We are a Cayman Islands specialty property and casualty reinsurer that provides reinsurance solutions through our reinsurance subsidiary, Oxbridge Reinsurance Limited. We recently organized a new subsidiary, Oxbridge Re NS Ltd., which was incorporated on December 22, 2017 to facilitate potential future hedging and investment activities with respect to our reinsurance risks, but the subsidiary has not yet commenced operations and has no assets or liabilities. We focus on underwriting fully-collateralized reinsurance contracts primarily for property and casualty insurance companies in the Gulf Coast region of the United States, with an emphasis on Florida. We specialize in underwriting medium frequency, high severity risks, where we believe sufficient data exists to analyze effectively the risk/return profile of reinsurance contracts.
Additionally, and in recognition of its dividend suspension, the Company had decided to suspend the payment of non-employee director fees, effective October 1, 2017, which had been $30,000 per director per annum, and such fee suspension will continue until otherwise determined by the board of directors.
Premiums assumed include all premiums received by a reinsurance company during a specified accounting period, even if the policy provides coverage beyond the end of the period. Premiums are earned over the term of the related policies. At the end of each accounting period, the portion of the premiums that are not yet earned are included in the unearned premiums reserve and are realized as revenue in subsequent periods over the remaining term of the policy. Our policies typically have a term of twelve months. Thus, for example, for a policy that is written on July 1, 2017, typically one-half of the premiums will be earned in 2017 and the other half will be earned during 2018. However, in the event of limit losses on our policies, as we have experienced during the quarter ended September 30, 2017, premium recognition has been accelerated to match losses incurred in the period, when there is no possibility of any future treaty-year losses under the contracts.
General. Net loss for the year ended December 31, 2017 was $20.6 million or ($3.55) per basic and diluted loss per share compared to a net income of $2.6 million or $0.43 per basic and diluted earnings per share for the year ended December 31, 2016. The significant decrease is wholly due to the triggering during the third quarter of 2017 of limit losses on all our reinsurance contracts, due to the individual and collective impact of Hurricane Harvey, Hurricane Irma and Hurricane Maria on our book of business, compared with nominal loss and loss adjustment expenses during the prior fiscal year.
Net premiums earned for the year ended December 31, 2017 increased $5.5 million, to $23.6 million, from $18.1 million for the year ended December 31, 2016. The increase is due to both the higher deployment of capital during 2017, and consequentially higher premiums, as well as the acceleration of premium recognition due to full limit losses being incurred on all of our reinsurance contracts during the year ended December 31, 2017.
Losses Incurred. Losses incurred for the year ended December 31, 2017 increased $27.6 million to $42.4 million, from $14.8 million for the year ended December 31, 2016. The increase is wholly due to the triggering of limit losses on all of our reinsurance contracts, due to the individual and collective impact of Hurricane Harvey, Hurricane Irma and Hurricane Maria on our book of business, as well as adverse development on prior year claims, compared with nominal loss and loss adjustment expenses during the prior fiscal year.
Acquisition Cost Ratio. The acquisition cost ratio is the ratio of policy acquisition costs and other underwriting expenses to net premiums earned. The acquisition cost ratio measures our operational efficiency in producing, underwriting and administering our reinsurance business. The acquisition cost ratio increased from 1.6% for the year ended December 31, 2016 to 2.9% for the year ended December 31, 2017. The increase is due wholly to the acceleration of acquisition costs recognition mentioned earlier, more than offset by a larger denominator in net premiums earned, when compared with prior fiscal year.
Our reinsurance operations exposed us to claims arising out of unpredictable catastrophic events during the third quarter of 2017. The incidence and severity of catastrophes are inherently unpredictable, but the loss experience of property catastrophe reinsurers has been generally characterized as low frequency and high severity. Claims from catastrophic events have reduced our earnings and caused substantial volatility in our results of operations, and adversely affected our financial condition. The corresponding reduction in our surplus level will impact our ability to write new reinsurance policies at future renewal periods.
Cash Flows for the Year ended December 31, 2017 (in thousands)
The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an emerging growth company. We have determined that, as an emerging growth company, we will not: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b); (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of our Chief Executive Officer’s compensation to median employee compensation; or (v) comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.