Reinsurance

9 Months Ended

Sep. 30, 2020

The Company's wholly-owned Luxembourg subsidiary, Hollenfels Re SA ("Hollenfels") provides reinsurance to third party insurance and reinsurance companies. Hollenfels's share of claims incurred and paid during the periods below, as well as the change in claims outstanding or incurred but not reported ("Claims IBNR") during these periods were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(dollars in thousands)
Incurred and paid claims	$	2,570	$	126	$	10,498	$	7,046
Change in Claims IBNR	2,722		833		$	26,638	$	11,724

Hollenfels utilizes several methods to determine its Claims IBNR. It generally employs an estimation methodology whereby historical average claims ratios over a period of up to 10 years are utilized, based on availability of data. In cases where current claims development contradicts historical results, Hollenfels employs a method to average claims ratios derived through different actuarial calculation methods. Also, if an event occurs that may give rise to significant future claims in excess of the amount

calculated using the above-mentioned methodologies, the impact of such an event is calculated using existing claims data and actuarial estimation methods to adjust Hollenfels's Claims IBNR. During the three and nine months ended September 30, 2020, Hollenfels calculated its claim liability or claim adjustment expenses using the above-mentioned methods consistent with prior years.

While Hollenfels typically settles its premiums and claim payments on a quarterly basis, the frequency of claims in the underlying policies is impractical for Hollenfels to obtain. Certain contracts Hollenfels has written are on a quota-share basis while the rest of the policies provide aggregate loss protection, rendering the collection of information for all underlying contracts impracticable. Hollenfels did not discount any of its reserves and did not cede any portion of its exposures during the three and nine months ended September 30, 2020 and 2019.

From time to time, Hollenfels may enter into reinsurance agreements that require it to post collateral of cash or US government bonds to cover certain exposures as defined in the respective reinsurance agreements. As of September 30, 2020, Hollenfels pledged $120.5 million of collateral towards such reinsurance obligations, of which $106.1 million was cash and $14.4 million was US government bonds. As of December 31, 2019, total collateral pledged was $15.0 million, of which $2.0 million was cash and $13.0 million was US government bonds. Hollenfels expects $101.2 million and none of the cash collateral pledged as of September 30, 2020 and December 31, 2019, respectively, to be released on September 30, 2023. The remaining cash collateral of $4.9 million and all of the US government bonds pledged as of September 30, 2020 as well as all cash and US government bonds pledged as of December 31, 2019 are expected to be released periodically between March 31, 2021 and March 31, 2024 in accordance with the terms of the underlying reinsurance agreements.