Insurance and reinsurance

12 Months Ended

Dec. 31, 2022

SEC Schedule, 12-17, Insurance Companies, Reinsurance [Abstract]

Insurance and reinsurance Cowen Insurance Co is a wholly owned Malta-based insurance company that reinsures a significant proportion of its portfolio (“Outward Reinsurance”). The Company's wholly owned subsidiaries, Cowen Reinsurance S.A. (based in Luxembourg) (“Cowen Re”) and Kelvin (based in Guernsey, see Note 3) provide reinsurance to third party insurance and reinsurance companies (“Inward Reinsurance”). Cowen Insurance Co's, Cowen Re's, and Kelvin's share of claims incurred and paid during the periods below, as well as the change in claims outstanding and claims incurred but not reported ("IBNR") during years ended December 31, 2022, 2021 and 2020, net of reinsurance, were as follows:


	Year Ended December 31,
		2022		2021		2020
		(dollars in thousands)
Paid claims
Insurance (net of Outward Reinsurance)		$	4,496	$	3,285	$	—
Inward Reinsurance		28,615		17,140		14,838
Total		$	33,111	$	20,425	$	14,838
Change in claims outstanding and claims IBNR
Insurance (net of Outward Reinsurance)		$	533	$	112	$	—
Inward Reinsurance		(55,803)		3,304		11,599
Total		$	(55,270)	$	3,416	$	11,599

As of December 31, 2022 and 2021, insurance and reinsurance assets and liabilities consisted of the following:


	As of December 31,
	2022		2021

Insurance and reinsurance assets
Reinsurance recoverable on paid claims	$	66,303	$	9,072
Deferred acquisition costs	4,610		5,672
Cash advances held by cedants	2,684		3,523
Reinsurance recoverable on claims reserves	60,189		11,806
Total	$	133,786	$	30,073
Insurance and reinsurance liabilities
Reinsurance payables on paid claims	$	27,030	$	3,837
Unearned Premium reserve	27,294		23,241
Loss reserves (incurred claims and IBNR)	263,223		44,191
Total	$	317,547	$	71,269

Cowen Insurance Co, Cowen Re, and Kelvin utilize several methods to determine their claims IBNR. Cowen Insurance Co and Cowen Re generally employ 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, Cowen Insurance Co and Cowen Re employ a method to determine average claims ratios derived through different actuarial calculation methods. 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 Cowen Insurance Co's and Cowen Re's IBNR provision. As Kelvin is in run-off Kelvin determines its IBNR liabilities based on figures provided by insurance companies that Kelvin reinsures as well as industry-wide information about claims development related to known events in the past, such as hurricanes, typhoons, earthquakes, etc. All entities utilize recognized actuarial methods and assumptions which are regularly reviewed through catastrophe models, own loss experience, historical industry loss experience, underwriter and originator experience, pricing adequacy trends and management’s professional judgement. During the year ended December 31, 2022, claims liability and claim adjustment expenses were calculated using the above-mentioned methods consistent with prior years.

Cowen Insurance Co, Cowen Re, and Kelvin typically settle their premiums and claim payments on a quarterly basis. Cowen Insurance Co, Cowen Re, and Kelvin write contracts on both a proportional and non-proportional basis. The contracts contain inspection rights to allow the companies to inspect the policy documents that provide the source for the underlying data provided by the cedant. This negates the need for them to collect and hold the documents themselves which would be impracticable. Cowen Insurance Co, Kelvin, and Cowen Re do not discount any of its reserves and manage their exposure to insurance risk from higher than expected claims via the purchase of outward reinsurance. Cowen Insurance Co purchases such reinsurance on a program by program basis while Cowen Re and Kelvin have purchased whole account reinsurance which extends to their entire business.

Cowen Insurance Co, Cowen Re and Kelvin have entered into insurance and reinsurance agreements that require them to post collateral of cash or U.S. government bonds to cover certain exposures as defined in the respective insurance and reinsurance agreements. As of December 31, 2022, Cowen Re had pledged $53.0 million of collateral towards such reinsurance obligations, of

which $43.0 million was in cash and $10.1 million was in U.S. government bonds. As of December 31, 2021, total collateral pledged was $60.1 million, of which $44.1 million was cash and $16.0 million was U.S. government bonds. The collateral pledged as of December 31, 2022 was $7.1 million lower than the amounts pledged at December 31, 2021. This change is due to a release of collateral on three of its cedant contracts. Cowen Re expects $40.5 million of the cash collateral pledged to be released on September 30, 2023. The remaining collateral of $12.5 million is expected to be released periodically between December 31, 2022 and December 31, 2029 in accordance with the terms of the underlying insurance and reinsurance agreements. As of December 31, 2022, Kelvin had pledged $76.6 million of collateral towards its reinsurance obligations, of which $52.2 million was in cash and $24.4 million was in the form of letters of credit from major banks. As of December 31, 2022 and December 31, 2021, Cowen Insurance Co had no pledged collateral.


	As of December 31,
	2022		2021

Insurance and reinsurance assets
Beginning balance at January 1	$	44,191	$	37,036
Increase/(Decreases) reinsurance recoverables	(11,806)		—
Total	$	32,385	$	37,036

Incurred related to:
Current Years	$	2,436	$	13,262
Prior Years	(36,200)		1,414
Total	$	(33,764)	$	14,676

Paid related to:
Current Years	$	3,941	$	6,874
Prior Years	29,170		13,551
Total	$	33,111	$	20,425

Acquired insurance and reinsurance liabilities net of reinsurance assets and liabilities	$	237,524	$	1,009

Balance at December 31	$	203,035	$	32,385
Increase/(Decreases) reinsurance recoverables	60,189		$	11,806
Ending balance at December 31	$	263,224	$	44,191