ASSURANT INC

4. Allowance for Credit Losses

The total allowance for credit losses for the financial assets was $20.7 million and $26.8 million as of December 31, 2024 and 2023, respectively.

The following table presents the net increases (decreases) to the allowance for credit losses as classified in the consolidated statements of operations for the periods indicated:

Reinsurance Recoverables

As part of the Company’s overall risk and capacity management strategy, reinsurance is used to mitigate certain risks underwritten by various business segments. The Company is exposed to the credit risk of reinsurers, as the Company remains liable to insureds regardless of whether related reinsurance recoverables are collected. As of December 31, 2024 and 2023, reinsurance recoverables totaled $7.58 billion and $6.65 billion, respectively, the majority of which are protected from credit risk by various types of collateral or other risk mitigation mechanisms, such as trusts, letters of credit or by withholding the assets in a modified coinsurance or funds withheld arrangement.

The Company utilizes external credit ratings published by S&P Global Ratings, a division of S&P Global Inc., at the balance sheet date when determining the allowance. Where rates are not available, the Company assigns default credit ratings based on if the reinsurer is authorized or unauthorized. Of the total recoverables subject to the allowance,84% were rated A- or better,5% were rated B- and 11% were not rated based on the Company’s analysis and assigned ratings for the year ended December 31, 2024; and 82% were rated A- or better,1% were rated BBB or BB, and 17% were not rated based on the Company’s analysis and assigned ratings for the year ended December 31, 2023.

The following table presents the changes in the allowance for credit losses by portfolio segment for reinsurance recoverables for the periods indicated:

For the years ended December 31, 2024 and 2023, the current period change for credit losses was $0.2 million and $(0.6) million, respectively. When determining the allowance as of December 31, 2024 and 2023, the Company did not increase default probabilities by reinsurer since there had been no credit rating downgrades or major negative credit indications of the Company’s reinsurers that has impacted rating. The allowance may be increased and income reduced in future periods if there are future ratings downgrades or other measurable information supporting an increase in reinsurer default probabilities, including collateral reductions.

Premium and Accounts Receivables

The Company is exposed to credit risk from premiums and other accounts receivables. For premiums receivable, the exposure to loss upon a default is often mitigated by the ability to terminate the policy on default and offset the corresponding unearned premium liability. The Company has other mitigating offsets from amounts payable on commissions and profit share arrangements when the counterparty to the receivable is a sponsor/agent of the Company’s insurance product.

The following table presents the changes in the allowance for credit losses by portfolio segment for premium and accounts receivables for the periods indicated:

For the year ended December 31, 2024, the current period change for credit losses was $2.9 million, primarily due to an increase in Global Lifestyle across various products. For the year ended December 31, 2023, the current period change for credit losses was $3.8 million. There is a risk that income may be reduced in future periods for additional credit losses.

Commercial Mortgage Loans

For the years ended December 31, 2024 and 2023, the current period change for credit losses was $2.5 million and $2.2 million, respectively. The increase in 2024 was primarily driven by changes in certain key credit quality indicators. Refer to Notes 2 and 7 for additional information on commercial mortgage loans.

Available for Sale Securities

There wasno allowance for credit losses as of December 31, 2024 and 2023. Refer to Notes 2 and 7 for additional information on available for sale securities.

High Deductible Recoverables

For the year ended December 31, 2024, the Company reduced its allowance for credit losses for the unsecured portion of the high deductible recoverables by $6.9 million to $1.4 million as of December 31, 2024, due to the ongoing run-off of the sharing economy business. Refer to Note 2 for additional information on high deductible recoverables.