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Reinsurance
 12 Months Ended
Dec. 31, 2021
Reinsurance Disclosures [Abstract]  
Reinsurance Reinsurance
 
In the ordinary course of business, our insurance subsidiaries may use reinsurance to provide protection against adverse loss experience and to expand our capital sources. Reinsurance recoverables are recorded as assets and included in other assets on our consolidated balance sheets, predicated on a reinsurer's ability to meet their obligations under the reinsurance
agreements. If the reinsurers are unable to satisfy their obligations under the agreements, our insurance subsidiaries would be liable for such defaulted amounts.

The effect of reinsurance on net premiums written and earned is as follows: 
Year Ended December 31,
(In thousands)202120202019
Net premiums written:
Direct$918,406 $922,851 $796,344 
Ceded (1)(110,914)(88,738)(35,499)
Net premiums written$807,492 $834,113 $760,845 
Net premiums earned:
Direct$983,457 $951,302 $812,924 
Ceded (1)(110,914)(88,738)(35,499)
Net premiums earned$872,543 $862,564 $777,425 
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(1)Net of profit commission.

Quota Share Reinsurance

Effective September 1, 2019, Essent Guaranty entered into a quota share reinsurance agreement with a panel of third-party reinsurers (the "QSR Agreement"). Each of the third-party reinsurers has an insurer financial strength rating of A or better by S&P Global Ratings, A.M. Best or both. Under the QSR Agreement, Essent Guaranty will cede premiums earned related to 40% of risk on eligible single premium policies and 20% of risk on all other eligible policies written September 1, 2019 through December 31, 2020, in exchange for reimbursement of ceded claims and claims expenses on covered policies, a 20% ceding commission, and a profit commission of up to 60% that varies directly and inversely with ceded claims. The QSR Agreement is scheduled to terminate on December 31, 2030. Essent Guaranty has certain termination rights under the QSR Agreement, including the option to terminate the QSR Agreement with no termination fee on December 31, 2021, and the option, subject to a termination fee, to terminate the QSR Agreement on December 31, 2022, or annually thereafter. As Essent Guaranty did not exercise its option to terminate the QSR Agreement on December 31, 2021, the maximum profit commission that Essent Guaranty could earn will increase to 63% in 2022 and thereafter. RIF ceded under the QSR Agreement was $4.6 billion as of December 31, 2021.

Excess of Loss Reinsurance

Essent Guaranty has entered into fully collateralized reinsurance agreements ("Radnor Re Transactions") with unaffiliated special purpose insurers domiciled in Bermuda. For the reinsurance coverage periods, Essent Guaranty and its affiliates retain the first layer of the respective aggregate losses, and a Radnor Re special purpose insurer will then provide second layer coverage up to the outstanding reinsurance coverage amount. Essent Guaranty and its affiliates retain losses in excess of the outstanding reinsurance coverage amount. The reinsurance premium due to each Radnor Re special purpose insurer is calculated by multiplying the outstanding reinsurance coverage amount at the beginning of a period by a coupon rate, which is the sum of one-month LIBOR or SOFR plus a risk margin, and then subtracting actual investment income collected on the assets in the related reinsurance trust during that period. The aggregate excess of loss reinsurance coverage decreases over a ten-year period as the underlying covered mortgages amortize. Essent Guaranty has rights to terminate the Radnor Re Transactions. The Radnor Re entities collateralized the coverage by issuing mortgage insurance-linked notes ("ILNs") in an aggregate amount equal to the initial coverage to unaffiliated investors. The notes have ten-year legal maturities and are non-recourse to any assets of Essent Guaranty or its affiliates. The proceeds of the notes were deposited into reinsurance trusts for the benefit of Essent Guaranty and will be the source of reinsurance claim payments to Essent Guaranty and principal repayments on the ILNs.

Essent Guaranty has also entered into reinsurance agreements with panels of reinsurers that provide aggregate excess of loss coverage immediately above or pari-passu to the coverage provided by the Radnor Re Transactions. The aggregate excess
of loss reinsurance coverage decreases over a ten-year period as the underlying covered mortgages amortize. Essent Guaranty has rights to terminate these reinsurance agreements.
    
The following tables summarizes Essent Guaranty's excess of loss reinsurance agreements as of December 31, 2021:
Vintage YearReinsurerEffective DateOptional Termination Date
2015 & 2016Radnor Re 2019-2 Ltd.June 20, 2019June 25, 2024
2017Radnor Re 2018-1 Ltd.March 22, 2018March 25, 2023(1)
2017Panel of ReinsurersNovember 1, 2018October 1, 2023(2)
2018Radnor Re 2019-1 Ltd.February 28, 2019February 25, 2026
2018Panel of ReinsurersFebruary 28, 2019February 25, 2026
2019Radnor Re 2020-1 Ltd.January 30, 2020January 25, 2027
2019Panel of ReinsurersJanuary 30, 2020January 25, 2027
2019 & 2020Radnor Re 2020-2 Ltd.October 8, 2020October 25, 2027
2020 & 2021Radnor Re 2021-1 Ltd.June 23, 2021June 26, 2028
2021Radnor Re 2021-2 Ltd.November 10, 2021November 25, 2027
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(1)If the reinsurance agreement is not terminated at the optional termination date, the risk margin component of the reinsurance premium increases by 50%.
(2)If the reinsurance agreement is not terminated at the optional termination date, the reinsurance premium increases by 50%.

The following table summarizes Essent Guaranty's excess of loss reinsurance coverages and retentions as of December 31, 2021:
(In thousands)Remaining
Reinsurance in Force
Vintage YearRemaining
Insurance
in Force		Remaining
Risk
in Force		ILNOther ReinsuranceTotalRemaining
First Layer
Retention
2015 & 2016$9,131,102 $2,462,841 $178,717 $— $178,717 $207,140 
20178,286,495 2,143,551 242,123 165,167 (7)407,290 217,409 
20189,341,880 2,382,994 325,537 76,144 (8)401,681 249,450 
2019 (3)
11,238,898 2,874,767 495,889 55,102 (9)550,991 215,115 
2019 & 2020 (4)
31,050,401 7,848,926 153,530 — 153,530 465,690 
2020 & 2021 (5)
50,143,288 12,263,000 557,911 — 557,911 278,956 
2021 (6)
45,887,021 12,086,006 439,407 — 439,407 279,415 
Total$165,079,085 $42,062,085 $2,393,114 $296,413 $2,689,527 $1,913,175 
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(3)Reinsurance coverage on new insurance written from January 1, 2019 through August 31, 2019.
(4)Reinsurance coverage on new insurance written from September 1, 2019 through July 31, 2020.
(5)Reinsurance coverage on new insurance written from August 1, 2020 through March 31, 2021.
(6)Reinsurance coverage on new insurance written from April 1, 2021 through September 30, 2021.
(7)Coverage provided immediately above the coverage provided by Radnor Re 2018-1 Ltd.
(8)Coverage provided pari-passu to the coverage provided by Radnor Re 2019-1 Ltd.
(9)Coverage provided pari-passu to the coverage provided by Radnor Re 2020-1 Ltd.

Based on the level of delinquencies reported to us, the ILN transactions entered into prior to March 31, 2020 became subject to a "trigger event" as of June 25, 2020. The amortization of principal of the notes issued by the unaffiliated special purpose insurers in connection with those ILN transactions is suspended and the aggregate excess of loss reinsurance coverage will not amortize during the continuation of a trigger event. As of November 26, 2021, Radnor Re 2019-2 was no longer subject to a trigger event.
The amount of monthly reinsurance premiums ceded to the Radnor Re entities will fluctuate due to changes in one-month LIBOR or SOFR and changes in money market rates that affect investment income collected on the assets in the reinsurance trusts. As the reinsurance premium will vary based on changes in these rates, we concluded that the Radnor Re Transactions contain embedded derivatives that will be accounted for separately like freestanding derivatives.

In connection with the Radnor Re Transactions, we concluded that the risk transfer requirements for reinsurance accounting were met as each Radnor Re entity is assuming significant insurance risk and a reasonable possibility of a significant loss. In addition, we assessed whether each Radnor Re entity was a variable interest entity ("VIE") and the appropriate accounting for the Radnor Re entities if they were VIEs. A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity. A VIE is consolidated by its primary beneficiary. The primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of the decision-making ability and ability to influence activities that significantly affect the economic performance of the VIE. We concluded that the Radnor Re entities are VIEs. However, given that Essent Guaranty (1) does not have the unilateral power to direct the activities that most significantly affect their economic performance and (2) does not have the obligation to absorb losses or the right to receive benefits that could be potentially significant to these entities, the Radnor Re entities are not consolidated in these financial statements.

The following table presents total assets of each Radnor Re special purpose insurer as well as our maximum exposure to loss associated with each Radnor Re entity, representing the fair value of the embedded derivatives, using observable inputs in active markets (Level 2), included in other assets (other accrued liabilities) on our consolidated balance sheet and the estimated net present value of investment earnings on the assets in the reinsurance trusts, each as of December 31, 2021:
Maximum Exposure to Loss
(In thousands)Total VIE AssetsOn - Balance SheetOff - Balance SheetTotal
Radnor Re 2018-1 Ltd.$242,123 $229 $39 $268 
Radnor Re 2019-1 Ltd.325,537 (2,478)76 (2,402)
Radnor Re 2019-2 Ltd.178,717 (1,521)14 (1,507)
Radnor Re 2020-1 Ltd.495,889 (1,652)134 (1,518)
Radnor Re 2020-2 Ltd.153,530 (472)9 (463)
Radnor Re 2021-1 Ltd.557,911 (1,421)232 (1,189)
Radnor Re 2021-2 Ltd.439,407 (1,110)233 (877)
Total$2,393,114 $(8,425)$737 $(7,688)

The assets of Radnor Re are the source of reinsurance claim payments to Essent Guaranty and provide capital relief under the PMIERs financial strength requirements (see Note 16). A decline in the assets available to pay claims would reduce the capital relief available to Essent Guaranty.