XML 234 R11.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Reinsurance
 12 Months Ended
Dec. 31, 2019
Insurance [Abstract]  
Reinsurance Reinsurance
ProAssurance purchases reinsurance from third-party reinsurers and insurance enterprises in order to reduce its net exposure to losses, to provide capacity to write larger limits of liability, to provide reimbursement for losses incurred under the higher limit coverages the Company offers and as a mechanism for providing custom insurance solutions. ProAssurance also uses reinsurance arrangements as a mechanism for sharing risk with insureds or their affiliates.
The effects of reinsurance for the years ended December 31, 2019, 2018 and 2017 were as follows:
 
 
Year Ended December 31
 (In thousands)
 
2019
 
2018
 
2017
Direct
 
$
919,799

 
$
910,198

 
$
842,968

Assumed
 
47,691

 
47,113

 
31,908

Ceded
 
(124,765
)
 
(122,397
)
 
(110,858
)
Net premiums written
 
$
842,725

 
$
834,914

 
$
764,018

 
 
 
 
 
 
 
Direct
 
$
926,035

 
$
903,354

 
$
821,249

Assumed
 
45,668

 
41,535

 
27,629

Ceded
 
(124,171
)
 
(126,036
)
 
(110,347
)
Net premiums earned
 
$
847,532

 
$
818,853

 
$
738,531

 
 
 
 
 
 
 
Losses and loss adjustment expenses
 
$
871,780

 
$
675,784

 
$
592,218

Reinsurance recoveries
 
(117,865
)
 
(82,574
)
 
(123,060
)
Net losses and loss adjustment expenses
 
$
753,915

 
$
593,210

 
$
469,158


The receivable from reinsurers on unpaid losses and LAE represents management’s estimated amount of future loss payments that will be recoverable under ProAssurance reinsurance agreements. Certain of the Company's reinsurance agreements base the amount of premium that is due to the reinsurer in part on losses reimbursed or to be reimbursed under the agreement, and terms may also include maximum and minimum amounts of ceded premium. Ceded premium amounts are estimated based on management’s expectation of ultimate losses and the portion of those losses that are allocable to reinsurers according to the terms of the agreements, including any minimums or maximums. Given the uncertainty of the ultimate amounts of losses, management’s estimates of losses and related amounts recoverable may vary significantly from the eventual outcome. Due to changes in management’s estimates of amounts due to reinsurers related to prior accident year loss recoveries, ProAssurance increased premiums ceded in its Specialty P&C segment by $2.8 million and $5.5 million during the years ended December 31, 2019 and 2018, respectively, and reduced premiums ceded by $1.2 million during the year ended December 31, 2017.
Reinsurance contracts do not relieve ProAssurance from its obligations to policyholders, and ProAssurance remains liable to its policyholders whether or not reinsurers honor their contractual obligations. ProAssurance continually monitors its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies.
At December 31, 2019, the net total amounts due from reinsurers was $393.3 million (receivables related to paid and unpaid losses and LAE and prepaid reinsurance premiums, less reinsurance premiums payable). No single reinsurer had an individual balance which exceeded $40.0 million.
At December 31, 2019 reinsurance recoverables totaling approximately $92.6 million were collateralized by letters of credit or funds withheld. ProAssurance had no allowance for credit losses related to its reinsurance receivables at December 31, 2019 or 2018 as all reinsurance balances were considered collectible. During the years ended December 31, 2019 and 2018, no reinsurance balances were written off for credit reasons. During the year ended December 31, 2017, reinsurance balances written off for credit reasons were nominal in amount.
During the fourth quarter of 2018, 2017 and 2016, ProAssurance commuted the 2017, 2016 and 2015 calendar year quota share reinsurance arrangements, respectively, between the Specialty P&C segment and Syndicate 1729. Due to the quarter lag, the effects of the 2017, 2016 and 2015 commutations were reported in both the Specialty P&C and Lloyd's Syndicates segments results during the first quarter of 2019, 2018 and 2017, respectively, which resulted in a net cash receipt of approximately $3.1 million, $6.1 million and $6.3 million, respectively. The commutations reduced the receivable from reinsurers on unpaid losses and LAE, combined, by approximately $3.8 million, $6.7 million and $6.6 million during the years ended December 31, 2019, 2018 and 2017, respectively.
During 2017, ProAssurance commuted an outstanding DDR reinsurance arrangement with one of its reinsurers which resulted in a net cash receipt of approximately $7.8 million and reduced its receivable from reinsurers on unpaid losses and LAE by approximately $5.4 million.