4. Reinsurance

The Company seeks to reduce its risk of loss by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers, generally as of the beginning of the hurricane season on June 1st of each year. The Company’s current reinsurance programs consist of catastrophe excess of loss reinsurance, subject to the terms and conditions of the applicable agreements. The Company is responsible for certain retained loss amounts before reinsurance attaches and insured losses related to catastrophes and other events that exceed coverage provided by the reinsurance programs. The Company remains responsible for the settlement of insured losses irrespective of whether any of the reinsurers fail to make payments otherwise due.

Amounts recoverable from reinsurers are estimated in a manner consistent with the terms of the reinsurance contracts. Reinsurance premiums, losses and loss adjustment expenses (“LAE”) are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts.

To reduce credit risk for amounts due from reinsurers, the Insurance Entities seek to do business with financially sound reinsurance companies and regularly evaluate the financial strength of all reinsurers used.

The following table presents ratings from rating agencies and the unsecured amounts due from the reinsurers whose aggregate balances due exceeded 3% of the Company’s stockholders’ equity as of the dates presented (in thousands):

	Ratings as of September 30, 2018			Due from as of
		Standard
		and Poor's	Moody's
	AM Best	Rating	Investors	December 31,
Reinsurer	Company	Services, Inc.	Service, Inc.	2017
Allianz Risk Transfer	A+	AA	Aa3	$	105,573
Florida Hurricane Catastrophe Fund (1)	n/a	n/a	n/a		52,054
Renaissance Reinsurance Ltd	A+	A+	A1		22,545
Total (2)				$	180,172

(1)	No rating is available, because the fund is not rated.

(2)	Amounts represent prepaid reinsurance premiums, reinsurance receivables, and net recoverables for paid and unpaid losses, including incurred but not reported reserves, loss adjustment expenses, and offsetting reinsurance payables.

There were no amounts due from the reinsurers whose aggregate balance exceeded 3% of the Company’s stockholders’ equity as of September 30, 2018.

The Company’s reinsurance arrangements had the following effect on certain items in the Condensed Consolidated Statements of Income for the periods presented (in thousands):

	Three Months Ended September 30,
	2018									2017
							Losses and Loss									Losses and Loss
	Premiums			Premiums			Adjustment			Premiums			Premiums			Adjustment
	Written			Earned			Expenses			Written			Earned			Expenses
Direct	$	309,176		$	288,404		$	270,158		$	274,744		$	254,809		$	531,268
Ceded		(17,256	)		(99,466	)		(184,211	)		(7,303	)		(80,292	)		(414,893	)
Net	$	291,920		$	188,938		$	85,947		$	267,441		$	174,517		$	116,375

	Nine Months Ended September 30,
	2018									2017
							Losses and Loss									Losses and Loss
	Premiums			Premiums			Adjustment			Premiums			Premiums			Adjustment
	Written			Earned			Expenses			Written			Earned			Expenses
Direct	$	921,941		$	824,692		$	593,419		$	816,350		$	735,807		$	687,707
Ceded		(356,507	)		(260,905	)		(341,704	)		(318,827	)		(230,722	)		(420,578	)
Net	$	565,434		$	563,787		$	251,715		$	497,523		$	505,085		$	267,129

The following prepaid reinsurance premiums and reinsurance recoverable and receivable are reflected in the Condensed Consolidated Balance Sheets as of the dates presented (in thousands):

	September 30,		December 31,
	2018		2017
Prepaid reinsurance premiums	$	228,408	$	132,806
Reinsurance recoverable on paid losses and LAE	$	27,037	$	—
Reinsurance recoverable on unpaid losses and LAE		131,566		182,405
Reinsurance receivable, net		961		—
Reinsurance recoverable and receivable	$	159,564	$	182,405