Note 16. 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 reinsurance ceded to the extent that any reinsurer is unable to meet its obligations. A collectability 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 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. 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	2018		2017
(In millions)

Reinsurance receivables related to insurance reserves:
Ceded claim and claim adjustment expenses	$	4,019	$	3,934
Ceded future policy benefits		233		230
Reinsurance receivables related to paid losses		203		126
Reinsurance receivables		4,455		4,290
Less allowance for doubtful accounts		29		29

Reinsurance receivables, net of allowance for doubtful accounts	$	4,426	$	4,261

CNA has established an allowance for doubtful accounts on reinsurance receivables related to credit risk. 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 $2.9 billion at December 31, 2018 and 2017.

CNA’s largest recoverables from a single reinsurer, including ceded unearned premium reserves as of December 31, 2018 were approximately $2.2 billion from a subsidiary of Berkshire Hathaway Insurance Group, $278 million from the Gateway Rivers Insurance Company and $233 million from subsidiaries of Wilton Re. These amounts are substantially collateralized. The recoverable from 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 loss portfolio transfer as discussed in Note 8.

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


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

Year Ended December 31, 2018

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


Year Ended December 31, 2017

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


Year Ended December 31, 2016

Property and casualty	$	10,400	$	258	$	4,270	$	6,388		4.0	%
Long term care		486		50				536		9.3
Earned premiums	$	10,886	$	308	$	4,270	$	6,924		4.4	%

Included in the direct and ceded earned premiums for the years ended December 31, 2018, 2017 and 2016 are $3.7 billion, $3.9 billion and $3.9 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.

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 Income are net of reinsurance recoveries of $2.8 billion, $3.1 billion and $3.0 billion for the years ended December 31, 2018, 2017 and 2016, including $1.9 billion, $2.5 billion and $2.6 billion related to the significant third party captive program discussed above.