Reinsurance

12 Months Ended

Dec. 31, 2022

REINSURANCE

Property and Casualty Insurance Business

Ceded and Assumed Reinsurance

Reinsurance is a contract by which one insurer, called the reinsurer, agrees to cover, under certain defined circumstances, a portion of the losses incurred by a primary insurer if a claim is made under a policy issued by the primary insurer. Our property and casualty insurance companies follow the industry practice of reinsuring a portion of their exposure by ceding to reinsurers a portion of the premium received and a portion of the risk under the policies written. We purchase reinsurance to reduce the net liability on individual risks to predetermined limits and to protect us against catastrophic losses, such as a hurricane or tornado. We do not engage in any reinsurance transactions classified as finite risk reinsurance.

We account for premiums, written and earned, and losses and loss settlement expenses incurred net of reinsurance ceded. The ceding of insurance does not legally discharge us from primary liability under our policies, and we must pay the loss if the reinsurer fails to meet its obligation. We periodically monitor the financial condition of our reinsurers to confirm that they are financially stable. We believe that all of our reinsurers are in an acceptable financial condition and there were no reinsurance balances at December 31, 2022 for which collection is at risk that would result in a material impact on our Consolidated Financial Statements. The amount of reinsurance recoverable on paid losses totaled $24,160 and $15,016 at December 31, 2022 and 2021, respectively.

We also assume both property and casualty insurance from other insurance or reinsurance companies.

Premiums and losses and loss settlement expenses related to our ceded and assumed business are as follows:



Years Ended December 31	2022		2021		2020
Ceded Business
Ceded premiums written	$	99,732	$	100,541	$	88,339
Ceded premiums earned	101,740		92,650		84,924
Loss and loss settlement expenses ceded	89,102		51,878		185,653

Assumed Business
Assumed premiums written	$	190,215	$	130,375	$	34,371
Assumed premiums earned	163,980		77,283		33,679
Loss and loss settlement expenses assumed	104,096		45,543		29,141

In 2022, we continued to grow our assumed programs by renewing the programs added in 2021 and continuing to diversify our risks in retro treaty, managing general agent, reinsurance intermediary, and financial lines. This increased our assumed written premiums by 45.9 percent and earned premiums by 112.2 percent over the prior year. Losses and loss settlement expenses ceded increased in 2022 due to two lines of business, other liability and fire and allied lines. Other liability is seeing more recoveries due to inflationary pressures and fire and allied lines has seen an increase in severity, with both of these issues driving increasing ceded recovery.

In 2021, we renewed our participation in all of our 2020 assumed programs. We also grew our assumed book significantly by signing on to new programs in various channels; including retro treaty, managing general agent, reinsurance intermediary, and financial lines. Losses and loss settlement expenses ceded decreased in 2021 as compared to 2020, primarily due to the Midwest derecho in August 2020, the recovery of the all lines aggregate program in 2020, and a decrease in severity of commercial property and workers’ compensation losses.

In 2020, we renewed our participation in all of our assumed programs. Losses and loss settlement expenses ceded increased in 2020 as compared to 2019, primarily due to the August Midwest derecho, the recovery of the all lines

aggregate program and increase in severity of commercial property and workers' compensation losses.

Refer to Note 5 "Reserves for Losses and Loss Settlement Expenses" for an analysis of changes in our overall property and casualty insurance reserves.

Reinsurance Programs and Retentions

We have several programs that provide reinsurance coverage. This reinsurance coverage limits the risk of loss that we retain by reinsuring direct risks in excess of our retention limits. The following table provides a summary of our primary reinsurance programs. Retention amounts reflect the accumulated retentions and co-participation of all layers within a program. For 2022 we decided not to renew the all lines aggregate excess loss program. In its place we added the pillared occurrence program in the table below. Another new program for 2022 was the addition of the earthquake quota share program. For 2021, there was an all lines annual aggregate excess of loss program with variable retention of 7.02 percent of gross net earned premium with a minimum retention of $58.5 million and a maximum of $71.5 million. Our all lines aggregate recovery is also limited to $30.0 million and 65.0 percent of the program was placed. For 2020, there was an all lines annual aggregate excess of loss program with variable retention of 6.37 percent of gross net earned premium with a minimum retention of $58.5 million and a maximum of $71.5 million. Our all lines aggregate recovery is also limited to $30.0 million and 75.0 percent of the program was placed. For 2020, the Company recovered the maximum of $22.5 million from the all lines annual aggregate excess of loss program.


	2022 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	3,000	$	60,000	100	%	of	$	57,000
Property excess of loss	3,000		25,000		100	%	of	$	22,000
Surety excess of loss	1,500		45,000		100	%	of	$	43,500
Property catastrophe, excess	15,000		180,000		100	%	of	$	165,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000
Pillared Occurrence Program	5,000		15,000		100	%	of	$	10,000
Earthquake Quota Share Program	N/A		180,000		100	%	of	$	180,000


	2021 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	2,500	$	60,000	100	%	of	$	57,500
Property excess of loss	2,500		25,000		100	%	of	$	22,500
Surety excess of loss	1,500		45,000		100	%	of	$	43,500
Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000


	2020 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	2,500	$	60,000	100	%	of	$	57,500
Property excess of loss	2,500		25,000		100	%	of	$	22,500
Surety excess of loss	1,500		45,000		100	%	of	$	43,500
Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000

If we incur catastrophe losses and loss settlement expenses that exceed the coverage limits of our reinsurance program, our property catastrophe program provides one guaranteed reinstatement. In such an instance, we are

required to pay the reinsurers a reinstatement premium equal to the full amount of the original premium, which will reinstate the full amount of reinsurance available under the property catastrophe program.