Reinsurance

12 Months Ended

Dec. 31, 2012

Reinsurance [Abstract]

Reinsurance

(4) Reinsurance

Reinsurance is a contractual arrangement under which one insurer (the ceding company) transfers to another insurer (the reinsurer) a portion of the liabilities that the ceding company has assumed under an insurance policy it has issued. A ceding company may purchase reinsurance for any number of reasons, including obtaining, through the transfer of a portion of its liabilities, greater underwriting capacity than its own capital resources would otherwise support, protection against catastrophic loss or to enter into or withdraw from a business line. Reinsurance can be written on a quota share basis (where premiums and losses are shared proportionally), an excess of loss basis (where losses are covered if they exceed a certain amount), under a treaty (involving more than one policy) or on a facultative basis (involving only one policy) reinsurance agreement.

For the year ended December 31, 2012, we ceded $63.9 million of premium (20.0% of gross written premiums) to unaffiliated third-party reinsurers, as compared to $57.9 million of premium (19.4% of gross written premiums) in 2011.

The approximate effects of reinsurance on the financial statement accounts listed below are as follows:

	Years ended December 31,
	2012			2011			2010
	(dollars in thousands)
Net written premiums:
Direct	$	260,692		$	241,180		$	234,158
Assumed		58,552			57,365			43,404
Ceded		(63,884	)		(57,927	)		(54,322	)
Net	$	255,360		$	240,618		$	223,240
Net earned premiums:
Direct	$	249,810		$	241,428		$	231,419
Assumed		60,756			51,047			40,872
Ceded		(56,700	)		(59,596	)		(71,558	)
Net	$	253,866		$	232,879		$	200,733
Losses and loss adjustment expenses incurred:
Direct	$	200,218		$	152,592		$	136,140
Assumed		39,276			48,699			26,038
Ceded		(67,796	)		(31,924	)		(41,883	)
Net	$	171,698		$	169,367		$	120,295
Unpaid loss and loss adjustment expenses:
Direct	$	597,238		$	570,835		$	568,740
Assumed		128,007			109,366			80,901
Ceded		(185,649	)		(173,267	)		(196,590	)
Net	$	539,596		$	506,934		$	453,051