Reinsurance (Tables)

12 Months Ended

Dec. 31, 2020

Effect of reinsurance agreements on premiums earned and losses incurred

Table 9.1 below shows the effect of all reinsurance agreements on premiums earned and losses incurred as reflected in the consolidated statements of operations.


Reinsurance
Table	9.1
		Years ended December 31,
(In thousands)		2020		2019		2018
Premiums earned:
Direct		$	1,199,824	$	1,155,240	$	1,084,748
Assumed		10,848		5,085		1,805
Ceded		(188,729)		(129,337)		(111,391)
Net premiums earned		1,021,943		1,030,988		975,162

Losses incurred:
Direct		442,194		130,100		43,060
Assumed		555		(125)		331
Ceded		(77,975)		(11,400)		(6,829)
Net losses incurred		$	364,774	$	118,575	$	36,562

Schedule of Quota Share Reinsurance Agreements

Table 9.2 below provides additional detail regarding our QSR agreements.


Reinsurance
Table	9.2

Quota Share Contract		Policy Year	Quota Share %		Annual Loss Ratio to Exhaust Profit Commission (1)		Contractual Termination Date
2015 QSR		Prior to 2017	15.0	%	68.0	%	December 31, 2031
2017 QSR		2017	30.0	%	60.0	%	December 31, 2028
2018 QSR		2018	30.0	%	62.0	%	December 31, 2029
2019 QSR		2019	30.0	%	62.0	%	December 31, 2030
2020 QSR - 1 Year		2020	12.5	%	62.0	%	December 31, 2031
2020 QSR - 2 Year		2020 - 2021	17.5	%	62.0	%	December 31, 2032
Credit Union QSR (2)		2020-2025	65.0	%	50.0	%	December 31, 2039

(1) We will receive a profit commission provided the annual loss ratio on loans covered under the transaction remains below this ratio.

(2) Eligible credit union business written before 2020 was covered by our 2019 and prior QSR Transactions.

Table 9.3 provides additional detail regarding optional termination dates and optional reductions to our quota share percentage. The optional reduction to the quota share percentage would give us an option to reduce our quota share percentage from the original percentage as shown in table 9.2.

Reinsurance

Table

9.3

Quota Share Contract

Optional Termination Date (1)

Optional Quota Share % Reduction Date (2)

Quota Share % Reduction

2015 QSR

June 30, 2021

2017 QSR

December 31, 2021

2018 QSR

December 31, 2021

2019 QSR

December 31, 2021

July 1, 2020

25% or 20%

2020 QSR - 1 Year

December 31, 2022

July 1, 2021

10.5% or 8%

2020 QSR - 2 Year

December 31, 2023

July 1, 2021

14.5% or 12%

(1) We can elect early termination of the QSR agreement beginning on this date, and bi-annually thereafter for the 2015 QSR, 2019 QSR, and 2020 QSR. Early termination of the 2018 QSR can be elected annually after this date.

(2) We can elect to reduce the quota share percentage beginning on this date, and bi-annually thereafter.

Quota share reinsurance agreements on premiums earned and losses incurred

Table 9.4 provides a summary of our quota share reinsurance agreements for 2020, 2019, and 2018.


Quota share reinsurance
Table	9.4
		Years ended December 31,
(In thousands)		2020		2019		2018
Ceded premiums written and earned, net of profit commission		$	167,930	$	111,550	$	108,337
Ceded losses incurred		78,012		11,395		6,543
Ceding commissions (1)		48,077		48,793		51,201
Profit commission		72,452		139,179		147,667

(1)Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations.

Reinsurance retention policy

Table 9.5 provides a summary of our excess of loss reinsurance agreements as of December 31, 2020, December 31, 2019 and December 31, 2018.


Excess of Loss Reinsurance
Table 9.5
(In thousands)	Home Re 2020-1, Ltd.	Home Re 2019-1, Ltd.	Home Re 2018-1, Ltd.
Issue Date	October, 2020	May 1, 2019	October 1, 2018
Policy Inforce Dates	January 1, 2020 - July 31, 2020	January 1, 2018 - March 31, 2019	July 1, 2016 - December 31, 2017
Termination Option Date (1)	October 25, 2030	May 25, 2026	October 25, 2025
Initial First Layer Retention	275,283	185,730	168,691
Initial Excess of Loss Reinsurance Coverage	412,917	315,739	318,636
2020
Remaining First Layer Retention	275,283	184,514	166,005
Remaining Excess of Loss Reinsurance Coverage	412,917	208,146	218,343
2019
Remaining First Layer Retention	—	185,636	167,779
Remaining Excess of Loss Reinsurance Coverage	—	271,021	260,957
2018
Remaining First Layer Retention	—	—	168,691
Remaining Excess of Loss Reinsurance Coverage	—	—	318,636

(1)We have the right to terminate the excess-of-loss reinsurance agreements under certain circumstances and on any payment date on or after the respective termination option date.

Schedule of total assets of Home Re Entities

Table 9.6 presents the total assets of Home Re Entities as of December 31, 2020 , December 31, 2019 and December 31, 2018.


Home Re Entities total assets
Table	9.6

(In thousands)
Home Re Entity		Total VIE Assets
December 31, 2020
Home Re 2018-01 Ltd.		$	218,343
Home Re 2019-01 Ltd.		$	208,146
Home Re 2020-01 Ltd.		$	412,917

December 31, 2019
Home Re 2018-01 Ltd.		$	269,451
Home Re 2019-01 Ltd.		$	283,150

December 31, 2018
Home Re 2018-01 Ltd.		$	318,636

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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