Reinsurance

In the normal course of business, the Company seeks to minimize the loss that may arise from catastrophes or other events that cause unfavorable underwriting results by reinsuring certain levels of risk in various areas of exposure with reinsurers. The Company participates in reinsurance agreements in order to limit its loss exposure including protecting against catastrophe losses. The Company primarily ceded all specific risks in excess of $500,000 in 2015, and $300,000 in 2014. Reinsurance does not discharge the direct insurer from liability to its policyholder. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors the concentration of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. To date, the Company has not experienced any significant difficulties in collecting reinsurance recoverables. The Company's current reinsurance structure includes the following primary categories

Casualty Clash

•

The Company is party to a workers' compensation and casualty clash reinsurance treaty with limits up to $18.0 million in excess of a $2.0 million rentention. Clash coverage is a type of reinsurance that provides additional coverage in the event that one casualty loss event results in two or more claims from our insured policyholders. Clash reinsurance further protects the balance sheet as it reduces the potential maximum loss on either a single risk or a large number of risks.

Facultative


•	The Company has an agreement with a large reinsurer for a property facultative facility for risks with property total insured values above the reinsurance treaty limits. Facultative reinsurance is where a reinsurer negotiates an individual reinsurance agreement for every policy it will reinsure on a policy by policy basis.

Property


•	Effective November 1, 2014, the Company entered into an excess of loss reinsurance agreement for personal property coverage with limits up to $2.7 million in excess of $300,000, for homeowners' and dwelling fire business.


•	Effective July 1, 2015, the Company entered into an excess of loss treaty for commercial property values from $2.0 million to $4.0 million, to replace much of the facultative reinsurance cover. A treaty provides for coverage over a class of risks and does not require policy by policy underwriting of the reinsurer.


•	The Company is covered for property catastrophe losses up to $94.0 million in excess of a $6.0 million retention for the first event. The Company also has second and third event property catastrophe coverage with a $1.0 million retention. The treaty renews June 1, 2016.

Multiple Line


•	Effective January 1, 2015, the Company has an excess of loss multi-line agreement that covers commercial property and casualty losses up to $1.5 million in excess of a $500,000 retention.

Quota Share

•

The Company has commercial umbrella treaties for commercial lines business in the form of a 90% quota share. A quota share agreement is an agreement between an insurer and a reinsurer whereby the reinsurer pays an agreed-upon percentage of all losses the insurer sustains. In turn, the insurer compensates the reinsurer for this agreement in the form of a percentage of the premiums written for the applicable lines covered and reinsurance period.

•

Effective December 31, 2014, the Company entered into a 25% quota share arrangement with a reinsurer for coverage net of the other reinsurance arrangements and within the Company's retention of $500,000 for commercial lines and $300,000 for personal homeowners lines. The Company terminated the agreement on August 1, 2015. The purpose of the quota share arrangement was to reduce the capital requirements necessary to support premium growth initiatives. The IPO provided sufficient capital to support growth initiatives, and the quota share was no longer deemed necessary.

Equipment Breakdown, Employment Practice Liability, and Data Compromise and Identity Recovery


•	The Company has a 100% quota share arrangement with another reinsurer for the small number of equipment breakdown, employment practices liability and data compromise coverages that are occasionally bundled with other products.

The Company assumes written premiums under a few fronting arrangements, most of which are net of other reinsurance arrangements. The fronting arrangements are with unaffiliated insurers who write on behalf of the Company in markets that require a higher A.M. Best rating than the Company’s rating, or where the policies are written in a state where the Company is not licensed or for other strategic reasons. Assumed premiums is comprised entirely of these arrangements other than where there are premiums assumed from Citizens Property and Casualty Corporation (“Citizens”).

Beginning in December 2014, the Company assumed written premium of $5.5 million under a policy assumption agreement with Citizens. Citizens is a Florida government-sponsored insurer that provides homeowners insurance to Florida residences that cannot find coverage in the voluntary market. Upon assuming this premium, the Company becomes the primary insurer to the policyholders. The Company is responsible for claims occurring on or after the effective date of the assumption.

In the first quarter of 2015, the Company assumed additional written premium from Citizens in the amount of $1.4 million. This assumption was offset during the year ended December 31, 2015 by a return of $1.3 million of assumed premiums from the 2014 assumption and $738,000 of assumed premiums from the 2015 assumption. The return premiums are related to the policyholders opting out of the related assumptions.

The Company assumed $2.5 million and $105,000 of written premiums under the insurance fronting arrangements for the years ended ended December 31, 2015 and 2014, respectively.

The following table presents the effects of such reinsurance and assumption transactions on written premiums, earned premiums and losses and LAE (dollars in thousands):



	Year Ended December 31,
	2015			2014			2013
Written premiums:
Direct	$	90,503		$	78,296		$	44,087
Assumed	3,247			5,551			—
Ceded	(14,076		)	(17,548		)	(6,439		)
Net written premiums	$	79,674		$	66,299		$	37,648

Earned premiums:
Direct	$	82,614		$	66,608		$	32,893
Assumed	6,602			361			—
Ceded	(22,451		)	(9,441		)	(5,264		)
Net earned premiums	$	66,765		$	57,528		$	27,629

Loss and loss adjustment expenses:
Direct	$	43,989		$	43,894		$	15,284
Assumed	2,756			107			(171		)
Ceded	(7,863		)	(3,271		)	711
Net Loss and loss adjustment expenses	$	38,882		$	40,730		$	15,824