Amounts recoverable under the terms of reinsurance contracts comprise approximately 16% of total Company assets as of December 31, 2011. In order to be able to provide the high limits required by the Company’s insureds, we share a significant amount of the insurance risk of the underlying contracts with various insurance entities through the use of reinsurance contracts. Some reinsurance contracts provide that a loss be shared among the Company and its reinsurers on a predetermined pro-rata basis (“quota-share”) while other contracts provide that the Company keep a fixed amount of the loss, similar to a deductible, with reinsurers taking all losses above this fixed amount (“excess of loss”). Some risks are covered by a combination of quota-share and excess of loss contracts. The computation of amounts due from reinsurers is based upon the terms of the various contracts and follows the underlying estimation process for loss and loss expense reserves, as described below. Accordingly, the uncertainties inherent in the loss and loss expense reserving process also affect the amounts recorded as recoverable from reinsurers. Estimation uncertainties are greatest for claims which have occurred but which have not yet been reported to the Company. Further, the high limits provided by the Company’s insurance policies for fleet transportation liability, workers’ compensation and professional liability risks provide more variability in the estimation process than lines of business with lower coverage limits.
and to case reserves with consideration given for that portion of loss adjustment expense already paid at the reserve measurement date. Such factors are monitored and revised, as necessary, on a quarterly basis.
Based on the structure of the Company’s investment portfolio, the most potentially significant of the three identified market risks relates to prices in the equity security market. Though not the largest category of the Company's invested assets, equity securities have a high potential for short-term price fluctuation. The market value of the Company's equity positions at December 31, 2011 was $88.1 million or approximately 14% of invested assets. This market valuation includes $40.4 million of appreciation over the adjusted cost basis of the equity security investments. Funds invested in the equities market are not considered to be assets necessary for the Company to conduct its daily operations and, therefore, can be committed for extended periods of time. The long-term nature of the Company's equity investments allows it to invest in positions where ultimate value, and not short-term market fluctuations, is the primary focus.
The Company’s loss and loss expense reserves do not have contractual maturity dates and the exact timing of the payment of claims cannot be predicted with certainty. However, based upon historical payment patterns, we have included an estimate of when we might expect our direct loss and loss expense reserves (without the benefit of reinsurance recoveries) to be paid in the preceding table. Timing of the collection of the related reinsurance recoverable, estimated to be $138.4 million at December 31, 2011, would approximate that of the above projected direct reserve payout.
The investment commitments in the above table relate to maximum unfunded capital obligations for limited partnership investments at December 31, 2011.
Company’s intent and ability to retain the equity security for a period of time sufficient to allow for such recovery in fair value. Additionally, the Company takes into account any known subjective information in evaluating for impairment without consideration to the Company’s quantitative criteria defined above.
Effective May 4, 2010, the Company issued 17,754 shares of class B restricted stock to the Company’s outside directors. The restricted shares became fully vested on May 4, 2011 and were distributed to directors on that date. The shares represent the annual retainer compensation for outside directors for the period July 1, 2010 through June 30, 2011. Each share was valued at $24.78 per share representing a total value of $440. Compensation expense related to the above stock grant was recognized over the period in which the directors rendered the services.
The Company leases office space and certain computer and related equipment using noncancelable operating leases. Lease expense for 2011, 2010 and 2009 was $1,483, $1,386 and $1,465, respectively. At December 31, 2011, future lease payments for operating leases with initial or remaining noncancelable terms of one year or more consisted of the following: