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Reinsurance (Tables)

3 Months Ended

Mar. 31, 2023

The effect of reinsurance on net premiums written and earned is as follows:


	Three Months Ended March 31,
(In thousands)		2023		2022
Net premiums written:
Direct		$	239,491	$	220,254
Ceded (1)		(33,591)		(20,523)
Net premiums written		$	205,900	$	199,731

Net premiums earned:
Direct		$	244,849	$	235,853
Ceded (1)		(33,591)		(20,523)
Net premiums earned		$	211,258	$	215,330

(1)Net of profit commission.

The following tables summarizes Essent Guaranty's quota share reinsurance agreements as of March 31, 2023:


QSR Agreement	Coverage Period	Ceding Percentage	Ceding Commission	Profit Commission
QSR-2019	September 1, 2019-December 31, 2020	(1)	20%	63%	(2)
QSR-2022	January 1, 2022-December 31, 2022	20%	20%	62%
QSR-2023	January 1, 2023-December 31, 2023	17.5%	20%	58%

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(1)Under QSR-2019, Essent Guaranty cedes 40% of premiums on singles policies and 20% on all other policies.

(2)The original profit commission on QSR-2019 was up to 60%; however because 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 increased to 63% in 2022 and thereafter.

Schedule of Coverages and Retentions

The following table summarizes Essent Guaranty's excess of loss reinsurance agreements as of March 31, 2023:

Vintage Year

Reinsurer

Effective Date

Optional Termination Date

2017

Panel of Reinsurers

November 1, 2018

October 1, 2023

(1)

2018

Radnor Re 2019-1 Ltd.

February 28, 2019

February 25, 2026

2018

Panel of Reinsurers

February 28, 2019

February 25, 2026

2019

Radnor Re 2020-1 Ltd.

January 30, 2020

January 25, 2027

2019

Panel of Reinsurers

January 30, 2020

January 25, 2027

2020 & 2021

Radnor Re 2021-1 Ltd.

June 23, 2021

June 26, 2028

2021

Radnor Re 2021-2 Ltd.

November 10, 2021

November 25, 2027

2021 & 2022

Panel of Reinsurers

June 1, 2022

January 1, 2030

2021 & 2022

Radnor Re 2022-1 Ltd.

September 21, 2022

September 25, 2028

(1) 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 March 31, 2023:


(In thousands)					Remaining Reinsurance in Force
Vintage Year	Remaining Insurance in Force		Remaining Risk in Force		ILN		Other Reinsurance			Total		Remaining First Layer Retention
2017	5,511,131		1,450,432		—		70,895		(7)	70,895		421,003		(10)
2018	6,349,474		1,644,287		325,537		76,144		(8)	401,681		248,221
2019 (2)	7,859,217		2,029,598		395,889		43,991		(9)	439,880		214,485

2020 & 2021 (3)	38,168,321		9,652,777		414,005		—			414,005		278,909
2021 (4)	40,543,749		10,825,130		399,786		—			399,786		279,400
2021 & 2022 (5)	74,276,338		19,998,840		—		141,992			141,992		507,114
2021 & 2022 (6)	33,357,208		8,966,697		237,868		—			237,868		303,761
Total	$	206,065,438	$	54,567,761	$	1,773,085	$	333,022		$	2,106,107	$	2,025,706	(11)

(2) Reinsurance coverage on new insurance written from January 1, 2019 through August 31, 2019.

(3) Reinsurance coverage on new insurance written from August 1, 2020 through March 31, 2021.

(4) Reinsurance coverage on new insurance written from April 1, 2021 through September 30, 2021.

(5) Reinsurance coverage on new insurance written from October 1, 2021 through December 31, 2022.

(6) Reinsurance coverage on new insurance written from October 1, 2021 through July 31, 2022.

(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.

(10) The original and remaining first layer retention is associated with reinsurance provided by a panel of reinsurers. Amounts reported in prior periods reflected the retention associated with an ILN that is no longer outstanding as of March 31, 2023.

(11) The total remaining first layer retention differs from the sum of the individual reinsurance transactions as a result of overlapping coverage between certain transactions.

Schedule of VIE Assets and Total Maximum Exposure to Loss

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 condensed consolidated balance sheet and the estimated net present value of investment earnings on the assets in the reinsurance trusts, each as of March 31, 2023:


			Maximum Exposure to Loss
(In thousands)	Total VIE Assets		On - Balance Sheet		Off - Balance Sheet		Total
Radnor Re 2019-1 Ltd.	325,537		(2,218)		90		(2,128)
Radnor Re 2020-1 Ltd.	395,889		(1,286)		158		(1,128)
Radnor Re 2021-1 Ltd.	414,005		(4,657)		98		(4,559)
Radnor Re 2021-2 Ltd.	$	399,786	$	(3,849)	$	95	$	(3,754)
Radnor Re 2022-1 Ltd.	$	237,868	$	695	$	78	$	773
Total	$	1,773,085	$	(11,315)	$	519	$	(10,796)

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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