Note 10 -- Reinsurance

Reinsurance obtained from other insurance companies

In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st of each year. The Company purchases reinsurance each year taking into consideration its overall insurance exposure, modeled probable maximum losses, risk tolerance and retention levels, mandatory reinsurance coverage provided by the Florida Hurricane Catastrophe Fund (a tax-exempt state trust fund), and overall reinsurance market conditions. Amounts recoverable from reinsurers are estimated in a manner consistent with the applicable reinsurance contract or contracts. Premiums ceded to other companies have been reported as a reduction of gross premiums earned to arrive at net premiums earned. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers.

Reinsurance contracts that do not transfer insurance risk are accounted for using the deposit method. Under the deposit method, net amounts paid, less any retained fees, are recorded as deposits within other assets in the consolidated balance sheets and within financing activities in the consolidated statements of cash flows. The adjustment of deposits to the ultimate expected cash flows is included in interest expense in the consolidated statements of income.

The Company remains liable for claims payments in the event any reinsurer is unable to meet its obligations under the reinsurance agreements. 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 concentrations 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.

As of September 30, 2026 and December 31, 2025, net amounts recoverable from reinsurers were $236,022 and $289,896, respectively. During the three and nine months ended September 30, 2026, the Company derecognized ceded losses of $4,469 primarily related to a change in estimated losses from Hurricane Milton. During the three and nine months ended September 30, 2025, the Company derecognized ceded losses of $51,500 and $112,706, respectively, primarily attributable to a favorable change in estimated losses from Hurricane Milton.

As of September 30, 2026 and December 31, 2025, there were over 40 reinsurers participating in the Company’s reinsurance program. As of September 30, 2026, approximately 64.1% of the reinsurance recoverable balance was receivable from five reinsurers, one of which was the Florida Hurricane Catastrophe Fund. The allowance for credit losses related to reinsurance recoverable was not material to the consolidated balance sheets or consolidated statements of income for the periods presented.

Under contracts in effect prior to June 1, 2025, reinsurance costs could be adjusted by retrospective provisions under reinsurance contracts. There were no adjustments to premiums ceded related to retrospective provisions for the three and nine months ended September 30, 2026 and 2025.

Reinsurance provided to other insurance companies

United Property & Casualty Insurance Company

The Company formerly provided quota share reinsurance to United Property & Casualty Insurance Company (“United”) on its policies in the northeast and southeast regions of the U.S. United was placed into receivership by the State of Florida due to its financial insolvency. As a result, the Company ceased providing quota share reinsurance on United policies, together with other administrative services, in March 2023. The liabilities and obligations under this quota-share reinsurance agreement were not material as of September 30, 2026 and December 31, 2025. Additionally, the balance of funds withheld for assumed business, which represent net amounts owed to the Company related to the Company’s quota share reinsurance agreements with United, were not material as of September 30, 2026 and December 31, 2025.

Citizens Property Insurance Corporation

The Company may participate in a “take-out program” through which the Company assumes insurance policies held by Citizens Property Insurance Corporation (“Citizens”), a Florida state-supported insurer. The take-out program is a legislatively mandated program designed to reduce the state’s risk exposure by encouraging private companies to assume policies from Citizens.