Assurant 2014 Annual Report Download - page 130

ASSURANT, INC. – 2014 Form 10-KF-42
14 Reinsurance
The effect of reinsurance on premiums earned and benefi ts incurred was as follows:
Years Ended December 31,
2014 2013 2012
Long
Duration
Short
Duration Total
Long
Duration
Short
Duration Total
Long
Duration
Short
Duration Total
Direct earned
premiums $ 510,822 $10,740,127 $11,250,949 $ 555,368 $ 9,293,288 $ 9,848,656 $ 568,308 $ 8,711,619 $ 9,279,927
Premiums
assumed 8,762 478,894 487,656 10,117 304,980 315,097 12,536 278,160 290,696
Premiums
ceded (276,525) (2,829,938) (3,106,463) (304,064) (2,099,893) (2,403,957) (322,428) (2,011,211) (2,333,639)
NET EARNED
PREMIUMS $ 243,059
$ 8,389,083 $ 8,632,142 $ 261,421 $ 7,498,375 $ 7,759,796 $ 258,416 $ 6,978,568 $ 7,236,984
Direct
policyholder
benefi ts $ 1,702,475 $ 5,244,646 $ 6,947,121 $ 933,110 $ 3,706,848 $ 4,639,958 $ 909,670 $ 4,152,252 $ 5,061,922
Policyholder
benefi ts
assumed 23,911 306,365 330,276 22,844 211,446 234,290 27,681 173,581 201,262
Policyholder
benefi ts
ceded (1,373,953) (1,498,111) (2,872,064) (590,281) (608,435) (1,198,716) (581,890) (1,025,890) (1,607,780)
NET
POLICYHOLDER
BENEFITS $
352,433 $ 4,052,900 $ 4,405,333 $ 365,673 $ 3,309,859 $ 3,675,532 $ 355,461 $ 3,299,943 $ 3,655,404
The Company had $1,022,078 and $1,035,617, respectively,
of invested assets held in trusts or by custodians as of
December 31, 2014 and 2013, respectively, for the benefi t
of others related to certain reinsurance arrangements.
The Company utilizes ceded reinsurance for loss protection
and capital management, business dispositions, and in the
Assurant Solutions and Assurant Specialty Property segments,
for client risk and profi t sharing.
Loss Protection and Capital Management
As part of the Company’s overall risk and capacity management
strategy, the Company purchases reinsurance for certain risks
underwritten by the Company’s various segments, including
signifi cant individual or catastrophic claims.
For those product lines where there is exposure to losses
from catastrophe events, the Company closely monitors and
manages its aggregate risk exposure by geographic area. The
Company has entered into reinsurance treaties to manage
exposure to these types of events.
On January 30, 2012, certain of the Companies’ subsidiaries
(“the Subsidiaries”) entered into two reinsurance agreements
with Ibis Re II Ltd. (“Ibis Re II”). Ibis Re II is an independent
special purpose reinsurance company domiciled in the Cayman
Islands. The Ibis Re II agreements provide up to $130,000 of
reinsurance coverage for protection against losses over a
three-year period from individual hurricane events in Hawaii,
Puerto Rico, and along the Gulf and Eastern Coasts of the
United States. The agreements expire in February 2015. Ibis Re
II fi nanced the property catastrophe reinsurance coverage by
issuing $130,000 in catastrophe bonds to unrelated investors
(the “Series 2012-1 Notes”).
On June 26, 2013, the Subsidiaries entered into three
additional reinsurance agreements with Ibis Re II providing
up to $185,000 of reinsurance coverage for protection against
losses over a three-year period from individual hurricane
events in Hawaii, Puerto Rico, and along the Gulf and Eastern
Coasts of the United States. The agreements expire in June
2016. Ibis Re II fi nanced the property catastrophe reinsurance
coverage by issuing $185,000 in catastrophe bonds to unrelated
investors (the “Series 2013-1 Notes”).
The $315,000 of coverage represents approximately 17% of
the expected fi rst event coverage (net of reimbursements of
the Florida Hurricane Catastrophe Fund) purchased by the
Company in excess of the Company’s anticipated retention.
Under the terms of these reinsurance agreements, the
Subsidiaries are obligated to pay annual reinsurance premiums
to Ibis Re II for the reinsurance coverage. The reinsurance
agreements with Ibis Re II utilize a dual trigger that is based
upon an index that is created by applying predetermined
percentages to insured industry losses in each state in the
covered area as reported by an independent party and the
Subsidiaries’ covered losses incurred. Reinsurance contracts
that have a separate, pre-identifi ed variable (e.g., a loss-
based index) are accounted for as reinsurance if certain
conditions are met. In the case of the reinsurance agreements
with Ibis Re II, these conditions were met, thus the Company
accounted for them as reinsurance in accordance with the
guidance for reinsurance contracts.
Amounts payable to the Subsidiaries under the reinsurance
agreements will be determined by the index-based losses,
which are designed to approximate the Subsidiaries’ actual
losses from any covered event. The amount of actual losses
and index losses from any covered event may differ. For each