REINSURANCE

The Company purchases reinsurance and other protection to manage its risk portfolio and to reduce its exposure to large losses. The Company currently has in place contracts that provide for recovery of a portion of certain claims and claim expenses, generally in excess of various retentions or on a proportional basis. In addition to loss recoveries, certain of the Company’s ceded reinsurance contracts provide for payments of additional premiums, for reinstatement premiums and for lost no-claims bonuses, which are incurred when losses are ceded to the respective reinsurance contracts. The Company remains liable to the extent that any reinsurer fails to meet its obligations.

The following table sets forth the effect of reinsurance and retrocessional activity on premiums written and earned and on net claims and claim expenses incurred:




	Three months ended
	March 31, 2018			March 31, 2017
Premiums written
Direct	$	85,167		$	73,408
Assumed	1,074,485			848,682
Ceded	(496,608		)	(377,954		)
Net premiums written	$	663,044		$	544,136
Premiums earned
Direct	$	70,032		$	58,168
Assumed	605,483			498,999
Ceded	(235,233		)	(191,122		)
Net premiums earned	$	440,282		$	366,045
Claims and claim expenses
Gross claims and claim expenses incurred	$	225,742		$	251,804
Claims and claim expenses recovered	(54,039		)	(58,723		)
Net claims and claim expenses incurred	$	171,703		$	193,081

At March 31, 2018, the Company’s reinsurance recoverable balance was $1.6 billion (2017 - $1.6 billion). Of this amount, 52.2% is fully collateralized by our reinsurers, 46.8% is recoverable from reinsurers rated A- or higher by major rating agencies and 1.0% is recoverable from reinsurers rated lower than A- by major rating agencies (December 31, 2017 - 54.5%, 44.5% and 1.0%, respectively). The reinsurers with the three largest balances accounted for 9.3%, 8.1% and 6.7%, respectively, of the Company’s reinsurance recoverable balance at March 31, 2018 (December 31, 2017 - 10.4%, 7.5% and 7.3%, respectively). The valuation allowance recorded against reinsurance recoverable was $7.8 million at March 31, 2018 (December 31, 2017 - $7.0 million). The three largest company-specific components of the valuation allowance represented 16.1%, 15.2% and 14.2%, respectively, of the Company’s total valuation allowance at March 31, 2018 (December 31, 2017 - 11.1%, 9.2% and 8.4%, respectively).