Reinsurance

12 Months Ended

Dec. 31, 2022

10 - Reinsurance

Unaffiliated Reinsurers

Our insurance subsidiaries and Donegal Mutual participate in a consolidated third-party reinsurance program, for which the coverage and parameters are common to all of our insurance subsidiaries and Donegal Mutual. The program utilizes several different reinsurers, all of which have an A.M. Best rating of A- (Excellent) or better or, with respect to foreign reinsurers, have a financial condition that, in the opinion of our management, is equivalent to a company with at least an A- rating from A.M. Best. The following information describes the external reinsurance Donegal Mutual and our insurance subsidiaries had in place for 2022:

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excess of loss reinsurance, under which Donegal Mutual and our insurance subsidiaries recovered losses over a set retention of $2.0 million; and

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catastrophe reinsurance, under which Donegal Mutual and our insurance subsidiaries recovered 100% of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention of $15.0 million up to aggregate losses of $185.0 million per occurrence.

As many as 29 reinsurers provided coverage for 2022 on any one treaty with no reinsurer taking more than 17.5% of any one treaty. The amount of coverage provided under each of these types of reinsurance depended upon the amount, nature, size and location of the risks being reinsured.

In order to write automobile insurance in the State of Michigan, MICO is required to be a member of the Michigan Catastrophic Claims Association (“MCCA”). The MCCA provides reinsurance to MICO for personal automobile and commercial automobile personal injury claims in the state of Michigan over a set retention. In November 2021, the MCCA approved the return of approximately $3.0 billion of its estimated surplus to its member insurance companies and provided guidance to those companies with respect to the payment of refunds to Michigan policyholders in the first half of 2022. We recorded a receivable from the MCCA and a corresponding payable for cash refunds due to Michigan policyholders in the amount of $18.1 million on our balance sheet as of December 31, 2021. In March 2022, we received such payment from the MCCA and subsequently paid the refunds due to our Michigan policyholders.

In addition to the pooling agreement and third-party reinsurance, our insurance subsidiaries had a catastrophe reinsurance agreement with Donegal Mutual, under which each of our insurance subsidiaries recovered 100% of an accumulation of multiple losses resulting from a single event, including natural disasters, over a set retention of $2.0 million up to aggregate losses of $13.0 million per occurrence. The agreement also provided additional coverage for an accumulation of losses from a single event including a combination of our insurance subsidiaries over a combined retention of $5.0 million.

Our insurance subsidiaries and Donegal Mutual also purchased facultative reinsurance to cover certain exposures, including property exposures in excess of the covered limits of their respective treaty reinsurance.

The following amounts represent ceded reinsurance transactions with unaffiliated reinsurers during 2022, 2021 and 2020:

	2022		2021		2020
Premiums written	$	37,002,702	$	38,173,733	$	34,165,635
Premiums earned		36,947,675		37,984,833		35,358,765
Losses and loss expenses		31,096,016		29,999,528		9,835,268
Prepaid reinsurance premiums		6,118,784		6,063,759		5,874,859
Liability for losses and loss expenses		149,628,406		138,909,584		133,158,907

Total Reinsurance

The following amounts represent total ceded reinsurance transactions with both affiliated and unaffiliated reinsurers during 2022, 2021 and 2020:

	2022		2021		2020
Premiums earned	$	383,059,075	$	399,284,886	$	356,669,937
Losses and loss expenses		249,037,288		282,083,985		231,771,575
Prepaid reinsurance premiums		160,591,399		176,935,842		169,418,333
Liability for losses and loss expenses		451,184,222		451,261,306		404,818,480

The following amounts represent the effect of reinsurance on premiums written for 2022, 2021 and 2020:

	2022			2021			2020
Direct	$	641,971,207		$	609,204,706		$	586,681,839
Assumed		568,272,026			601,864,198			539,070,557
Ceded		(366,714,634	)		(406,802,395	)		(383,612,503	)
Net premiums written	$	843,528,599		$	804,266,509		$	742,139,893

The following amounts represent the effect of reinsurance on premiums earned for 2022, 2021 and 2020:

	2022			2021			2020
Direct	$	627,331,528		$	601,408,581		$	584,537,580
Assumed		578,216,997			573,891,506			514,172,696
Ceded		(383,059,075	)		(399,284,886	)		(356,669,937	)
Net premiums earned	$	822,489,450		$	776,015,201		$	742,040,339
Percentage of assumed premiums earned to net premiums earned		70.3	%		74.0	%		69.3	%