Reinsurance

6 Months Ended

Jun. 30, 2023

Reinsurance

Reinsurance

10. Reinsurance

2023 Program

Our third-party quota share reinsurance program is split into three separate placements to maximize coverage and cost efficiency. The 2023 Coastal Program covers our business in certain Texas coastal regions and the Houston metropolitan area and is placed at 42% of subject property and casualty losses (“P&C losses”), as well as all business in South Carolina which is placed at 7% of P&C losses. The 2023 Core Program, which covers the portion of our business not in the Coastal Program, is placed at 49.5% of P&C losses of our remaining business in Texas and 48% of P&C

losses of our business in other states. In addition, the Combined Program covers all of our business and is placed at 5% of P&C losses. All programs are effective for the period January 1, 2023, through December 31, 2023, or March 31, 2024, and are subject to certain limits and exclusions, which vary by participating reinsurer.

Property catastrophe excess of loss treaties were placed on April 1, 2023, and limited our net retention to $8 million per occurrence. The five layers provide coverage up to a net loss of $440 million. We also place reinstatement premium protection to cover any reinstatement premiums due on the first four layers.

The effects of reinsurance on premiums written and earned for the three and six months ended June 30, 2023 and 2022, were as follows:

	Three Months Ended June 30,
	2023				2022
	Written		Earned		Written		Earned
Direct premiums	$	121,540	$	116,397	$	124,914	$	93,082
Ceded premiums		(67,387)		(72,166)		(117,926)		(83,095)
Net premiums	$	54,153	$	44,231	$	6,988	$	9,987

	Six Months Ended June 30,
	2023				2022
	Written		Earned		Written		Earned
Direct premiums	$	218,413	$	231,221	$	212,037	$	177,400
Ceded premiums		(65,121)		(146,840)		(178,562)		(154,822)
Net premiums	$	153,292	$	84,381	$	33,475	$	22,578

Our 2023 third-party quota share program was placed at a reduced ceding percentage as compared to the 2022 program, which resulted in a portfolio transfer and lower ceded written premiums in the six months ended June 30, 2023.

The effects of reinsurance on incurred losses and loss adjustment expense (“LAE”) for the three and six months ended June 30, 2023 and 2022, were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Direct losses and LAE	$	137,591	$	74,617	$	227,606	$	142,838
Ceded losses and LAE		(66,442)		(60,133)		(113,598)		(119,106)
Net losses and LAE	$	71,149	$	14,484	$	114,008	$	23,732

The detail of reinsurance balances due is as follows:

	June 30, 2023		December 31, 2022
Ceded unearned premium	$	147,297	$	203,157
Losses and LAE reserve		89,296		76,999
Reinsurance recoverable		29,260		18,765
Other		6,614		139
Reinsurance balance due	$	272,467	$	299,060