Losses and Loss Adjustment Reserve

9 Months Ended

Sep. 30, 2018

Although the reinsurers are liable to the Company for amounts reinsured, our subsidiary, Wright National Flood Insurance Company (“Wright Flood”) remains primarily liable to its policyholders for the full amount of the policies written whether or not the reinsurers meet their obligations to the Company when they become due. The effects of reinsurance on premiums written and earned are as follows:



	Period from January 1, 2018 to September 30, 2018
(in thousands)	Written			Earned
Direct premiums	$	469,078		$	445,140
Ceded premiums	(469,065		)	(445,127		)
Net premiums	$	13		$	13

All premiums written by Wright Flood under the National Flood Insurance Program are 100% ceded to the Federal Emergency Management Agency, or FEMA, for which Wright Flood received a 30.9% expense allowance from January 1, 2018 through September 30, 2018. For the period from January 1, 2018 through September 30, 2018, the Company ceded $467.7 million of written premiums.

Effective April 1, 2014, Wright Flood is also a party to a quota share agreement whereby it cedes 100% of its gross excess flood premiums, excluding fees, to Arch Reinsurance Company and receives a 30.5% commission. Wright Flood ceded $1.4 million for the period from January 1, 2018 through September 30, 2018. As of September 30, 2018, Wright Flood had $2.1 million in paid excess flood losses, $92,519 in loss adjustment expenses, case reserves of $161,758 and $1,500 in allocated loss adjustment expense ("ALAE") case reserves and incurred but not reported of $485,000.

Wright Flood also ceded 100% of the homeowners, private passenger auto liability, and other liability occurrence to Stillwater Insurance Company, formerly known as Fidelity National Insurance Company. This business is in runoff. Therefore, only loss data exists on this business. As of September 30, 2018, no ceded unpaid losses and loss adjustment expenses or incurred but not reported expenses for homeowners, private passenger auto liability and other liability occurrence existed.

As of September 30, 2018 the Condensed Consolidated Balance Sheet contained reinsurance recoverable of $98.5 million, prepaid reinsurance premiums of $345.0 million and recoverable on paid losses of $40.9 thousand. There was no net activity in the reserve for losses and loss adjustment expense during the period January 1, 2018 through September 30, 2018, as Wright Flood’s direct premiums written were 100% ceded to two reinsurers. The balance of the reserve for losses and loss adjustment expense, excluding related reinsurance recoverable, as of September 30, 2018 was $98.5 million.