Reinsurance
 9 Months Ended
Sep. 30, 2016
Reinsurance Disclosures [Abstract]  
Reinsurance
Reinsurance
In September 2016, in order to continue to grow our business and manage insurance risk and our minimum required assets under PMIERs financial requirements, the Company entered into a quota-share reinsurance transaction with a panel of third-party reinsurers, subject to certain conditions (2016 QSR Transaction). Each of the third-party reinsurers has an insurer financial strength rating of A- or better by Standard and Poor’s Rating Services (S&P), A.M. Best or both. The GSEs and the Wisconsin Office of the Commissioner of Insurance (Wisconsin OCI) approved the 2016 QSR Transaction (subject to certain conditions), giving full capital credit under PMIERs and statutory accounting principles, respectively, for the risk ceded under the agreement. The credit that we receive under PMIERs is subject to periodic review by the GSEs.

Under the 2016 QSR Transaction, effective September 1, 2016, NMIC ceded premiums related to:

•25% of existing risk written on eligible policies as of August 31, 2016;
•
100% of our existing risk under our pool agreement with Fannie Mae; and
•
25% of risk on eligible policies written from September 1, 2016 through December 31, 2017.
Net premiums written and earned, net of reinsurance, is as follows:
 
For the nine months ended
 
September 30, 2016
 
September 30, 2015
 
(In Thousands)
Net premiums written (1)
$
96,190

 
$
68,629

Increase in unearned premiums
(18,534
)
 
(40,003
)
Net premiums earned
$
77,656

 
$
28,626

(1) Net of ceded premiums written under the 2016 QSR Transaction.    
The effect of reinsurance on net premiums written and earned is as follows:
 
For the nine months ended
 
September 30, 2016
 
September 30, 2015
 
(In Thousands)
Net premiums written
 
 
 
Direct
$
133,526

 
$
68,629

Ceded
(37,336
)
 
—

Net premiums written
$
96,190


$
68,629

 
 
 
 
Net premiums earned
 
 
 
Direct
$
78,900

 
$
28,626

Ceded
(1,244
)
 
—

Net premiums earned
$
77,656


$
28,626

The following tables show the amounts ceded related to the 2016 QSR Transaction:
 
For the nine months ended
 
September 30, 2016
 
September 30, 2015
 
(In Thousands)
Ceded risk-in-force
$
1,685,145

 
$
—

Ceded premiums written
(37,336
)
 
—

Ceded premiums earned
(1,244
)
 
—

Ceding commission written
7,795

 
—

Ceding commission earned
(530
)
 
—


    
NMIC receives a 20% ceding commission for premiums ceded pursuant to this transaction. NMIC will also receive a profit commission, provided that the loss ratio on the loans covered under the agreement generally remains below 60%, as measured annually. Losses on the ceded risk reduce NMIC's profit commission on a dollar-for-dollar basis.
In accordance with the terms of the 2016 QSR Transaction, rather than making a cash payment or transferring investments for ceded premiums written, NMIC established a funds withheld liability, which also includes amounts due to NMIC for ceding and profit commissions. Any loss recoveries and any potential profit commission to NMIC will be realized from this account until exhausted. Ceded premiums written are recorded on the balance sheet as prepaid reinsurance premiums and amortized to ceded premiums earned in a manner consistent with the recognition of income on direct premiums.    
The reinsurance recoverable on loss reserves related to our 2016 QSR Transaction was $90 thousand as of September 30, 2016. The reinsurance recoverable balance is further secured by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements that address ceded risk.
The agreement is scheduled to terminate on December 31, 2027, except with respect to the ceded pool risk, which is scheduled to terminate on August 31, 2023. However, NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2020, or at the end of any calendar quarter thereafter, which would result in NMIC reassuming the related risk.