Reinsurance

12 Months Ended

Dec. 31, 2019

The Company cedes insurance to reinsurers to limit its maximum loss, provide greater diversification of risk, minimize exposures on larger risks and to exit certain lines of business. The ceding of insurance does not discharge the primary liability of the Company. A credit exposure exists with respect to reinsurance ceded to the extent that any reinsurer is unable to meet its obligations. A collectibility exposure also exists to the extent that the reinsurer disputes the liabilities assumed under reinsurance agreements. Property and casualty reinsurance coverages are tailored to the specific risk characteristics of each product line and the Company's retained amount varies by type of coverage. Reinsurance contracts are purchased to protect specific lines of business such as property and workers' compensation. Corporate catastrophe reinsurance is also purchased for property and workers' compensation exposure. The Company also utilizes facultative reinsurance in certain lines. In addition, the Company assumes reinsurance primarily through Hardy and as a member of various reinsurance pools and associations.

The following table presents the amounts receivable from reinsurers.



December 31
(In millions)	2019			2018
Reinsurance receivables related to insurance reserves:
Ceded claim and claim adjustment expenses	$	3,835		$	4,019
Ceded future policy benefits	226			233
Reinsurance receivables related to paid losses	143			203
Reinsurance receivables	4,204			4,455
Allowance for uncollectible reinsurance	(25		)	(29		)
Reinsurance receivables, net of allowance for uncollectible reinsurance	$	4,179		$	4,426

The Company has established an allowance for uncollectible reinsurance receivables related to credit risk. The Company reviews the allowance quarterly and adjusts the allowance as necessary to reflect changes in estimates of uncollectible balances. The allowance may also be reduced by write-offs of reinsurance receivable balances.

The Company attempts to mitigate its credit risk related to reinsurance by entering into reinsurance arrangements with reinsurers that have credit ratings above certain levels and by obtaining collateral. On a limited basis, the Company may enter into reinsurance agreements with reinsurers that are not rated, primarily captive reinsurers. The primary methods of obtaining collateral are through reinsurance trusts, letters of credit and funds withheld balances. Such collateral, limited by the balance of open recoverables, was approximately $3.2 billion as of December 31, 2019 and 2018.

The Company's largest recoverables from a single reinsurer as of December 31, 2019, including ceded unearned premium reserves, were approximately $2.0 billion from subsidiaries of Berkshire Hathaway Insurance Group, $289 million from the Palo Verde Insurance Company and $226 million from a subsidiary of Wilton Re. These amounts are substantially collateralized. The recoverable from subsidiaries of the Berkshire Hathaway Insurance Group includes amounts related to third-party reinsurance for which NICO has assumed the credit risk under the terms of the LPT as discussed in Note E to the Consolidated Financial Statements.

The effects of reinsurance on earned premiums and written premiums are presented in the following tables.



(In millions)	Direct		Assumed		Ceded		Net		Assumed/ Net %
2019 Earned Premiums
Property and casualty	$	11,021	$	288	$	4,401	$	6,908	4.2	%
Long term care	470		50		—		520		9.6	%
Total earned premiums	$	11,491	$	338	$	4,401	$	7,428	4.6	%

2018 Earned Premiums
Property and casualty	$	10,857	$	305	$	4,380	$	6,782	4.5	%
Long term care	480		50		—		530		9.4	%
Total earned premiums	$	11,337	$	355	$	4,380	$	7,312	4.9	%

2017 Earned Premiums
Property and casualty	$	10,447	$	317	$	4,315	$	6,449	4.9	%
Long term care	489		50		—		539		9.3	%
Total earned premiums	$	10,936	$	367	$	4,315	$	6,988	5.3	%



(In millions)	Direct		Assumed		Ceded		Net		Assumed/ Net %
2019 Written Premiums
Property and casualty	$	11,421	$	281	$	4,569	$	7,133	3.9	%
Long term care	473		50		—		523		9.6	%
Total written premiums	$	11,894	$	331	$	4,569	$	7,656	4.3	%

2018 Written Premiums
Property and casualty	$	11,094	$	310	$	4,583	$	6,821	4.5	%
Long term care	474		50		—		524		9.5	%
Total written premiums	$	11,568	$	360	$	4,583	$	7,345	4.9	%

2017 Written Premiums
Property and casualty	$	10,655	$	327	$	4,449	$	6,533	5.0	%
Long term care	486		50		—		536		9.3	%
Total written premiums	$	11,141	$	377	$	4,449	$	7,069	5.3	%

Included in the direct and ceded earned premiums for the years ended December 31, 2019, 2018 and 2017 are $3,578 million, $3,740 million and $3,864 million related to property business that is 100% reinsured under a significant third-party captive program. The third-party captives that participate in this program are affiliated with the non-insurance company policyholders, therefore this program provides a means for the policyholders to self-insure this property risk. The Company receives and retains a ceding commission.

Long term care premiums are from long duration contracts; property and casualty premiums are from short duration contracts.

Insurance claims and policyholders' benefits reported on the Consolidated Statements of Operations are net of estimated reinsurance recoveries of $2,733 million, $2,836 million and $3,085 million for the years ended December 31, 2019, 2018 and 2017, including $2,080 million, $1,927 million and $2,541 million, respectively, related to the significant third-party captive program discussed above.