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Reserves for Losses and Loss Settlement Expenses
 12 Months Ended
Dec. 31, 2022
Insurance Loss Reserves [Abstract]  
Reserves for Losses and Loss Settlement Expenses RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES
Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property or the loss of its income-producing abilities. Casualty insurance primarily covers liability for damage to property of, or injury to, a person or entity other than the insured. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation, arising out of events covered by the policy.

Liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what we expect to pay for claims that have been reported and those that have been incurred but not reported ("IBNR"), based on known facts, circumstances, and historical trends. Because property and casualty insurance reserves are estimates of the unpaid portions of incurred losses that have been reported to us, as well as losses that have been incurred but not reported, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process. The ultimate cost of losses and related loss settlement expenses may vary materially from recorded amounts. We regularly update our reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported as a component of losses and loss settlement expenses incurred in the period such changes are determined.

The determination of reserves (particularly those relating to liability lines of insurance that have relatively longer lag in claim reporting) requires significant work to reasonably project expected future claim reporting and payment patterns. If, during the course of our regular monitoring of reserves, we determine that coverages previously written are incurring higher than expected losses, we will evaluate an appropriate response that may include, among other things, increasing the related reserves. Any adjustments we make to reserves are reflected in operating results in the year in which we make those adjustments. We engage an independent actuary, Regnier Consulting Group, Inc. ("Regnier"), to render an opinion as to the reasonableness of our statutory reserves annually. The actuarial opinion is filed in those states where we are licensed.

On a quarterly basis, United Fire's team of actuaries performs a detailed actuarial review of IBNR reserves. This review includes a comparison of results from the most recent analysis of reserves completed by both our internal and external actuaries. Senior management meets with our actuarial team to review, on a regular and quarterly basis, the adequacy of carried reserves based on results from this actuarial analysis. There are two fundamental types or sources of IBNR reserves. We record IBNR reserves for "normal" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate establishing specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate.

Our IBNR methodologies and assumptions are reviewed periodically, but changes are infrequent. In response to an increase in severity of losses and an increase in distracted driving claims, we revised our commercial automobile assumptions, resulting in an increase to our carried loss IBNR. We also reviewed our methodology and assumptions in our product liability line, associated with our construction defects business, and assumptions due to improvement in development patterns related to the statute of limitations on accident years that have matured 13 to 15 years which haven't developed to the extent we initially expected. Besides the changes to our assumptions used for our commercial automobile line and product liability line, we continually review and revise items affecting our projections of required reserves for unpaid loss and LAE. Items reviewed and revised include development factors for paid and reported loss, paid development factors for allocated LAE, and the ratios of paid unallocated LAE to paid loss.

We do not discount loss reserves based on the time value of money. 
The following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves for 2022, 2021 and 2020 (net of reinsurance amounts):
   
Years Ended December 31,202220212020
Gross liability for losses and loss settlement expenses
at beginning of year		$1,514,265 $1,578,131 $1,421,754 
Ceded losses and loss settlement expenses(112,900)(131,843)(68,536)
Net liability for losses and loss settlement expenses
at beginning of year		$1,401,365 $1,446,288 $1,353,218 
Losses and loss settlement expenses incurred
for claims occurring during
   Current year$624,411 $701,064 $887,119 
   Prior years12,890 (48,909)(17,652)
Total incurred$637,301 $652,155 $869,467 
Losses and loss settlement expense payments
for claims occurring during
   Current year$215,891 $277,115 $354,635 
   Prior years472,377 419,963 421,762 
Total paid$688,268 $697,078 $776,397 
Net liability for losses and loss settlement expenses
at end of year		$1,350,399 $1,401,365 $1,446,288 
Ceded losses and loss settlement expenses(1)146,875 112,900 131,843 
Gross liability for losses and loss settlement expenses
at end of year		$1,497,274 $1,514,265 $1,578,131 

There are a multitude of factors that can impact loss reserve development. Those factors include, but are not limited to: historical data, the potential impact of various loss reserve development factors and trends including historical loss experience, legislative enactments, judicial decisions, legal developments in imposition of damages, experience with alternative dispute resolution, results of our medical bill review process, the potential impact of salvage and subrogation and changes and trends in general economic conditions, including the effects of inflation. All of these factors influence our estimates of required reserves and for long tail lines these factors can change over the course of the settlement of the claim. However, there is no precise method for evaluating the specific monetary impact of any individual factor on the development of reserves.
Generally, we base reserves for each claim on the estimated ultimate exposure for that claim. We believe that it is appropriate and reasonable to establish a best estimate for reserves within a range of reasonable estimates, especially when we are reserving for claims for bodily injury, disabilities and similar claims, for which settlements and verdicts can vary widely. Our reserving philosophy may result in favorable reserve development in future years that may decrease losses and loss settlement expenses for prior year claims in the year of adjustment. We realize that this philosophy, coupled with what we believe to be aggressive and successful claims management and loss settlement practices, has resulted in year-to-year redundancies in reserves. We believe our approach produces recorded reserves that are reasonably consistent as to their relative position within a range of reasonable reserves from year-to-year. However, conditions and trends that have affected the reserve development for a given year do change. Therefore, such development cannot be used to project future reserve redundancies or deficiencies.
We are not aware of any significant contingent liabilities related to environmental issues. Because of the type of property coverage we write, we have potential exposure to environmental pollution, mold and asbestos claims. Our underwriters are aware of these exposures and use riders or endorsements to limit exposure.
Reserve Development

The significant drivers of the unfavorable reserve development in 2022 were commercial other liability and commercial fire and allied lines. This was offset partially by favorable development in commercial automobile, workers compensation and fidelity and surety. The unfavorable development in commercial other liability was due to paid loss and LAE which was greater than reductions in reserves for unpaid loss and LAE. Emerging claim experience and deeper data insights during 2022 pointed to an increase in loss exposure on these longer tailed businesses driven in part by social and economic inflation. Commercial fire and allied developed unfavorably due to paid loss and LAE which was greater than reductions in reserves for unpaid loss and LAE driven by catastrophe losses and increased severity on non-catastrophe claims. The favorable development for commercial automobile was from both loss and LAE where reductions of reserves for unpaid liabilities were more than sufficient to offset actual paid loss and paid LAE reductions in reserves for IBNR claims also contributed favorable development in addition to LAE where reductions in reserves were more than sufficient to offset payments.

The significant drivers of the favorable reserve development in 2021 were commercial automobile along with a favorable contribution from workers' compensation. This favorable development was partially offset by unfavorable development from commercial other liability. Favorable development for both commercial automobile and workers' compensation was from both loss and LAE. Reserve reductions for unpaid loss and LAE were more than sufficient to offset payments. Commercial other liability was adversely affected by reserve strengthening for reported claims and reserve strengthening for incurred but unreported claims. Commercial other liability reserve strengthening resulted in unfavorable development because paid loss exceeded the reduction in unpaid claim reserves but favorable development for LAE partially offset the unfavorable loss development.

The significant drivers of the favorable reserve development in 2020 were workers' compensation, commercial fire and allied lines, fidelity and surety and personal automobile. The favorable development for workers' compensation was primarily from reductions in reserves for reported claims which were more than sufficient to offset paid loss. Reductions in reserves for IBNR claims also contributed favorable development in addition to LAE where reductions in reserves were more than sufficient to offset payments. Commercial fire and allied lines developed favorably because reductions in reserves for reported claims combined with reductions in reserves for IBNR claims were more than sufficient to offset paid loss. LAE also contributed favorable development with reductions in reserves more than sufficient to offset payments. Fidelity and surety loss developed favorably because a reduction in reserves for IBNR claims was more than sufficient to offset both paid loss and increases in reserves for reported claims. The personal automobile line of business developed favorably because reductions of reserves for reported claims combined with reductions of reserves for IBNR claims were more than sufficient to offset paid loss. LAE also contributed favorable development with reductions in reserves more than sufficient to offset payments. Much of the favorable development was offset by unfavorable development from three lines: commercial liability, reinsurance assumed and commercial automobile. The commercial liability line of business experienced unfavorable development due to paid loss which was greater than reductions in reserves for unpaid loss. LAE developed favorably and partially offset the unfavorable loss development. The unfavorable development for reinsurance assumed was due to paid loss which was greater than reductions in reserves for unpaid loss. The commercial automobile line of business experienced unfavorable development because paid loss was greater than reductions in reserves for unpaid loss, but a portion of the unfavorable loss development was offset by favorable development from LAE where payments were more than offset by reductions of reserves for unpaid LAE. On an all lines combined basis, favorable development is attributable to LAE which continues to benefit from additional litigation management efforts.
The following tables provide information about incurred and paid losses and loss settlement expense development as of December 31, 2022, net of reinsurance, as well as cumulative development, cumulative claim frequency and IBNR liabilities. Claim data for Mercer Insurance Group, Inc., which was acquired on March 28, 2011, is presented retrospectively.
The cumulative number of reported claims, for calendar year 2022, 2021 and 2020, are counted for all lines of business on a per claimant per coverage basis and a single event may result in multiple claims due to the involvement of multiple individual claimants and/or multiple independent coverages. Claim counts for calendar years 2016 and prior are counted on a per claim and per coverage basis. Claim counts include open claims, claims that have been paid and closed, and reported claims that have been closed without the need for any payment.

Line of business: Commercial other liability
Incurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2022
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$104,982 $91,460 $90,502 $86,119 $85,399 $88,816 $86,082 $85,999 $94,808 $92,809 $1,677 (12,173)6,556 
2014118,928 117,958 106,486 97,809 102,487 105,507 107,417 111,517 111,558 3,675 (7,370)6,772 
2015137,386 125,307 120,005 127,091 129,945 131,325 132,694 136,161 7,358 (1,225)7,922 
2016139,144 130,041 136,275 142,397 140,784 148,324 153,491 11,394 14,347 9,332 
2017139,602 139,032 152,547 156,369 159,653 173,092 20,797 33,490 9,203 
2018163,059 172,894 176,496 187,841 197,696 22,305 34,637 9,054 
2019149,173 169,344 183,918 179,667 33,160 30,494 8,375 
2020171,013 158,022 162,471 43,607 (8,542)6,090 
2021145,822 162,359 63,217 16,537 3,106 
2022161,826 91,135 2,100 
Total$1,531,130 
Line of business: Commercial other liability
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$9,835 $25,228 $39,953 $54,559 $65,773 $72,115 $75,961 $78,448 $83,491 $87,739 
201410,207 29,679 50,211 70,363 83,109 93,060 96,509 102,042 103,075 
201511,185 27,182 53,901 74,292 96,339 104,472 109,540 117,734 
201613,782 38,184 63,526 88,885 102,757 115,107 126,561 
201717,716 43,172 70,500 91,984 111,085 128,430 
201816,200 44,772 79,168 105,515 130,943 
201918,221 46,986 72,179 102,510 
202017,011 43,596 60,114 
202112,434 33,642 
202210,468 
Total$901,216 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2013, net of reinsurance16,140 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$646,054 
Line of business: Commercial fire and allied
Incurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2022
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$91,521 $88,550 $91,498 $92,212 $93,826 $93,858 $92,988 $92,855 $93,498 $93,246 $47 1,725 6,679 
2014126,216 131,198 128,762 128,185 128,503 126,811 127,068 128,180 128,491 167 2,275 7,952 
2015103,177 108,293 110,633 108,235 105,218 104,646 105,043 104,978 107 1,801 7,596 
2016147,473 144,208 143,721 143,724 143,108 144,109 145,351 331 (2,122)9,874 
2017155,139 160,240 160,946 161,693 161,232 161,456 627 6,317 13,502 
2018143,280 146,951 146,378 146,010 147,356 624 4,076 10,776 
2019164,030 155,482 158,475 157,667 837 (6,363)11,185 
2020207,207 201,391 202,930 2,033 (4,277)14,583 
2021156,794 169,669 10,090 12,875 5,253 
2022161,776 35,947 3,797 
Total$1,472,920 
Line of business: Commercial fire and allied
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$59,331 $78,226 $82,853 $86,115 $89,200 $91,493 $92,012 $92,472 $93,200 $93,068 
201484,456 113,663 116,750 122,370 123,697 125,745 126,307 127,883 128,033 
201567,217 90,454 95,515 101,367 104,115 103,975 104,127 104,339 
201692,895 125,962 132,429 137,909 139,353 141,104 142,248 
201799,484 137,058 145,900 152,219 157,512 159,286 
201892,770 123,559 133,703 137,794 141,841 
2019100,980 136,084 142,342 150,196 
2020128,704 173,055 192,903 
202197,451 140,406 
202296,160 
Total$1,348,480 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2013, net of reinsurance1,991 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$126,432 
Line of business: Commercial automobile
Incurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2022
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$104,356 $98,037 $102,943 $103,726 $104,980 $105,248 $104,886 $106,140 $106,288 $105,130 $146 774 15,530 
2014107,723 106,076 113,720 118,869 120,385 121,077 120,599 119,214 121,311 219 13,588 17,327 
2015125,506 129,816 132,206 138,987 137,395 137,335 136,826 137,240 133 11,734 20,088 
2016174,018 175,357 174,337 175,657 173,823 174,588 175,016 1,138 998 27,306 
2017227,919 224,553 235,110 233,159 233,007 233,535 1,573 5,616 32,895 
2018236,629 245,173 253,045 255,017 255,409 4,010 18,780 34,477 
2019279,229 291,139 289,929 282,154 5,498 2,925 34,725 
2020243,360 216,951 196,412 4,363 (46,948)24,107 
2021179,880 172,599 10,183 (7,281)12,212 
2022157,165 29,029 9,226 
Total$1,835,971 
Line of business: Commercial automobile
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$43,592 $67,630 $79,663 $90,780 $96,375 $100,058 $101,580 $103,037 $103,368 $103,773 
201445,704 68,033 87,590 99,922 109,682 113,751 116,843 117,770 118,985 
201550,782 78,225 99,201 118,395 129,317 134,100 135,462 137,075 
201666,013 103,528 128,157 148,224 164,341 168,950 171,380 
201781,311 126,644 166,170 197,893 212,947 223,076 
201881,572 138,092 187,405 211,123 235,519 
201991,919 153,244 205,614 246,800 
202067,660 109,686 138,158 
202164,381 99,116 
202262,477 
Total$1,536,359 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2013, net of reinsurance56 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$299,668 
Line of business: Workers' compensation
Incurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2022
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$64,048 $62,579 $56,369 $54,584 $52,761 $51,753 $50,984 $50,349 $49,801 $49,913 $248 (14,135)4,263 
201464,051 60,729 58,284 56,630 54,636 53,023 52,889 52,388 51,861 252 (12,190)4,812 
201553,788 55,578 51,003 46,682 46,019 44,706 43,751 43,209 516 (10,579)5,680 
201670,419 66,575 61,648 55,168 53,964 52,870 53,090 709 (17,329)7,973 
201776,184 69,528 55,982 51,874 49,362 47,801 629 (28,383)8,208 
201871,972 67,883 59,192 56,109 53,812 157 (18,160)8,045 
201952,136 49,189 49,336 48,945 (899)(3,191)7,384 
202045,365 46,612 43,724 (948)(1,641)4,524 
202145,177 42,283 957 (2,894)1,808 
202229,597 7,920 1,151 
Total$464,235 
Line of business: Workers' compensation
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$14,136 $30,209 $38,023 $42,941 $45,078 $47,071 $47,572 $48,093 $48,327 $48,424 
201413,965 30,289 38,441 42,964 45,193 45,825 46,299 46,664 47,192 
201512,063 27,304 35,229 38,424 39,305 40,034 41,006 41,211 
201614,413 32,345 40,680 45,743 47,082 48,277 50,127 
201714,647 31,309 38,083 41,672 43,833 45,508 
201816,949 35,369 43,189 47,173 48,807 
201913,582 29,668 38,382 43,044 
202017,603 29,605 35,542 
202117,949 29,453 
20229,434 
Total$398,742 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2013, net of reinsurance18,525 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$84,019 
Line of business: Personal
Incurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2022
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$39,232 $38,525 $37,262 $37,086 $36,729 $36,661 $36,486 $36,467 $36,466 $36,466 $— (2,766)9,253 
201453,910 52,661 52,944 52,782 52,615 52,702 52,810 52,854 52,910 16 (1,000)10,966 
201542,848 41,088 40,336 40,368 40,220 40,194 40,189 40,190 12 (2,658)9,553 
201648,072 45,840 45,379 45,961 45,113 45,297 45,199 40 (2,873)11,905 
201760,330 59,342 58,695 58,544 59,023 58,790 81 (1,540)14,714 
201851,639 51,721 52,715 52,062 51,457 108 (182)13,683 
201959,547 58,378 58,745 57,929 250 (1,618)13,596 
202081,206 73,761 73,204 763 (8,002)17,057 
202128,537 26,489 326 (2,048)2,565 
20221,493 656 57 
Total$444,127 
Line of business: Personal
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year2013201420152016201720182019202020212022
(Unaudited)
2013$25,505 $32,788 $34,297 $35,306 $36,155 $36,323 $36,397 $36,466 $36,466 $36,466 
201437,055 47,912 49,710 51,837 52,018 52,543 52,519 52,526 52,565 
201529,551 37,431 39,027 39,428 39,865 40,029 40,053 40,053 
201632,999 40,910 42,660 44,046 44,618 44,737 44,828 
201742,135 53,111 55,982 57,169 57,824 58,206 
201837,410 47,433 49,464 50,185 50,661 
201940,544 52,390 54,935 56,657 
202054,181 68,124 70,542 
202120,298 23,829 
2022551 
Total$434,358 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2013, net of reinsurance570 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$10,339 
The reconciliation of the net incurred and loss development tables to the liability for unpaid losses and loss settlement expenses in the consolidated statement of financial position is as follows.

December 31, 2022
Net outstanding liabilities for unpaid losses and allocated loss settlement expenses:
Commercial other liability$646,054 
Commercial fire and allied126,432 
Commercial automobile299,668 
Commercial workers' compensation84,019 
Personal10,339 
All other lines95,075 
Net outstanding liabilities for unpaid losses and allocated loss settlement expenses1,261,587 
Net outstanding liabilities for unpaid unallocated loss settlement expenses88,252 
Fair value adjustment (purchase accounting adjustment for Mercer acquisition)560 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance1,350,399 
Reinsurance recoverable on unpaid losses and allocated loss settlement expenses:
Commercial other liability55,381 
Commercial fire and allied19,423 
Commercial automobile2,607 
Commercial workers' compensation44,588 
Personal918 
All other lines24,494 
Reinsurance recoverable on unpaid losses and allocated loss settlement expenses147,411 
Reinsurance fair value amortization (purchase accounting adjustment for Mercer acquisition)(536)
Total reinsurance recoverable on unpaid losses and loss settlement expenses146,875 
Total gross liability for unpaid losses and loss settlement expenses$1,497,274 
The following is supplementary information about average historical claims duration as of December 31, 2022.
Average annual percentage payout of incurred claims by age, net of reinsurance
Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10
(Unaudited)
Commercial other liability9.0 %15.1 %16.0 %15.4 %12.1 %8.0 %4.6 %4.6 %3.2 %4.6 %
Commercial fire and allied62.6 %22.4 %5.3 %4.1 %2.3 %1.2 %0.5 %0.6 %0.4 %(0.1)%
Commercial automobile36.5 %20.8 %15.8 %12.0 %7.8 %3.5 %1.6 %1.1 %0.7 %0.4 %
Commercial workers' compensation31.5 %32.1 %15.7 %8.6 %3.4 %2.5 %1.9 %0.7 %0.7 %0.2 %
Personal68.8 %18.7 %4.0 %2.5 %1.2 %0.6 %0.1 %0.1 %— %— %