Assurant 2015 Annual Report Download - page 130

ASSURANT, INC. – 2015 Form 10-KF-44
14 Reinsurance
The effect of reinsurance on premiums earned and benets incurred was as follows:
Years Ended December 31,
2015 2014 2013
Long
Duration
Short
Duration Total
Long
Duration
Short
Duration Total
Long
Duration
Short
Duration Total
Direct earned
premiums $ 509,080 $11,091,644 $11,600,724 $510,822 $10,740,127 $11,250,949 $555,368 $9,293,288 $9,848,656
Premiums
assumed 8,410 517,578 525,988 8,762 478,894 487,656 10,117 304,980 315,097
Premiums
ceded (288,975)(3,486,740)(3,775,715)(276,525)(2,829,938)(3,106,463)(304,064)(2,099,893)(2,403,957)
NET EARNED
PREMIUMS $ 228,515
$ 8,122,482 $ 8,350,997 $ 243,059 $ 8,389,083 $ 8,632,142 $ 261,421 $ 7,498,375 $ 7,759,796
Direct
policyholder
benets $937,962 $6,024,395 $6,962,357 $ 1,702,475 $5,244,646 $6,947,121 $933,110 $3,706,848 $4,639,958
Policyholder
benets
assumed 19,948 290,925 310,873 23,911 306,365 330,276 22,844 211,446 234,290
Policyholder
benets
ceded (647,873)(1,882,822)(2,530,695) (1,373,953 )(1,498,111)(2,872,064)(590,281)(608,435)(1,198,716)
NET
POLICYHOLDER
BENEFITS $
310,037 $ 4,432,498 $ 4,742,535 $ 352,433 $ 4,052,900 $ 4,405,333 $ 365,673 $ 3,309,859 $ 3,675,532
The Company had $923,512 and $1,022,078, respectively,
of invested assets held in trusts or by custodians as of
December 31, 2015 and 2014, respectively, for the bene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 pro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
signi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 expired in February 2015� Ibis
Re II 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 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 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-
identi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
covered event, Ibis Re II pays the Subsidiaries the lesser of the