Note 8 - Reinsurance

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Reinsurance [Text Block]

8.          Reinsurance

Reinsurance obtained from other insurance companies

Certain premiums and benefits at NCTIC are ceded to other insurance companies under reinsurance agreements. The reinsurance agreements provide NCTIC with increased capacity to write more risk and maintain its exposure to loss within its capital resources. For the years ended December 31, 2023 and 2022, NCTIC's reinsurance program consisted of excess of loss reinsurance treaties. The following is a summary of the reinsurance coverage.

Effective January 1, 2023, NCTIC entered into a per risk excess of loss reinsurance agreement that provides coverage of $4.0 million in excess of $1.0 million on each and every risk. The contract allows for one full reinstatement at 100% additional premium as to time and pro rata as to amount. This per risk agreement is shared with other non-affiliated companies. Each company pays its share of the reinsurance cost based on separate company earned premiums. The agreement expired  December 31, 2023.

Effective January 1, 2022, NCTIC entered into a per risk excess of loss reinsurance agreement that provided coverage of $4.0 million in excess of $1.0 million on each and every risk. The contract allowed for one full reinstatement at 100% additional premium as to time and pro rata as to amount. This per risk agreement was shared with other non-affiliated companies. Each company paid its share of the reinsurance cost based on separate company earned premiums. The agreement expired on December 31, 2022.

Effective January 1, 2022, NCTIC entered into a reinstatement premium protection reinsurance agreement to reinsure the reinstatement premium payment obligations of NCTIC under the shared per risk excess of loss agreement. The coverage was limited to 100% of the original contracted reinsurance placement. This agreement was shared with the other nonaffiliated companies. Each company paid its share of the reinsurance cost based on separate company earned premiums. The agreement expired on December 31, 2022.

NCTIC’s reinsured risks are treated, to the extent of reinsurance, as though they are risks for which the Company is not liable. However, NCTIC remains contingently liable in the event its reinsurers do not meet their obligations under these reinsurance contracts. NCTIC uses a broker to place its reinsurance through Lloyd’s syndicates, a group of underwriters who work together to provide insurance coverage for a variety of risks. Chaucer Syndicates Ltd. (“Chaucer Syndicates”) and Beazley Syndicate (“Beazley”) are each 50% participants in the Lloyd’s syndicate.  As such, NCTIC has a concentration of reinsurance risk with these third-party reinsurers that could have a material impact on NCTIC’s financial position in the event that either of these reinsurers fail to perform their obligations under the reinsurance treaty. As of December 31, 2023, Chaucer Syndicates was rated A (excellent) by A.M. Best, A+ (strong) by Standard & Poor’s and AA- (very strong) by Fitch. Beazley was rated A by A.M. Best, A+ by Standard & Poor’s and A+ by Fitch. The Company monitors the financial condition of individual reinsurers, risk concentration arising from similar activities as well as economic characteristics of reinsurers to attempt to reduce the risk of default by such reinsurers. Given the quality of the reinsurers, management believes this possibility to be remote. At December 31, 2023 and 2022, there were no reinsurance recoverables on paid claims or unpaid reserves.

The effects of reinsurance on premiums written and earned at NCTIC for the years ended December 31, 2023 and 2022 are as follows (in thousands):

	For the Year			For the Year
	Ended			Ended
	December 31,			December 31,
	2023			2022
Direct title premiums	$	3,664		$	2,170
Ceded title premiums		(61	)		(55	)
Net title premiums	$	3,603		$	2,115

Reinsurance provided to other insurance companies

Effective July 1, 2022, the Company formed White Rock USA Cell 47 (the “Protected Cell”). The Protected Cell entered into an Excess Catastrophe Reinsurance Contract (the “Reinsurance Contract”) with Maison Insurance Company (“Maison”) effective July 1, 2022 to provide Maison catastrophic windstorm reinsurance protection on approximately 7,650 Texas insurance policies in-force at inception of the Reinsurance Contract. The Reinsurance Contract provided $7.8 million of limit to Maison in excess of a $5 million retention. Maison paid the Protected Cell $6.63 million in reinsurance premiums for the term of the Reinsurance Contract, which terminated on December 31, 2022.

During the contract period, Maison was ordered into liquidation by the State of Florida. Given that there were no covered losses that occurred in Texas during the term of the Reinsurance Contract, effective March 3, 2023, the Protected Cell and Maison entered into an agreement to commute any potential losses arising from the Reinsurance Contract. 

The following is a reconciliation of total reinsurance premiums written to reinsurance premiums earned for the years ended  December 31, 2023 and 2022 (amounts in thousands):

	For the Year		For the Year
	Ended		Ended
	December 31,		December 31,
	2023		2022
Reinsurance premiums written	$	300	$	6,630
Increase in unearned premium reserves		-		(300	)
Reinsurance premiums earned	$	300	$	6,330

The Company may actively look to provide reinsurance coverage to other carriers as future opportunities arise.