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Property and Casualty Insurance Activity
 9 Months Ended
Sep. 30, 2024
Property and Casualty Insurance Activity  
Property and Casualty Insurance Activity Property and Casualty Insurance Activity
Premiums Earned
Premiums written, ceded and earned are as follows:
 
Direct
Assumed
Ceded
Net
    
Nine months ended September 30, 2024   
Premiums written$169,446,603 $- $(69,381,336)$100,065,267 
Change in unearned premiums(14,353,242)- 6,818,683 (7,534,559)
Premiums earned$155,093,361 $- $(62,562,653)$92,530,708 
     
Nine months ended September 30, 2023    
Premiums written$147,236,636 $- $(75,963,569)$71,273,067 
Change in unearned premiums4,331,226 - 10,097,174 14,428,400 
Premiums earned$151,567,862 $- $(65,866,395)$85,701,467 
     
Three months ended September 30, 2024    
Premiums written$66,626,664 $- $(46,081,473)$20,545,191 
Change in unearned premiums(12,540,101)- 25,402,104 12,862,003 
Premiums earned$54,086,563 $- $(20,679,369)$33,407,194 
     
Three months ended September 30, 2023    
Premiums written$51,992,246 $- $(48,316,946)$3,675,300 
Change in unearned premiums(1,246,657)- 25,509,675 24,263,018 
Premiums earned$50,745,589 $- $(22,807,271)$27,938,318 
Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of September 30, 2024 and December 31, 2023 was $5,307,223 and $3,797,590, respectively.
Loss and Loss Adjustment Expense Reserves
The following table provides a reconciliation of the beginning and ending balances for unpaid loss and LAE reserves:
Nine months ended September 30,
20242023
 
Balance at beginning of period $121,817,862 $118,339,513 
Less reinsurance recoverables(33,288,650)(27,659,500)
Net balance, beginning of period 88,529,212 90,680,013 
   
Incurred related to:  
Current year46,762,530 66,568,985 
Prior years(1,637,038)(16,420)
Total incurred45,125,492 66,552,565 
   
Paid related to:  
Current year24,507,023 37,932,760 
Prior years21,353,578 29,928,162 
Total paid45,860,601 67,860,922 
   
Net balance at end of period87,794,103 89,371,656 
Add reinsurance recoverables29,048,348 32,303,291 
Balance at end of period $116,842,451 $121,674,947 
Incurred losses and LAE are presented net of reinsurance recoveries under reinsurance contracts of $13,744,230 and $34,019,370 for the nine months ended September 30, 2024 and 2023, respectively.
Prior year incurred loss and LAE development is based upon estimates by line of business and accident year. Prior year loss and LAE development incurred during the nine months ended September 30, 2024 and 2023 was $1,637,038 favorable and $16,420 favorable, respectively. Management, on a quarterly basis, performs a review of open liability claims to assess carried case and incurred but not reported (“IBNR”) reserve levels, giving consideration to both Company and industry trends.
Loss and LAE Reserves
The reserving process for loss and LAE reserves provides for the Company’s best estimate at a particular point in time of the ultimate unpaid cost of all losses and LAE incurred, including settlement and administration of losses, and is based on facts and circumstances then known including losses that have occurred but that have not yet been reported. The process relies on standard actuarial reserving methodologies, judgments relative to estimates of ultimate claim severity and frequency, the length of time before losses will develop to their ultimate level (‘tail’ factors), and the likelihood of changes in the law or other external factors that are beyond the Company’s control. Several actuarial reserving methodologies are used to estimate required loss reserves. The process produces carried reserves set by management based upon the actuaries’ best estimate and is the cumulative combination of the best estimates made by line of business, accident year, and loss and LAE. The amount of loss and LAE reserves for individual reported claims (the “case reserve”) is determined by the claims department and changes over time as new information is gathered. Such information is critical to the review of appropriate IBNR reserves and includes a review of coverage applicability, comparative liability on the part of the insured, injury severity, property damage, replacement cost estimates, and any other information considered pertinent to estimating the exposure presented by the claim. The amounts of loss and LAE reserves for unreported claims and development on known claims (IBNR reserves) are determined using historical information aggregated by line of insurance as adjusted to current conditions. Since this process produces loss reserves set by management based upon the actuaries’ best estimate, there is no explicit or implicit provision for uncertainty in the carried loss reserves.
Due to the inherent uncertainty associated with the reserving process, the ultimate liability may differ, perhaps substantially, from the original estimate. Such estimates are regularly reviewed and updated and any resulting adjustments are included in the current period’s results. Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. On at least a quarterly basis, the Company reviews by line of business existing reserves, new claims, changes to existing case reserves, and paid losses with respect to the current and prior periods. Several methods are used, varying by line of business and accident year, in order to select the estimated period-end loss reserves. These methods include the following:
Paid Loss Development – historical patterns of paid loss development are used to project future paid loss emergence in order to estimate required reserves.
Incurred Loss Development – historical patterns of incurred loss development, reflecting both paid losses and changes in case reserves, are used to project future incurred loss emergence in order to estimate required reserves.
Paid Bornhuetter-Ferguson (“BF”) – an estimated loss ratio for a particular accident year is determined, and is weighted against the portion of the accident year claims that have been paid, based on historical paid loss development patterns. The estimate of required reserves assumes that the remaining unpaid portion of a particular accident year will pay out at a rate consistent with the estimated loss ratio for that year. This method can be useful for situations where an unusually high or low amount of paid losses exists at the early stages of the claims development process.
Incurred Bornhuetter-Ferguson (“BF”) - an estimated loss ratio for a particular accident year is determined, and is weighted against the portion of the accident year claims that have been reported, based on historical incurred loss development patterns. The estimate of required reserves assumes that the remaining unreported portion of a particular accident year will pay out at a rate consistent with the estimated loss ratio for that year. This method can be useful for situations where an unusually high or low amount of reported losses exists at the early stages of the claims development process.
Incremental Claim-Based Methods – historical patterns of incremental incurred losses and paid LAE during various stages of development are reviewed and assumptions are made regarding average loss and LAE development applied to remaining claims inventory. Such methods more properly reflect changes in the speed of claims closure and the relative adequacy of case reserve levels at various stages of development. These methods may provide a more accurate estimate of IBNR for lines of business with relatively few remaining open claims but for which significant recent settlement activity has occurred.
Frequency / Severity Based Methods – historical measurements of claim frequency and average paid claim size (severity) are reviewed for more mature accident years where a majority of claims have been reported and/or closed. These historical averages are trended forward to more recent periods in order to estimate ultimate losses for newer accident years that are not yet fully developed. These methods are useful for lines of business with slow and/or volatile loss development patterns, such as liability lines where information pertaining to individual cases may not be completely known for many years. The claim frequency and severity information for older periods can then be used as reasonable measures for developing a range of estimates for more recent immature periods.
Management’s best estimate of required reserves is generally based on an average of the methods above, with appropriate weighting of methods based on the line of business and accident year being projected. In some cases, additional methods or historical data from industry sources are employed to supplement the projections derived from the methods listed above.
Three key assumptions that materially affect the estimate of loss reserves are the loss ratio estimate for the current accident year used in the BF methods, the loss development factor selections used in the loss development methods, and the loss severity assumptions used in the frequency / severity method described above. The loss ratio estimates used in the BF methods are selected after reviewing historical accident year loss ratios adjusted for rate changes, trend, and mix of business. The severity assumptions used in the frequency / severity method are determined by reviewing historical average claim severity for older more mature accident periods, trended forward to less mature accident periods.
The Company reviews the carried reserves levels on a regular basis as additional information becomes available and makes adjustments in the periods in which such adjustments are determined to be necessary. The Company is not aware of any claim trends that have emerged or that would cause future adverse development that have not already been contemplated in setting current carried reserves levels.
In New York State, lawsuits for negligence are subject to certain limitations and must be commenced within three years from the date of the accident or are otherwise barred. Accordingly, the Company’s exposure to unreported claims (“pure” IBNR) for accident dates of September 30, 2021 and prior is limited, although there remains the possibility of adverse development on reported claims (“case development” IBNR). In certain rare circumstances states have retroactively revised a statute of limitations. The Company is not aware of any such effort that would have a material impact on the Company’s results.
The following is information about incurred and paid claims development as of September 30, 2024, net of reinsurance, as well as the cumulative reported claims by accident year and total IBNR reserves as of September 30, 2024 included in the net incurred loss and allocated expense amounts. The historical information regarding incurred and paid claims development for the years ended December 31, 2015 to December 31, 2023 is presented as supplementary unaudited information.
All Lines of Business
(in thousands, except reported claims data)
 Incurred Loss and Allocated Loss Adjustment Expenses, Net of ReinsuranceAs of
September 30, 2024
Accident YearFor the Years Ended December 31,Nine
Months
Ended
September 30,
2024		IBNRCumulative
Number of
Reported
Claims by
Accident
Year
201520162017201820192020202120222023
 (Unaudited 2015 - 2023)(Unaudited)
            
2015$22,340 $21,994 $22,148 $22,491 $23,386 $23,291 $23,528 $23,533 $23,428 $23,506 $300 2,559
2016 26,062 24,941 24,789 27,887 27,966 27,417 27,352 27,271 27,281 121 2,882
2017  31,605 32,169 35,304 36,160 36,532 36,502 36,819 37,201 246 3,401
2018   54,455 56,351 58,441 59,404 61,237 61,145 61,381 930 4,237
2019    75,092 72,368 71,544 71,964 73,310 73,900 1,436 4,507
2020     63,083 62,833 63,217 63,562 63,677 1,078 5,892
2021      96,425 96,673 96,134 96,365 3,056 5,827
2022       79,835 78,759 78,931 5,312 4,706
2023        78,978 74,170 12,761 4,068
2024         42,089 11,852 2,396
          Total $578,500   
All Lines of Business
(in thousands)
 Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident YearFor the Years Ended December 31,Nine
Months Ended
September 30,
2024
201520162017201820192020202120222023
 (Unaudited 2015 - 2023)(Unaudited)
 
2015$12,295 $16,181 $18,266 $19,984 $21,067 $22,104 $22,318 $22,473 $22,519 $22,539 
2016 15,364 19,001 21,106 23,974 25,234 25,750 26,382 26,854 26,806 
2017  16,704 24,820 28,693 31,393 32,529 33,522 34,683 34,990 
2018   32,383 44,516 50,553 52,025 54,424 56,199 56,867 
2019    40,933 54,897 58,055 60,374 63,932 65,602 
2020     39,045 50,719 53,432 56,523 59,081 
2021      56,282 77,756 82,317 84,987 
2022       45,856 65,732 67,834 
2023        46,280 56,139 
2024         21,671 
         Total$496,516 
           
Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented$81,985 
All outstanding liabilities before 2015, net of reinsurance976 
Liabilities for loss and allocated loss adjustment expenses, net of reinsurance$82,960 
(Components may not sum to totals due to rounding)
Reported claim counts are measured on an occurrence or per event basis. A single claim occurrence could result in more than one loss type or claimant; however, the Company counts claims at the occurrence level as a single claim regardless of the number of claimants or claim features involved.
The reconciliation of the net incurred and paid loss development tables to the loss and LAE reserves in the condensed consolidated balance sheet is as follows:
Reconciliation of the Disclosure of Incurred and Paid Loss Development
to the Liability for Loss and LAE Reserves
(in thousands)As of
September 30, 2024
Liabilities for allocated loss and loss adjustment expenses, net of reinsurance$82,960 
Total reinsurance recoverable on unpaid losses29,048 
Unallocated loss adjustment expenses4,834 
Total gross liability for loss and LAE reserves$116,842 
Reinsurance
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”).
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, 2022, the Company entered into an underlying excess of loss reinsurance treaty (“Underlying XOL Treaty”) covering the period from January 1, 2022 through January 1, 2023. 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, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024. Effective January 1, 2024, the Underlying XOL Treaty was renewed covering the period from January 1, 2024 through January 1, 2025. Material terms for reinsurance treaties in effect for the treaty years shown below are as follows:
 
 Treaty Period
  2024/2025 Treaty 2023/2024 Treaty2021/2023 Treaty
Line of Business
January 2,
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		July 1,
2022
to
January 1,
2023 		December 31,
2021
to
June 30,
2022
        
Personal Lines:       
Homeowners, dwelling fire and canine legal liability Quota share treaty: Percent ceded (7)(6)27 %27 %30 %30 %30 %30 %
Risk retained on initial $1,000,000 of losses (5) (6) (7)
$1,000,000 $730,000 $730,000 $700,000 $700,000 $700,000 $700,000 
Losses per occurrence subject to quota share reinsurance coverage
(6)$1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 
Expiration date(6)January 1, 2025January 1, 2025January 1, 2024January 1, 2024January 1, 2023January 1, 2023
Excess of loss coverage and facultative facility coverage (1) (5) (6)
$8,000,000 $8,400,000 $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 in excess of
 $1,000,000 $600,000 $600,000 $600,000 $600,000 $600,000 $600,000 
Total reinsurance coverage per occurrence (5) (6)
$8,000,000 $8,470,000 $8,470,000 $8,500,000 $8,500,000 $8,500,000 $8,500,000 
Losses per occurrence subject to reinsurance coverage (6)
$9,000,000 $9,000,000 $9,000,000 $9,000,000 $9,000,000 $9,000,000 $9,000,000 
Expiration date (6)June 30, 2025June 30, 2025June 30, 2024June 30, 2024June 30, 2023June 30, 2023June 30, 2022
Catastrophe Reinsurance:
Initial loss subject to personal lines quota share treaty (6)
(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)5,000,000 4,750,000 $9,500,000 $8,750,000 $8,750,000 $7,400,000 $7,400,000 
Catastrophe loss coverage in excess of quota share coverage (2) (6)
$275,000,000 $275,000,000 $315,000,000 $315,000,000 $335,000,000 $335,000,000 $490,000,000 
Reinstatement premium protection (3) (4)
 Yes  Yes  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 $10,500,000 of catastrophe coverage in excess of $10,000,000.
(5)For the period January 1, 2022 through January 1, 2025, Underlying XOL 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 2021/2023 Treaty and 2023/2024 Treaty. Reduces retention to $530,000 from $730,000 under the 2024/2025 Treaty. After the expiration of the Underlying XOL Treaty and 2024/2025 Treaty on January 1, 2025, retention will be $1,000,000.
(6)Personal lines quota share (homeowners, dwelling fire and canine liability) and underlying excess of loss reinsurance will expire on January 1, 2025, with none of these coverages to be in effect during the period from January 2, 2025 through June 30, 2025. Reinsurance coverage in effect from January 2, 2025 through June 30, 2025 is only for excess of loss and catastrophe reinsurance treaties.
(7)For the 2021/2023 Treaty, 4% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event. 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.
(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 of $4,500,000 in excess of $5,500,000. Retention for winter storms under this treaty is $4,800,000.
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, 2025June 30, 2024June 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.
Ceding Commission Revenue
The Company earned ceding commission revenue under the 2024/2025 Treaty for the nine months ended September 30, 2024, and under the 2023/2024 Treaty for the nine months ended September 30, 2023, 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 the 2021/2023 Treaty 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:
Three months ended
September 30,		Nine months ended
September 30,
2024202320242023
   
Provisional ceding commissions earned $4,742,557 $4,992,312 $13,859,795 $15,733,145 
Contingent ceding commissions earned (881)544,015 10,953 660,799 
$4,741,676 $5,536,327 $13,870,748 $16,393,944 
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 September 30, 2024 and December 31, 2023, net contingent ceding commissions payable to reinsurers under all treaties was approximately $724,000 and $3,302,000, respectively, which is recorded in reinsurance balances payable on the accompanying condensed 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 condensed consolidated statements of operations and comprehensive income (loss).