Reinsurance

The Company utilizes reinsurance and retrocession agreements principally to increase aggregate capacity and to reduce the risk of loss on business assumed. The Company's reinsurance and retrocession agreements provide for recovery of a portion of losses and loss expenses from reinsurers, and reinsurance recoverables are recorded as assets. The purchase of reinsurance does not relieve the Company of its obligation to policyholders. Under its reinsurance security policy, the Company seeks to cede business to reinsurers generally with a financial strength rating of "A" or better. The Company considers reinsurers that are not rated or do not fall within the above rating categories and may grant exceptions to the Company's general policy on a case-by-case basis.

The effect of reinsurance and retrocessional activity on premiums written and earned from property and casualty operations is shown below:



(U.S. dollars in thousands)	Premiums Written Year Ended December 31,									Premiums Earned Year Ended December 31,
(U.S. dollars in thousands)	2017			2016			2015			2017			2016			2015
Direct	$	8,965,259		$	9,166,627		$	7,847,236		$	9,078,575		$	9,142,690		$	7,717,173
Assumed	5,787,313			4,458,981			2,821,771			4,903,909			4,074,817			3,465,421
Ceded	(4,084,148		)	(3,394,972		)	(2,780,183		)	(3,658,206		)	(3,451,620		)	(3,018,410		)
Net	$	10,668,424		$	10,230,636		$	7,888,824		$	10,324,278		$	9,765,887		$	8,164,184

The Company recorded reinsurance recoveries on losses and loss expenses incurred of $3.2 billion, $1.7 billion and $1.6 billion for the years ended December 31, 2017, 2016 and 2015, respectively.

The following table presents a summary of total reinsurance assets for the years ended December 31, 2017 and 2016:



(U.S. dollars in thousands)	2017		2016
Unpaid losses and loss expenses recoverable - P&C Operations	$	7,239,446	$	5,480,300
Unpaid losses and loss expenses recoverable - Corporate and Other	8,277		10,997
Total unpaid losses and loss expenses recoverable	7,247,723		5,491,297
Reinsurance balances receivable	930,114		577,479
Ceded unearned premiums	2,198,217		1,687,864
Total reinsurance assets	$	10,376,054	$	7,756,640

The table above excludes a combined $3.2 billion and $0.2 billion of the Company's future policy benefit reserve recoverables under the GreyCastle Life Retro Arrangements and U.S. Term Life Retro Arrangements, as defined in Note 11, "Future Policy Benefit Reserves," respectively, and are also excluded from the remainder of this disclosure.

Reinsurance assets include amounts recoverable from reinsurers on both paid and unpaid losses and loss expenses which are contractual rights subject to credit risk. Amounts recoverable on unpaid losses and loss expenses will not be due for collection until sometime in the future. Economic conditions and operational performance of a particular reinsurer may impact its ability to fully meet these obligations. As such, the collectibility of such amounts requires significant estimation by the Company.

The provision for uncollectible reinsurance on unpaid losses and loss expenses recoverable is established principally based on an analysis of reinsurer credit quality, using default factors derived from reinsurer financial strength ratings. This analysis contemplates collateral in place, which is generally limited to assets held in trust, letters of credit and funds held by the Company with the same legal entity for which the Company believes there is a right of offset. The Company is the beneficiary of letters of credit, trust accounts and funds withheld in the aggregate amount of $6.7 billion and $4.1 billion at December 31, 2017 and 2016, respectively, collateralizing reinsurance recoverables with respect to certain reinsurers.

The Company uses an aging analysis to estimate uncollectible reinsurance balances receivable relating to paid losses in addition to recording allowances relating to any specific balances with known collectibility issues, irrespective of aging. The balances are aged from the date the expected recovery was billed to the reinsurer. Provisions are applied at specified percentages of the outstanding balances based upon the aging profile. Allowances otherwise required as a result of the aging process may not be recorded to the extent that specific facts and circumstances exist that lead management to believe that amounts will ultimately be collectible.

The following table presents a summary of the Company's allowance for uncollectible reinsurance at December 31, 2017 and 2016:



(U.S. dollars in thousands)	2017		2016
Allowance relating to unpaid losses and loss expenses recoverable	$	41,103	$	42,119
Allowance relating to reinsurance balances receivable	22,733		20,710
Total allowance for uncollectible reinsurance	$	63,836	$	62,829

At December 31, 2017 and 2016, approximately 95.6% and 95.4%, respectively, of the total reinsurance assets, net of collateral held, was due from reinsurers with a financial strength rating of "A" or better. The following table sets forth the ratings profile of the Company's reinsurers at December 31, 2017:



Reinsurer Financial Strength Rating	% of Total
AAA	—	%
AA	37.0	%
A	58.6	%
BBB	0.5	%
BB and below	0.7	%
Captives	3.1	%
Not Rated	0.1	%
Total	100.0	%

The following is an analysis of the total reinsurance assets, net of collateral held, at December 31, 2017, by reinsurers owing 3% or more of such total:



Name of Reinsurer	Reinsurer Financial Strength Rating	% of Total
Munich Reinsurance Co.	AA-/Stable	10.5	%
Lloyd's Syndicates	A+/Negative	7.4	%
Arch Reinsurance Company	A+/Negative	7.3	%
Transatlantic Reinsurance Company	A+/Stable	5.1	%
AXIS Reinsurance Co.	A+/Negative	5.0	%
Endurance Assurance Corporation	A/Positive	4.3	%
Hannover Rueck SE	AA-/Stable	3.5	%
National Indemnity Company	AA+/Negative	3.1	%
Swiss Reinsurance Co.	AA-/Stable	3.1	%
Everest Reinsurance (Bermuda) Ltd.	A+/Stable	3.0	%