceded (7)	16		%	16		%	27		%	27		%	30		%	30		%
Risk retained on initial
$1,000,000 of losses (5) (6) (7)	$	840,000		$	840,000		$	730,000		$	730,000		$	700,000		$	700,000
Losses per occurrence
subject to quota share
reinsurance coverage	$	1,000,000		$	1,000,000		$	1,000,000		$	1,000,000		$	1,000,000		$	1,000,000
Expiration date	January 1, 2026			January 1, 2026			January 1, 2025			January 1, 2025			January 1, 2024			January 1, 2024
Excess of loss coverage and
facultative facility
coverage (1) (5) (6)	$	400,000		$	8,400,000		$	8,400,000		$	8,400,000		$	8,400,000		$	8,400,000
	in excess of			in excess of			in excess of			in excess of			in excess of			in excess of
	$	600,000		$	600,000		$	600,000		$	600,000		$	600,000		$	600,000
Total reinsurance coverage
per occurrence (5) (6)	$	360,000		$	8,360,000		$	8,470,000		$	8,470,000		$	8,500,000		$	8,500,000
Losses per occurrence
subject to reinsurance
coverage (6)	$	1,000,000		$	9,000,000		$	9,000,000		$	9,000,000		$	9,000,000		$	9,000,000
Expiration date	(6)			June 30, 2025			June 30, 2025			June 30, 2024			June 30, 2024			June 30, 2023

Catastrophe Reinsurance:
Initial loss subject to personal
lines quota share treaty (6)	$	10,000,000		$	10,000,000		$	10,000,000		$	10,000,000		$	10,000,000		$	10,000,000
Risk retained per catastrophe
occurrence (6) (7) (8) (9)	(6)			$	4,250,000		$	4,750,000		$	9,500,000		$	8,750,000		$	8,750,000
Catastrophe loss coverage
in excess of quota share
coverage (2) (6)	(6)			$	275,000,000		$	275,000,000		$	315,000,000		$	315,000,000		$	335,000,000

Reinstatement premium
protection (3) (4)	(6)			Yes			Yes			Yes			Yes			Yes

(1)For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $9,000,000 in total insured value, which covers direct losses from $3,500,000 to $9,000,000 through June 30, 2025.

(2)Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone.

(3)For the period July 1, 2022 through June 30, 2023, reinstatement premium protection for $12,500,000 of catastrophe coverage in excess of $10,000,000. For the period July 1, 2023 through June 30, 2024, reinstatement premium protection for $50,000,000 of catastrophe coverage in excess of $10,000,000.

(4)For the period July 1, 2024 through June 30, 2025 (expiration date of the catastrophe reinsurance treaty), reinstatement premium protection for $50,000,000 of catastrophe coverage in excess of $10,000,000.

(5)For the period January 1, 2022 through June 30, 2025, underlying excess of loss treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Excludes losses from named storms. Reduces retention to $500,000 from $700,000 under the 2023/2024 Treaty. Reduces retention to $530,000 from $730,000 under the 2024/2025 Treaty. Retention increases to $640,000 from $530,000 under the 2025/2026 Treaty.

(6)Excess of loss coverage and facultative facility and catastrophe reinsurance treaties will expire on June 30,2025, with none of these coverages to be in effect during the period from July 1 2025 through January 1, 2026. If and when these treaties are renewed on July 1, 2025, the excess of loss and facultative facility, and the catastrophe reinsurance treaty, will be as provided for therein. Reinsurance coverage in effect from July 1, 2025 through January 1, 2026 is currently only covered under the 2025/2026 Treaty and underlying excess of loss reinsurance treaty through June 30, 2025. The 2025/2026 Treaty will expire on January 1, 2026.

(7)For the 2023/2024 Treaty, 17.5% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event. For the 2024/2025 Treaty, 22% of the 27% total of losses ceded under this treaty are excluded from a named catastrophe event. For the 2025/2026 Treaty, 6% of the 16% total of losses ceded under this treaty are excluded from a named catastrophe event.

(8)Plus losses in excess of catastrophe coverage.

(9)For the period October 1, 2024 through April 30, 2025, additional catastrophe reinsurance treaty will provide coverage for winter storm losses to the extent of 71% of $4,500,000 in excess of $5,500,000. Retention for winter storms under this treaty is $4,800,000 under the 2024/2025 Treaty and $5,200,000 under the 2025/2026 Treaty.


	Treaty Year
Line of Business	July 1, 2024 to June 30, 2025			July 1, 2023 to June 30, 2024			July 1, 2022 to June 30, 2023

Personal Lines:
Personal Umbrella
Quota share treaty:
Percent ceded - first $1,000,000 of coverage	90		%	90		%	90		%
Percent ceded - excess of $1,000,000 dollars of coverage	95		%	95		%	95		%
Risk retained	$	300,000		$	300,000		$	300,000
Total reinsurance coverage per occurrence	$	4,700,000		$	4,700,000		$	4,700,000
Losses per occurrence subject to quota share reinsurance coverage	$	5,000,000		$	5,000,000		$	5,000,000
Expiration date	June 30, 2025			June 30, 2024			June 30, 2023

Commercial Lines (1)

(1)Coverage on all commercial lines policies expired in September 2020; reinsurance coverage is based on treaties in effect on the date of loss.

The Company’s reinsurance program has been structured to enable the Company to grow its premium volume while maintaining regulatory capital and other financial ratios generally within or below the expected ranges used for regulatory oversight purposes. The reinsurance program also provides income as a result of ceding commissions earned pursuant to the quota share reinsurance contracts. The Company’s participation in reinsurance arrangements does not relieve the Company of its obligations to policyholders.

Approximate reinsurance recoverables on unpaid and paid losses by reinsurer at December 31, 2024 and 2023 are as follows:


($ in thousands)	Unpaid Losses		Paid Losses		Total		Security
December 31, 2024
Swiss Reinsurance America Corporation	13,565		1,346		14,911		—
Hannover Rueck SE	7,195		559		7,754		—
Lancashire Insurance Company Limited	4,893		1,288		6,181		—
Others	6,670		2,061		8,731		393		(2)
Total	$	32,323	$	5,254	$	37,577	$	393

December 31, 2023
Swiss Reinsurance America Corporation	11,027		6,560		17,587		—
Hannover Rueck SE	8,753		(92)		8,661		—
Allied World Insurance Company	4,724		2,190		6,914		4		(1)
Ace Property and Casualty Insurance Company	3,205		1,840		5,045		—
Lancashire Insurance Company Limited	3,203		1,583		4,786		—
Others	2,377		3,296		5,673		2,662		(2)
Total	$	33,289	$	15,377	$	48,666	$	2,666

(1)As of December 31, 2023, represents $4,000 guaranteed by irrevocable letters of credit.

(2)As of December 31, 2024 and December 31, 2023, represents $393,000 and $2,662,000, respectively, guaranteed by irrevocable letters of credit.

In addition to reinsurance recoverables on unpaid and paid losses, reinsurance receivables in the accompanying consolidated balance sheets as of December 31, 2024 and 2023 include unearned ceded premiums of approximately $31,745,000 and $26,928,000, respectively.

Ceding Commission Revenue

The Company earned ceding commission revenue under the 2024/2025 Treaty for the year ended December 31, 2024, and under the 2023/2024 Treaty for the year ended December 31, 2023, are based on a fixed provisional commission rate at which provisional ceding commissions are earned. The Company earned ceding commission revenue under its quota share reinsurance agreements that expired prior to July 1, 2022 based on: (i) a fixed provisional commission rate at which provisional ceding commissions were earned, and (ii) under certain of the quota share reinsurance agreements, a continuing sliding scale of commission rates and ultimate treaty year loss ratios on the policies reinsured under each of these agreements based upon which contingent ceding commissions are earned. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratios. The commission rate and contingent ceding commissions earned increase when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned decrease when the estimated ultimate loss ratio increases.

Ceding commission revenue consists of the following:


	Year ended December 31,
	2024		2023

Provisional ceding commissions earned	$	18,829,278	$	20,397,454
Contingent ceding commissions earned	8,668		656,040
	$	18,837,946	$	21,053,494

Provisional ceding commissions are settled monthly. Balances due from reinsurers for contingent ceding commissions on quota share treaties are settled periodically based on the Loss Ratio of each treaty year that ends on June 30, for the expired treaties that were subject to contingent commissions. As discussed above, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods develop, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. As of December 31, 2024 and 2023, net contingent ceding commissions payable to reinsurers under all treaties was approximately $727,000 and $3,302,000, respectively, which is recorded in reinsurance balances payable on the accompanying consolidated balance sheets.

Expected Credit Losses – Uncollectible Reinsurance

The Company reviews reinsurance receivables which relate to both amounts already billed on ceded paid losses as well as ceded reserves that will be billed when losses are paid in the future. The Company has not recorded an allowance for uncollectible reinsurance as there is no perceived credit risk. The principal credit quality indicator used in the valuation of the allowance on reinsurance receivables is the financial strength rating of the reinsurer sourced from major rating agencies. Changes in the allowance are presented as a component of other underwriting expenses on the consolidated statements of operations and comprehensive income (loss).