Note 10 - Reinsurance

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Reinsurance [Text Block]

10.          Reinsurance

Reinsurance obtained from other insurance companies

Certain premiums and benefits at NCTIC are ceded to other insurance companies under various reinsurance agreements. The reinsurance agreements provide NCTIC with increased capacity to write more risk and maintain its exposure to loss within its capital resources. For the years ended December 31, 2022 and 2021, NCTIC's reinsurance program consisted of excess of loss reinsurance treaties. The following is a summary of the reinsurance coverage.

Effective January 1, 2022, NCTIC entered into a per risk excess of loss reinsurance agreement that provided coverage of $4,000,000 in excess of $1,000,000 on each and every risk. The contract allowed for one full reinstatement at 100% additional premium as to time and pro rata as to amount. This per risk agreement was shared with other non-affiliated companies. Each company paid its share of the reinsurance cost based on separate company earned premiums. The agreement expired on December 31, 2022.

Effective January 1, 2022, NCTIC entered into a reinstatement premium protection reinsurance agreement to reinsure the reinstatement premium payment obligations of NCTIC under the shared per risk excess of loss agreement. The coverage was limited to 100% of the original contracted reinsurance placement. This agreement was shared with the other nonaffiliated companies. Each company paid its share of the reinsurance cost based on separate company earned premiums. The agreement expired on December 31, 2022.

NCTIC’s reinsured risks are treated, to the extent of reinsurance, as though they are risks for which the Company is not liable. However, NCTIC remains contingently liable in the event the reinsuring companies do not meet their obligations under these reinsurance contracts. NCTIC uses a broker to place its reinsurance through Lloyd’s syndicates. Chaucer Ltd (“Chaucer”) and Beazley Syndicate (“Beazley”) are each 50% participants in the Lloyd’s syndicate. As such, NCTIC has a concentration of reinsurance risk with these third party reinsurers that could have a material impact on NCTIC’s financial position in the event that either of these reinsurers fail to perform their obligations under the reinsurance treaty. As of December 31, 2022, both reinsurers had an A-issuer credit rating from AM Best, an AA- from Fitch, and an A+ from S&P. The Company monitors both the financial condition of individual reinsurers and risk concentration arising from similar activities and economic characteristics of reinsurers to attempt to reduce the risk of default by such reinsurers. Given the quality of the reinsurers, management believes this possibility to be remote. See Note 9 for recoveries due from reinsurers relating to paid and unpaid claims under these treaties.

The effects of reinsurance on premiums written and earned at NCTIC are as follows (in thousands):

	For the Year Ended December 31, 2022			For the Year Ended December 31, 2021
Direct title premiums	$	2,170		$	898
Ceded title premiums		(55	)		(83	)
Net title premiums	$	2,115		$	815

Reinsurance provided to other insurance companies

Effective July 1, 2022, the Company formed White Rock USA Protected Cell 47 (the “Protected Cell”). The Protected Cell entered into an Excess Catastrophe Reinsurance Contract (the “Reinsurance Contract”) with Maison Insurance Company (“Maison”) effective July 1, 2022 to provide Maison catastrophic windstorm reinsurance protection on approximately 7,650 Texas insurance policies in-force at inception of the Reinsurance Contract. The Reinsurance Contract provides $7.8 million of limit to Maison in excess of a $5 million retention. Maison paid the Protected Cell $6.63 million in reinsurance premiums for the term of the Reinsurance Contract, which terminated on December 31, 2022. The Company may actively look to provide reinsurance coverage to other carriers as future opportunities arise.

The following is a reconciliation of total reinsurance premiums written to reinsurance premiums earned for the years ended December 31, 2022 and 2021 (amounts in thousands):

	For the Year Ended December 31, 2022			For the Year Ended December 31, 2021
Reinsurance premiums written	$	6,630		$	-
Increase in unearned premium reserves		(300	)		-
Reinsurance premiums earned	$	6,330		$	-