Reinsurance

12 Months Ended

Dec. 31, 2020

Note D – Reinsurance

The Insurance Subsidiaries cede portions of their gross premiums written to certain other insurers under excess of loss and quota share treaties and by facultative placements. Some reinsurance contracts provide that a loss be shared among the Company and its reinsurers on a predetermined pro-rata basis ("quota share"), while other contracts provide that the Company keep a fixed amount of the loss, similar to a deductible, with reinsurers taking all losses above this fixed amount ("excess of loss"). Reinsurance treaties with other companies permit the recovery of a portion of related direct losses. Management determines the amount of net exposure it is willing to accept generally on a product-line basis. Certain treaties covering commercial automobile risks include annual deductibles which must be exceeded before the Company can recover under the terms of the treaty. The Company retains a higher percentage of the direct premium in consideration of these deductible provisions. The Company remains liable to the extent the reinsuring companies are unable to meet their obligations under reinsurance contracts.

The Company also serves as an assuming reinsurer on treaties with direct writing insurance companies and, prior to June 30, 2015, under retrocessions from other reinsurers for catastrophic property coverages. Accordingly, for periods prior to that date, the occurrence of catastrophic events could have had a significant impact on the Company's operations. In addition, the Insurance Subsidiaries participate in certain mandatory residual market pools, which require insurance companies to provide coverages on assigned risks. The assigned risk pools allocate participation to all insurers based upon each insurer's portion of premium writings on a state or national level. Historically, the operation of these assigned risk pools has resulted in net losses being allocated to the Company, although such losses have not been material in relation to the Company's operations.

The following table summarizes the impact of reinsurance ceded and assumed on the Company's net premiums written and earned for the most recent three years:

	Premiums Written									Premiums Earned
	2020			2019			2018			2020			2019			2018
Direct	$	546,708		$	574,181		$	581,070		$	557,795		$	570,959		$	562,364
Ceded on direct		(106,561	)		(122,676	)		(138,102	)		(113,125	)		(124,446	)		(131,080	)
Net direct		440,147			451,505			442,968			444,670			446,513			431,284

Assumed		853			737			1,430			845			775			1,596
Ceded on assumed		–			–			–			–			–			–
Net assumed		853			737			1,430			845			775			1,596

Net	$	441,000		$	452,242		$	444,398		$	445,515		$	447,288		$	432,880

Net losses and loss expenses incurred for 2020, 2019 and 2018 have been reduced by ceded reinsurance recoveries of approximately $105,895, $121,927 and $148,173, respectively. Ceded reinsurance premiums and loss recoveries for the purchase of catastrophe reinsurance coverage on the Company's net direct business were not material.

Net losses and loss expenses incurred include expenses of $432 for 2020, expenses of $193 for 2019 and a savings of $1,300 for 2018, relating to reinsurance assumed from non-affiliated insurance or reinsurance companies.

Components of reinsurance recoverable at December 31, 2020 and 2019 are as follows:

	2020		2019
Case unpaid losses, net of allowance for reinsurance	$	166,171	$	166,675
Incurred but not reported unpaid losses and loss expenses		257,225		230,459
Paid losses and loss expenses		24,133		20,334
Unearned premiums		8,035		14,599
	$	455,564	$	432,067