Reinsurance |
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| Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reinsurance | 7. Reinsurance In the normal course of business, the Company participates in reinsurance agreements in order to limit losses that may arise from catastrophes or other individually severe events. Effective June 1, 2025, the Company was party to a new quota share reinsurance agreement wherein it cedes 50% of written premiums, and unearned premiums as of the effective date, on substantially all of its homeowners business. This agreement generated $19.8 million of ceded written premiums in 2025. The agreement allows for a sliding-scale ceding commission depending on the performance of the underlying business. We calculated the ceding commission based on a 36.2% rate. Effective June 1, 2025, the Company was party to a property catastrophe reinsurance treaty for aggregate losses up to $56.0 million in excess of a $4.0 million retention. The Company ceded primarily all specific commercial property and liability risks in excess of $400,000 in 2025 and 2024. The Company ceded homeowners specific risks in excess of $500,000 and $400,000 in 2025 and 2024, respectively. The homeowners quota share effectively reduces the net retention of the specific loss coverage from $500,000 to $250,000, and reduces the retention of the catastrophe reinsurance coverage from $4.0 million to $2.0 million. A "treaty" is a reinsurance agreement in which coverage is provided for a class of risks and does not require policy by policy underwriting of the reinsurer. "Facultative" reinsurance is where a reinsurer negotiates an individual reinsurance agreement for every policy it will reinsure on a policy-by-policy basis. A loss is covered under a reinsurance contract if the loss occurs within the effective dates of the agreement notwithstanding when the loss is reported. The Company entered into new specific loss reinsurance treaties on December 31, 2021 and January 1, 2022 that included a 40% ceding commission. The reinsurance premiums related to these treaties increased by the same amount as the ceding commission. The ceding commissions were carried forward under the 2024 treaties with substantially similar terms, and most agreements ran off in 2025. Reinsurance does not discharge the Company, as the direct insurer, from liability to its policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors the concentration of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. To date, the Company has not experienced any significant difficulties in collecting reinsurance recoverables. The Company's current reinsurance structure includes the following primary categories: Casualty Clash • Clash coverage is a type of reinsurance that provides additional coverage in the event that one casualty loss event results in two or more claims and recovery under the reinsurance treaties may otherwise be limited due to the amount, type or number of claims. Clash reinsurance further protects the balance sheet as it reduces the potential maximum loss on either a single risk or a large number of risks. • Effective January 1, 2025 through December 31, 2025, the Company was party to a workers' compensation reinsurance treaty. • Effective January 1, 2023 through December 31, 2024, the Company was party to a workers' compensation and casualty clash reinsurance treaty with a limit of $29.0 million in excess of $1.0 million. This treaty ran off in 2025. Facultative • The Company was party to a facultative reinsurance agreement with a large reinsurer for commercial auto physical damage risks primarily in excess of $400,000. • The Company was party to a facultative reinsurance agreement with a large reinsurer for property risks with total insured values above the other reinsurance treaty limits. Liability • Effective January 1, 2022 through December 31, 2024, the Company was party to an excess of loss reinsurance treaty for commercial liability coverage with a limit of $600,000 in excess of $400,000. This treaty ran off in 2025. Property • Effective January 1, 2025 through December 31, 2025, the Company was party to an excess of loss reinsurance treaty for personal property coverage with a limit of $1.5 million in excess of $500,000, for homeowners' and dwelling fire business. • Effective January 1, 2024 through December 31, 2024, the Company was party to an excess of loss reinsurance treaty for personal property coverage with a limit of $1.6 million in excess of $400,000, for homeowners' and dwelling fire business. • Effective January 1, 2024, through December 31, 2024, the Company was party to an excess of loss reinsurance treaty for commercial property coverage with a limit of $7.6 million in excess of $400,000. This treaty ran off in 2025. • At December 31, 2025, the Company was covered for property catastrophe losses up to $56.0 million in excess of $4.0 million retention for the first event. This treaty terminates on June 1, 2026. • At December 31, 2024, the Company was covered for property catastrophe losses up to $27.0 million in excess of $3.0 million retention for the first event. This treaty terminated on June 1, 2025. • At January 1, 2024, the Company was covered for property catastrophe losses up to $27.0 million in excess of a $3.0 million retention for the first event. This treaty terminated on June 1, 2024. Quota Share • Under a quota share agreement, the reinsurer pays a percentage of all losses the insurer sustains in return for a similar percent of the premiums written on that risk. A ceding commission is paid by the reinsurer to the insurer to cover acquisition and operating expenses. • The Company ceded 50% of its homeowners property business under a quota share treaty. • The Company ceded 90% to 100% of its commercial umbrella coverages under a quota share treaty. • The Company ceded 50% of its cannabis program net written premiums under a quota share treaty. • The Company ceded 100% of a small number of equipment breakdown, employment practices liability, data compromise, and cannabis cyber liability coverages that are occasionally bundled with other products under separate quota share agreements. Loss Portfolio Transfer • On November 1, 2022, the Company entered into a loss portfolio transfer (“LPT”) reinsurance agreement with Fleming Reinsurance Ltd (“Fleming Re”). Under the agreement, Fleming Re will cover an aggregate limit of $66.3 million of paid losses on $40.8 million of stated net reserves as of June 30, 2022, relating to accident years 2019 and prior. Within the aggregate limit, there is a $5.5 million loss corridor in which the Company retains losses in excess of $40.8 million. Fleming Re is then responsible to cover paid losses in excess of $46.3 million up to $66.3 million. Accordingly, there is $20.0 million of adverse development cover for accident years 2019 and prior. Recoverables due to the Company under this agreement are recorded as reinsurance recoverables. The agreement is between TIC and WPIC and Fleming Re. • As of December 31, 2025, the Company has recorded losses through the $5.5 million corridor and $16.5 million into the $20.0 layer of the LPT. Due to the insolvency of the reinsurer, we do not expect any additional recoveries from the loss portfolio transfer. • As of December 31, 2025, the Consolidated Balance Sheet included $3.4 million of fully collateralized reinsurance recoverables on unpaid losses related to the LPT. • As of December 31, 2024, the Company had recorded losses through the $5.5 million corridor and $14.0 million into the $20.0 million layer. • As of December 31, 2024, the Consolidated Balance Sheet included $3.4 million of reinsurance recoverables on paid losses related to the LPT and $10.6 million of reinsurance recoverables on unpaid losses related to the LPT. The Company assumes written premiums under a few fronting arrangements. The fronting arrangements are with unaffiliated insurers who write on behalf of the Company in markets that require a higher A.M. Best rating than the Company’s rating, or where the policies are written in a state where the Company is not licensed or for other strategic reasons. The Company assumed $3,000 and $1.5 million of written premiums under the insurance fronting arrangements for the years ended December 31, 2025 and 2024, respectively. The following table presents the effects of reinsurance and assumed reinsurance transactions on written premiums, earned premiums and losses and LAE (dollars in thousands):
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