25.	Captive Insurance Company :

October 2007,

the Company formed a wholly-owned captive insurance company, KIC, which provides general liability insurance coverage for all losses below the deductible under the Company’s

third

-party liability insurance policy. The Company created KIC as part of its overall risk management program and to stabilize its insurance costs, manage exposure and recoup expenses through the functions of the captive program. The Company capitalized KIC in accordance with the applicable regulatory requirements. KIC established annual premiums based on projections derived from the past loss experience of the Company’s properties. KIC has engaged an independent

third

party to perform an actuarial estimate of future projected claims, related deductibles and projected expenses necessary to fund associated risk management programs. Premiums paid to KIC

may

be adjusted based on this estimate. Like premiums paid to

third

-party insurance companies, premiums paid to KIC

may

be reimbursed by tenants pursuant to specific lease terms.

KIC assumes occurrence basis general liability coverage (

not

including casualty loss or business interruption) for the Company and its affiliates under the terms of a reinsurance agreement entered into by KIC and the reinsurance provider.

From

October 1, 2007

through

October 1, 2019,

KIC assumes

100%

of the

first

$250,000

per occurrence risk layer. This coverage is subject to annual aggregates ranging between

$7.8

million and

$11.1

million per policy year. The annual aggregate is adjustable based on the amount of audited square footage of the insureds’ locations and can be adjusted for subsequent program years. Defense costs erode the stated policy limits. KIC is required to pay the reinsurance provider for unallocated loss adjustment expenses an amount ranging between

8.0%

and

12.2%

of incurred losses for the policy periods ending

September 30, 2008

through

September 30, 2019.

These amounts do

not

erode the Company’s per occurrence or aggregate limits.

As of

December 31, 2018

and

2017,

the Company maintained a letter of credit in the amount of

$23.0

million, issued in favor of the reinsurance provider to provide security for the Company’s obligations under its agreement with the reinsurance provider. The letter of credit maintained as of

December 31, 2018,

has an expiration date of

February 15, 2019,

with automatic renewals for

one

year.

Activity in the liability for unpaid losses and loss adjustment expenses for the years ended

December 31, 2018

and

2017,

is summarized as follows (in thousands):

	201 8			201 7
Balance at the beginning of the year	$	18,965		$	19,515
Incurred related to:
Current year		5,236			5,915
Prior years		(2,653	)		(727	)
Total incurred		2,583			5,188
Paid related to:
Current year		(683	)		(742	)
Prior years		(4,735	)		(4,996	)
Total paid		(5,418	)		(5,738	)
Balance at the end of the year	$	16,130		$	18,965

For the years ended

December 31, 2018

and

2017,

the changes in estimates in insured events in the prior years, incurred losses and loss adjustment expenses resulted in a decrease of

$2.7

million and

$0.7

million, respectively, which was primarily due to continued regular favorable loss development on the general liability coverage assumed.