Note 15. Reinsurance

CNA 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 CNA. A credit exposure exists with respect to property and casualty and life reinsurance ceded to the extent that any reinsurer is unable to meet its obligations or 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 CNA’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. Currently most reinsurance contracts are purchased on an excess of loss basis. CNA also utilizes facultative reinsurance in certain lines. In addition, CNA 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	2015			2014
(In millions)

Reinsurance receivables related to insurance reserves:
Ceded claim and claim adjustment expenses		$	4,087		$	4,344
Ceded future policy benefits			207			185
Reinsurance receivables related to paid losses			197			213
Reinsurance receivables			4,491			4,742
Less allowance for doubtful accounts			38			48

Reinsurance receivables, net of allowance for doubtful accounts		$	4,453		$	4,694

CNA has established an allowance for doubtful accounts on reinsurance receivables. CNA 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.

CNA 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, CNA 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 was approximately $3.2 billion and $3.4 billion at December 31, 2015 and 2014.

CNA’s largest recoverables from a single reinsurer, including ceded unearned premium reserves as of December 31, 2015 were approximately $2.4 billion from subsidiaries of Berkshire Hathaway Group, $284 million from the Gateway Rivers Insurance Company and $207 million from subsidiaries of the Hartford Insurance Group. The recoverable from the Berkshire Hathaway Group includes amounts related to third party reinsurance for which NICO has assumed the credit risk under the terms of the loss portfolio transfer as discussed in Note 8.

The effects of reinsurance on earned premiums are presented in the following table:


	Direct		Assumed		Ceded		Net		Assumed/ Net %
(In millions)

Year Ended December 31, 2015

Property and casualty	$	9,853	$	274	$	3,754	$	6,373		4.3	%
Accident and health		498		50				548		9.1
Earned premiums	$	10,351	$	324	$	3,754	$	6,921		4.7	%


Year Ended December 31, 2014

Property and casualty	$	9,452	$	277	$	3,073	$	6,656		4.2	%
Accident and health		508		48				556		8.6
Earned premiums	$	9,960	$	325	$	3,073	$	7,212		4.5	%


Year Ended December 31, 2013

Property and casualty	$	9,063	$	258	$	2,609	$	6,712		3.8	%
Accident and health		511		48				559		8.6
Earned premiums	$	9,574	$	306	$	2,609	$	7,271		4.2	%

Included in the direct and ceded earned premiums for the years ended December 31, 2015, 2014 and 2013 are $3.3 billion, $2.6 billion and $2.2 billion 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. CNA receives and retains a ceding commission.

Accident and health 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 Income are net of reinsurance recoveries of $2.6 billion, $1.4 billion and $1.5 billion for the years ended December 31, 2015, 2014 and 2013, including $2.3 billion, $1.5 billion and $712 million related to the significant third party captive program discussed above. Reinsurance recoveries in 2014 were unfavorably affected by the commutation of a workers’ compensation reinsurance pool.