Reinsurance

12 Months Ended

May 31, 2014

Reinsurance

Reinsurance

Note U – Reinsurance

The Company limits the maximum net loss that can arise from large risks by reinsuring (ceding) certain levels of such risk with reinsurers. Ceded reinsurance is treated as the risk and liability of the assuming companies. The Company cedes insurance to other companies and these reinsurance contracts do not relieve the Company from its obligations to policyholders.

Effective April 1, 2009, FSC entered into a reinsurance agreement with various syndicates at Lloyd’s of London (“Reinsurer”) for its coal reclamation surety bonding programs. The agreement has been renewed annually with the Reinsurer, with the most recent renewal effective April 1, 2017. The reinsurance agreement is an excess of loss contract which protects the Company against losses up to certain limits over stipulated amounts and can be terminated by either party by written notice of at least 90 days prior to any July 1. The contract calls for a premium rate of 35% subject to a minimum premium of $490,000. Deposits to the reinsurers are made quarterly in arrears in equal amounts of $140,000. At May 31, 2014 and May 31, 2013, the Company had prepaid reinsurance premiums of $215,616 and $196,565 and ceded reinsurance deposited of $62,091 and $41,605.

There were no ceded Loss and Loss Adjustment Expenses for the years ended May 31, 2014 or 2013.

The effects of reinsurance on premium written and earned for fiscal 2014 and 2013 are as follows;

	2014 Written		2014 Earned		2013 Written		2013 Earned
Direct	$	1,230,079	$	1,193,586	$	1,088,202	$	1,237,316
Ceded		430,032		410,981		441,893		489,204
Net	$	800,047	$	782,605	$	646,309	$	748,112