Reinsurance

12 Months Ended

Dec. 31, 2021

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)	2021			2020			2019
WRITTEN
Direct	$	1,313,093		$	1,107,303		$	1,039,955
Reinsurance assumed		34,261			29,129			25,047
Reinsurance ceded		(289,821	)		(244,344	)		(204,665	)
Net	$	1,057,533		$	892,088		$	860,337

EARNED
Direct	$	1,222,346		$	1,062,608		$	981,121
Reinsurance assumed		30,950			27,651			40,173
Reinsurance ceded		(272,393	)		(224,512	)		(182,183	)
Net	$	980,903		$	865,747		$	839,111

LOSSES AND SETTLEMENT EXPENSES INCURRED
Direct	$	703,903		$	608,638		$	521,055
Reinsurance assumed		18,087			18,783			21,951
Reinsurance ceded		(265,388	)		(184,537	)		(129,590	)
Net	$	456,602		$	442,884		$	413,416

More than 89 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, 2021. 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 2021.

			Net Reinsurer					Ceded
	AM Best	S&P	Exposure as of		Percent of			Premiums		Percent of
(dollars in thousands)	Rating	Rating	12/31/2021		Total			Written		Total
Munich Re / HSB	A+, Superior	AA-, Very Strong	$	102,632		14.5	%	$	34,462		11.9	%
Renaissance Re	A+, Superior	A+, Strong		58,417		8.3	%		25,001		8.6	%
Endurance Re	A+, Superior	A+, Strong		47,136		6.7	%		9,865		3.4	%
Scor Re	A+, Superior	AA-, Very Strong		37,160		5.3	%		13,398		4.6	%
Aspen UK Ltd.	A, Excellent	A-, Strong		36,164		5.1	%		9,402		3.2	%
Berkley Insurance Co.	A+, Superior	A+, Strong		36,033		5.1	%		12,950		4.5	%
Hannover Ruckversicherung	A+, Superior	AA-, Very Strong		33,125		4.7	%		12,942		4.5	%
Safety National	A++, Superior	A+, Strong		32,196		4.6	%		15,544		5.4	%
Nationwide Mutual	A+, Superior	A+, Strong		29,818		4.2	%		17,738		6.1	%
Liberty Mutual	A, Excellent	A, Strong		23,236		3.3	%		7,240		2.5	%
All other reinsurers*				270,331		38.2	%		131,279		45.3	%
Total ceded exposure			$	706,248		100.0	%	$	289,821		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 $11.2 million, respectively, at December 31, 2021. At December 31, 2020, the amounts were $15.9 million and $8.6 million, respectively. Changes in the allowances during 2021 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 2021 and $0.2 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.