Note D – Reinsurance

The Insurance Subsidiaries cede portions of their gross premiums written to certain other insurers under excess of loss and quota share treaties and by facultative placements. Some reinsurance contracts provide that a loss be shared among the Company and its reinsurers on a predetermined pro-rata basis ("quota share"), while other contracts provide that the Company keep a fixed amount of the loss, similar to a deductible, with reinsurers taking all losses above this fixed amount ("excess of loss"). Reinsurance treaties with other companies permit the recovery of a portion of related direct losses. Management determines the amount of net exposure it is willing to accept generally on a product-line basis. Certain treaties covering commercial automobile risks include annual deductibles which must be exceeded before the Company can recover under the terms of the treaty. The Company retains a higher percentage of the direct premium in consideration of these deductible provisions. The Company remains liable to the extent the reinsuring companies are unable to meet their obligations under reinsurance contracts.

The Company also serves as an assuming reinsurer on treaties with direct writing insurance companies and, prior to June 30, 2015, under retrocessions from other reinsurers for catastrophic property coverages. Accordingly, for periods prior to that date, the occurrence of catastrophic events could have had a significant impact on the Company's operations. In addition, the Insurance Subsidiaries participate in certain mandatory residual market pools, which require insurance companies to provide coverages on assigned risks. The assigned risk pools allocate participation to all insurers based upon each insurer's portion of premium writings on a state or national level. Historically, the operation of these assigned risk pools has resulted in net losses being allocated to the Company, although such losses have not been material in relation to the Company's operations.

The following table summarizes the impact of reinsurance ceded and assumed on the Company's net premiums written and earned for the most recent three years:

	Premiums Written									Premiums Earned
	2019			2018			2017			2019			2018			2017
Direct	$	574,181		$	581,070		$	504,033		$	570,959		$	562,364		$	470,158
Ceded on direct		(122,676	)		(138,102	)		(151,348	)		(124,446	)		(131,080	)		(145,201	)
Net direct		451,505			442,968			352,685			446,513			431,284			324,957

Assumed		737			1,430			704			775			1,596			3,188
Ceded on assumed		–			–			—			–			–			—
Net assumed		737			1,430			704			775			1,596			3,188

Net	$	452,242		$	444,398		$	353,389		$	447,288		$	432,880		$	328,145

Net losses and loss expenses incurred for 2019, 2018 and 2017 have been reduced by ceded reinsurance recoveries of approximately $121,927, $148,173 and $128,086, respectively. Ceded reinsurance premiums and loss recoveries for the purchase of catastrophe reinsurance coverage on the Company's net direct business were not material.

Net losses and loss expenses incurred include expenses of $193 for 2019, a savings of $1,300 for 2018 and expenses of $5,223 for 2017, relating to reinsurance assumed from non-affiliated insurance or reinsurance companies.

Components of reinsurance recoverable at December 31, 2019, 2018 and 2017 are as follows:

	2019		2018
Case unpaid losses, net of valuation allowance	$	166,675	$	163,011
Incurred but not reported unpaid losses and loss expenses		230,459		211,805
Paid losses and loss expenses		20,334		1,250
Unearned premiums		14,599		16,370
	$	432,067	$	392,436