Radian Group Inc. Notes to Consolidated Financial Statements - (Continued) 9. Reinsurance  In our mortgage insurance business, we use reinsurance as a risk management tool to reduce our net risk and strengthen  our regulatory risk-to-capital ratio.  We primarily have used reinsurance in our financial guaranty business to the extent  necessary in specific transactions to comply with applicable single risk limits.  Although the use of reinsurance does not  discharge an insurer from its primary liability to the insured, the reinsuring company assumes the related liability under these  arrangements. Included in other assets are unearned premiums on risk that we have ceded of  $64.5 million and $0.8 million at  December 31, 2012 and 2011, respectively. The effect of reinsurance on net premiums written and earned is as follows: Net premiums written-insurance: Direct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ceded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net premiums written-insurance. . . . . . . . . . . . . . . . . . . . Net premiums earned-insurance: Direct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ceded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net premiums earned-insurance. . . . . . . . . . . . . . . . . . . . During the second quarter of 2012, Radian Guaranty entered into the Initial Quota Share Reinsurance  Transaction.  Through the Initial Quota Share Reinsurance  Transaction, Radian Guaranty agreed to reinsure to a third party  20% of its NIW  beginning with the business written in the fourth quarter of 201 1. As of December 31, 2012, RIF ceded under the Initial Quota  Share Reinsurance Transaction was $1.5 billion. Radian Guaranty has the ability , at its option, to commute two-thirds of the  reinsurance ceded as part of this transaction on December 31, 2014, which would result in Radian Guaranty reassuming the  related RIF in exchange for a payment of a predefined commutation amount from the reinsurer . Under the Initial Quota Share Reinsurance  Transaction, for the year ended  December 31, 2012, ceded premiums written  were $52.2 million and ceded premiums earned were $16.1 million. Ceding commissions earned under the Initial Quota Share  Reinsurance Transaction for the year ended  December 31, 2012 were $13 million. In the fourth quarter of 2012, Radian Guaranty and the same third-party reinsurance provider agreed to the terms of the  Second Quota Share Reinsurance Transaction, which provides for additional reinsurance for Radian Guaranty’ s NIW, as further  described below. As of December 31, 2012, the amount ceded pursuant to this transaction was  $368.4 million of Radian  Guaranty’s RIF. The limitation on ceded risk is $750 million initially and the parties have the ability to mutually increase the  amount of ceded risk up to a maximum of  $2 billion. The agreed upon terms also provide that, ef fective as of December 31,  2015, Radian Guaranty will have the ability , at its option (the “Commutation Option”), to commute one-half of the reinsurance  ceded with respect to conventional GSE loans, which would result in Radian Guaranty reassuming the related RIF in exchange  for a payment of a predefined commutation amount from the reinsurer . Pursuant to the agreed upon terms: (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. 220 (In thousands) Year Ended December 31, 2012 2011 2010 $ 892,983 $ 755,758 $ 788,321 (88,991 ) (11,162 ) (6,585 ) (117,362 ) (37,349 ) (89,855 ) $ 686,630 $ 707,247 $ 691,881 $ 796,253 $ 762,428 $ 891,167 (3,571 ) 32,337 29,063 (53,700 ) (38,740 ) (94,497 ) $ 738,982 $ 756,025 $ 825,733