Unpaid Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Unpaid Losses and Loss Adjustment Expenses

NOTE 11 – UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

The following table provides an analysis of Crusader’s loss and loss adjustment expense reserves, including a reconciliation of the beginning and ending balance sheet liability for the periods indicated:

	Three Months Ended March 31
	2018		2017
Reserve for unpaid losses and loss adjustment expenses at January 1 – gross of reinsurance	$	49,076,991	$	47,055,787
Less reinsurance recoverable on unpaid losses and loss adjustment expenses		8,393,550		9,520,970
Reserve for unpaid losses and loss adjustment expenses at January 1 – net of reinsurance		40,683,441		37,534,817
Incurred losses and loss adjustment expenses:
Provision for insured events of current year		6,009,138		6,497,566
Development of insured events of prior years		1,792,619		2,027,615
Total incurred losses and loss adjustment expenses		7,801,757		8,525,181
Loss and loss adjustment expense payments:
Attributable to insured events of the current year		1,388,589		1,035,179
Attributable to insured events of prior years		4,752,912		5,020,402
Total payments		6,141,501		6,055,581
Reserve for unpaid losses and loss adjustment expenses at March 31 – net of reinsurance		42,343,697		40,004,417
Reinsurance recoverable on unpaid losses and loss adjustment expenses		11,570,306		9,885,632
Reserve for unpaid losses and loss adjustment expenses at March 31 – gross of reinsurance	$	53,914,003	$	49,890,049

Some lines of insurance are commonly referred to as "long-tail" lines because of the extended time required before claims are ultimately settled. Lines of insurance in which claims are settled relatively quickly are called "short-tail" lines. It is generally more difficult to estimate loss reserves for long-tail lines because of the long period of time that elapses between the occurrence of a claim and its final disposition and the difficulty of estimating the settlement value of the claim. Crusader’s short-tail lines consist of its property coverages, and its long-tail lines consist of its liability coverages. However, Crusader’s long-tail liability claims tend to be settled relatively quicker than other long-tail lines not underwritten by Crusader, such as workers’ compensation, professional liability, umbrella liability, and medical malpractice. Since trends develop over longer periods of time on long-tail lines of business, the Company generally gives credibility to those trends more slowly than for short-tail or less volatile lines of business.  

The $6,009,138 provision for insured events of current year for the three months ended March 31, 2018, was $488,428 lower than the $6,497,566 provision for insured events of current year for the three months ended March 31, 2017, due primarily to lower frequency and severity of short-tail property claims during the three months ended March 31, 2018.

The $1,792,619 development of insured events of prior years for the three months ended March 31, 2018, was $234,996 lower than the $2,027,615 for the three months ended March 31, 2017, due primarily to lower incurred losses and loss adjustment expenses on long-tail liability claims for 2013, 2014, and 2015 accident years during the three months ended March 31, 2018. The $1,792,619 development of insured events of prior years during the three months ended March 31, 2018, was due primarily to strengthening of 2017 and 2016 accident years loss and loss adjustment expense reserves.