Ceded Reinsurance

12 Months Ended

Dec. 31, 2015

Insurance [Abstract]

Ceded Reinsurance

NOTE 6.  CEDED REINSURANCE

We utilize reinsurance principally to reduce our exposure on individual risks, to protect against catastrophic losses and to stabilize loss ratios and net underwriting results.  Reinsurers are liable to us to the extent the risk is transferred or ceded to them. However, ceded reinsurance arrangements do not eliminate our obligation to pay claims to our policyholders.  Accordingly, we bear credit risk with respect to our reinsurers.

We are protected by various treaty and facultative reinsurance agreements.  Our exposure to credit risk from any one reinsurer is managed through diversification of reinsurers, principally in the U.S. and European reinsurance markets.   A reinsurer generally must have a rating from A.M. Best and/or S&P of “A” or better, or an equivalent financial strength if not rated, plus at least $500 million in policyholders’ surplus to meet our standards of acceptability.  Our Reinsurance Security Committee, which is part of our Enterprise Risk Management Finance and Credit Sub-Committee, monitors the financial strength of our reinsurers and the related reinsurance recoverables and periodically reviews the list of acceptable reinsurers.

The following table lists our Company’s 10 largest reinsurers measured by the amount of total reinsurance recoverables as of December 31, 2015, and the reinsurers’ ratings from A.M. Best and S&P:

	Reinsurance Recoverables
	Unearned		Paid/Unpaid				Collateral
amounts in thousands	Premium		Losses		Total (1)		Held		A.M. Best	S&P
National Indemnity Company	$	14,854	$	118,337	$	133,191	$	7,198	A++	AA+
Everest Reinsurance Company		21,097		77,702		98,799		3,933	A+	A+
Swiss Reinsurance America Corporation		25,564		63,081		88,645		7,814	A+	AA-
Transatlantic Reinsurance Company		9,267		62,402		71,669		1,783	A	A+
Munich Reinsurance America Inc.		9,051		51,795		60,846		1,577	A+	AA-
Allied World Reinsurance		7,177		38,343		45,520		1,012	A	A
Employers Mutual Casualty Company		10,775		28,321		39,096		4,015	A	NR
Ace Property and Casualty Insurance    Company		12,577		21,470		34,047		3,284	A++	AA
Partner Reinsurance Europe		11,231		21,728		32,959		17,619	A	A+
National Union Fire Ins.		7,478		22,288		29,766		5,717	A	A+
Top 10	$	129,071	$	505,467	$	634,538	$	53,952
Others		103,517		353,557		457,074		105,618
Total	$	232,588	$	859,024	$	1,091,612	$	159,570

(1) - Net of reserve for uncollectible reinsurance of approximately $6.9 million.

We have established reserves for uncollectible reinsurance in the amounts of $6.9 million and $11.3 million as of December 31, 2015 and 2014, respectively. This reserve is determined by reinsurer specific default risk as indicated by their financial strength ratings as well as additional default risk for asbestos and environmental related recoverables. Actual uncollectible reinsurance could exceed or be less than our reserve balance.

Our Company holds collateral of $159.6 million, which consists of $107.4 million in ceded balances payable, $45.8 million in letters of credit and $6.4 million of funds held and trust account balances.   NIC and NSIC are required to collateralize reinsurance obligations due to us from reinsurers not authorized by their respective states of domicile.

The following table summarizes the components of Net written premium:

	Years Ended December 31,
amounts in thousands	2015			2014			2013
Direct	$	1,277,728		$	1,232,012		$	1,177,483
Assumed		175,774			200,341			193,034
Ceded		(409,642	)		(432,215	)		(482,595	)
Net written premiums	$	1,043,860		$	1,000,138		$	887,922

The following table summarizes the components of Net earned premium:

	Years Ended December 31,
amounts in thousands	2015			2014			2013
Direct	$	1,223,840		$	1,183,120		$	1,121,198
Assumed		175,153			193,431			176,726
Ceded		(414,906	)		(440,656	)		(455,985	)
Net earned premiums	$	984,087		$	935,895		$	841,939

The following table summarizes the components of Net losses and LAE incurred:

	Years Ended December 31,
amounts in thousands	2015			2014			2013
Direct	$	703,361		$	657,059		$	574,020
Assumed		97,947			118,352			133,674
Ceded		(228,710	)		(230,182	)		(188,733	)
Net losses and LAE	$	572,598		$	545,229		$	518,961