(i) Radian Guaranty will cede to the reinsurer 20% of all premiums and losses incurred with respect to conventional GSE  loans and will initially receive a 35% ceding commission; provided, that if we do not exercise our Commutation  Option, the ceding commission will be reduced to 30% for the portion of the ceded RIF that was subject to the  Commutation Option; and (ii) Radian Guaranty has the ability to cede 100% of all premiums and losses incurred with respect to non-conventional  portfolio loans and will receive a 25% ceding commission.  We do not expect the volume of such portfolio loans to be  material. Under the Second Quota Share Reinsurance  Transaction, for the year ended December 31, 2012, ceded premiums written  were $9.6 million and ceded premiums earned were $0.5 million. Smart Home . In 2004, we developed a program referred to as “Smart Home” for reinsuring risk associated with non- prime mortgages. These reinsurance transactions used variable interest entity (“VIE”) structures to ef fectively transfer risk from  our portfolio to investors in the capital markets. In 201 1, we exercised our option to terminate two of our four Smart Home  transactions with RIF of approximately $41 million, and in the second quarter of 2012, we terminated one of the remaining  Smart Home transactions (which otherwise would have matured in November 2012) with RIF of approximately $243 million.  The final remaining Smart Home transaction is scheduled to mature in May 2013. See Note 9 of Notes to Consolidated  Financial Statements for more information. At December 31, 2012, $0.4 billion, or approximately 1.1% of our primary mortgage insurance RIF , was included in the  Smart Home reinsurance program, compared to $0.8 billion, or approximately 2.7% at  December 31, 2011.  Captive Reinsurance . We and other companies in the mortgage insurance industry participated in reinsurance  arrangements with mortgage lenders commonly referred to as “captive reinsurance arrangements.” Under captive reinsurance  arrangements, a mortgage lender typically established a reinsurance company that assumed part of the risk associated with the  portfolio of that lender’s mortgages insured by us on a flow basis (as compared to mortgages insured in structured transactions,  which typically are not eligible for captive reinsurance arrangements). In return for the reinsurance company’ s assumption of a  portion of the risk, we ceded to the reinsurance company a portion of the mortgage insurance premiums that would have been  paid to us. Captive reinsurance typically was conducted on an “excess-of-loss” basis, with the captive reinsurer paying losses  only after a certain level of losses had been incurred. In addition, on a limited basis, we participated in “quota share” captive  reinsurance arrangements under which the captive reinsurance company assumed a pro rata share of all losses in return for a pro  rata share of the premiums collected. In most cases, the risk assumed by the reinsurance company was an excess layer of aggregate losses that would be  penetrated in a situation of adverse loss development.  As a result of the housing and related credit market downturn that began  in 2007, most captive reinsurance arrangements have “attached,” meaning that losses have exceeded the threshold so that we  are now entitled to cash recoveries from the captive. In all cases, the captive reinsurer established a trust to secure our potential  cash recoveries. We generally are the sole beneficiary under these trusts, and therefore, have the ability to initiate disbursements  under the trusts in accordance with the terms of our captive reinsurance agreements. Ceded losses recoverable related to  captives at December 31, 2012 were $82.2 million. We expect that most of the actual cash recoveries from these captives will  be received over the next few years.  In some instances, we anticipate that the ultimate recoveries from the captive reinsurers will be greater than the assets  currently held by the segregated trusts established for each captive reinsurer . Recorded recoverables, however, are limited to the  current trust balances.  All of our existing captive reinsurance arrangements are operating on a run-of f basis, meaning that no new business is  being placed in these captives. In 2010, we terminated a significant portion of our remaining captive reinsurance arrangements  on a “cut-off” basis, meaning that the terminated captive arrangements were dissolved and all outstanding liabilities were  settled. For additional information about our captive reinsurance arrangements, see “Legal Proceedings.” As of December 31, 2012, we have received total cash reinsurance recoveries (including recoveries from the termination  of captive arrangements) from Smart Home and captive reinsurance arrangements of approximately $835.7 million since  inception of these programs, with most of these recoveries coming from captive reinsurance arrangements. GSE Arrangements . We also have entered into risk/revenue-sharing arrangements with the GSEs whereby the primary  insurance coverage amount on certain loans is recast into primary and pool insurance and our overall exposure is reduced in  return for a payment made to the GSEs. Ceded premiums written and earned for the year ended  December 31, 2012, were each  $2.6 million under these programs and are expected to decline over time. 22