Reinsurance

12 Months Ended

Dec. 31, 2022

Reinsurance Disclosures [Abstract]

Reinsurance

5. REINSURANCE

In the ordinary course of business, our insurance subsidiaries assume and cede premiums and selected insured risks with other insurance companies, known as reinsurance. A large portion of the reinsurance is put into effect under contracts known as treaties and, in some instances, by negotiation on each individual risk known as facultative reinsurance. In addition, there are several types of treaties including quota share, excess of loss and catastrophe reinsurance contracts that protect against losses over stipulated amounts arising from any one occurrence or event. The arrangements allow the Company to pursue greater diversification of business and serve to limit the maximum net loss to a single event, such as a catastrophe. Through the quantification of exposed policy limits in each region and the extensive use of computer-assisted modeling techniques, we monitor the concentration of risks exposed to catastrophic events.

Through the purchase of reinsurance, we also limit our net loss on any individual risk to a maximum of $9.7 million, although retentions can vary.

Premiums written and earned along with losses and settlement expenses incurred for the years ended December 31 are summarized as follows:

(in thousands)	2022		2021		2020
WRITTEN
Direct	$	1,531,656	$	1,313,093	$	1,107,303
Reinsurance assumed		33,830		34,261		29,129
Reinsurance ceded		(323,950)		(289,821)		(244,344)
Net	$	1,241,536	$	1,057,533	$	892,088
EARNED
Direct	$	1,425,165	$	1,222,346	$	1,062,608
Reinsurance assumed		35,680		30,950		27,651
Reinsurance ceded		(316,409)		(272,393)		(224,512)
Net	$	1,144,436	$	980,903	$	865,747
LOSSES AND SETTLEMENT EXPENSES INCURRED
Direct	$	776,448	$	703,903	$	608,638
Reinsurance assumed		22,813		18,087		18,783
Reinsurance ceded		(284,885)		(265,388)		(184,537)
Net	$	514,376	$	456,602	$	442,884

More than 93 percent of our reinsurance recoverables are due from companies with financial strength ratings of A or better by AM Best and S&P rating services. The following table displays net reinsurance balances recoverable, after consideration of collateral, from our top reinsurers as of December 31, 2022. These reinsurers all have financial strength ratings of A or better by AM Best and S&P’s ratings services. Also shown are the amounts of written premium ceded to these reinsurers during the calendar year 2022.

			Net Reinsurer				Ceded
	AM Best	S&P	Exposure as of		Percent of		Premiums		Percent of
(dollars in thousands)	Rating	Rating	12/31/2022		Total		Written		Total
Munich Re / HSB	A+, Superior	AA-, Very Strong	$	110,142	13.6	%	$	35,040	10.8	%
Renaissance Re	A+, Superior	A+, Strong		82,929	10.3	%		22,865	7.1	%
Nationwide Mutual	A+, Superior	A+, Strong		45,492	5.6	%		21,493	6.6	%
Aspen UK Ltd.	A, Excellent	A-, Strong		43,632	5.4	%		11,021	3.4	%
Safety National	A++, Superior	A+, Strong		42,218	5.2	%		14,971	4.6	%
Endurance Re	A+, Superior	A+, Strong		40,979	5.1	%		5,570	1.7	%
Berkley Insurance Co.	A+, Superior	A+, Strong		36,105	4.5	%		8,931	2.8	%
Lloyds of London	A, Excellent	A+, Strong		34,737	4.3	%		26,677	8.2	%
Partner Re	A+, Superior	A+, Strong		34,322	4.3	%		15,363	4.7	%
Hannover Ruckversicherung	A+, Superior	AA-, Very Strong		33,507	4.2	%		16,746	5.2	%
Scor Re	A+, Superior	A+, Strong		32,153	4.0	%		6,048	1.9	%
Toa Re	A, Excellent	A+, Strong		27,278	3.4	%		13,092	4.0	%
Liberty Mutual	A, Excellent	A, Strong		24,665	3.1	%		6,140	1.9	%
Odyssey America Re	A, Excellent	A, Strong		23,945	3.0	%		9,049	2.8	%
All other reinsurers*				194,683	24.0	%		110,944	34.3	%
Total ceded exposure			$	806,787	100.0	%	$	323,950	100.0	%

* All other reinsurance balances recoverable, when considered by individual reinsurer, are less than 2 percent of shareholders’ equity.

The allowances for uncollectible amounts on paid and unpaid recoverables were $16.1 million and $11.3 million, respectively, at December 31, 2022. At December 31, 2021, the amounts were $16.1 million and $11.2 million, respectively. Changes in the allowances during 2022 were due to changes in the amount of reinsurance balances outstanding, the composition of reinsurers from whom the balances were recoverable and their associated S&P default ratings. No write-offs were applied to the allowances in 2022 and less than $0.1 million was recovered. We have no receivables with a due date that extends beyond one year that are not included in our allowance for uncollectible amounts.