Reinsurance

12 Months Ended

Dec. 31, 2023

We reinsure certain risks with other insurance companies. Such arrangements serve to limit our maximum loss on certain individual risks as well as on catastrophes and large or unusually hazardous risks. We are liable to our insureds for reinsurance ceded in the event our reinsurers do not meet their obligations. Thus, a credit exposure exists with respect to reinsurance ceded to the extent that any reinsurer is unable or unwilling to meet the obligations assumed under the reinsurance contracts. Our allowance for uncollectible reinsurance balances receivable on paid losses and incurred claims was nil at December 31, 2023 as compared to $4.7 million at December 31, 2022 (see Note 4, “Allowance for Credit Losses” for additional information). Under certain reinsurance agreements, collateral, including letters of credit, is held to secure performance of reinsurers in meeting their obligations. The amount of such collateral was $1,212.2 million and $1,299.3 million at December 31, 2023 and December 31, 2022, respectively. The collateral we hold does not apply to our entire outstanding reinsurance recoverable. Rather, collateral is provided on an individual contract basis, as appropriate. For each individual reinsurer, the collateral held may exceed or fall below the total outstanding recoverable from that individual reinsurer.

The long-term nature of the reinsurance contracts creates a credit risk to us over time arising from potentially uncollectible reinsurance. To mitigate that counterparty risk, we evaluate our reinsurers to assess their financial condition. The factors that underlie these reviews include a financial risk assessment as well as an internal assessment of the capitalization and the operational risk of the reinsurer. As a result of these reviews, we may make changes to the approved markets that are used in both our treaty and facultative reinsurance programs.

In light of collateral held, we believe that no exposure to a single reinsurer represents an inappropriate concentration of credit risk to the Company. Gross reinsurance assets due from reinsurers exceeding five percent of our total reinsurance assets were approximately $945.0 million and $1,244.3 million at December 31, 2023 and 2022, respectively, of which approximately $465.1 million and $564.0 million, respectively, was secured by collateral.

Estimated losses recoverable from reinsurers and the ceded portion of unearned premiums are reported as assets in our Consolidated Balance Sheets. Included in Reinsurance recoverables are paid loss recoverables of $161.9 million and $190.6 million as of December 31, 2023 and 2022, respectively. Earned premiums and losses and loss adjustment expenses are reported net of reinsurance in our Consolidated Statements of Income (Loss).

Losses and loss adjustment expenses were $94.2 million for the period November 16, 2023 through December 31, 2023 (Successor), $1,043.2 million for January 1, 2023 through November 15, 2023 (Predecessor), and, $1,166.9 million and $1,314.6 million for the years ended December 31, 2022, and 2021, respectively, are net of amounts ceded to reinsurers of $79.3 million, $607.3 million, $958.8 million and $829.6 million, respectively.

We are required to accept certain assigned risks and other legally mandated reinsurance obligations. Prior to the mid-1980s, we assumed various forms of casualty reinsurance for which we continue to maintain reserves for losses and loss adjustment expenses (see Note 8, “Run-off Lines”). For such assumed reinsurance transactions, we engage in various monitoring steps that are common with assumed reinsurance such as ongoing claims reviews. We assumed property related reinsurance primarily through, Argo Re and Ariel Re, and casualty related reinsurance.

Premiums were as follows:


	Successor			Predecessor
	Period from			Period from			For the Years Ended December 31,
	November 16, 2023 through December 31, 2023			January 1, 2023 through November 15, 2023			2022			2021
(in millions)
Direct written premiums	$	186.0		$	1,907.9		$	2,682.8		$	2,990.6
Reinsurance ceded to other companies	(66.8)			(803.6)			(1,106.7)			(1,203.9)
Reinsurance assumed from other companies	5.1			40.4			165.4			190.6
Net written premiums	$	124.3		$	1,144.7		$	1,741.5		$	1,977.3
Direct earned premiums	$	252.3		$	1,906.5		$	2,757.8		$	2,917.7
Reinsurance ceded to other companies	(98.4)			(724.9)			(1,205.3)			(1,272.7)
Reinsurance assumed from other companies	8.4			44.3			187.9			265.1
Net earned premiums	$	162.3		$	1,225.9		$	1,740.4		$	1,910.1
Percentage of reinsurance assumed to net earned premiums	5.2		%	3.6		%	10.8		%	13.9		%

Loss Portfolio Transfer - U.S.

On November 9, 2022, the U.S. loss portfolio transaction with Enstar covering a majority of the Company’s U.S. casualty insurance reserves, including construction, for accident years 2011 to 2019 closed. See Note 2, “Recent Acquisitions, Disposals & Other Transactions” for further discussion.