Loss and Loss Adjustment Expenses

12 Months Ended

Dec. 31, 2022

The following development tables provide the incurred and paid losses and allocated loss adjustment expenses, net of reinsurance, for workers’ compensation and general liability for accident years 2013 through 2022. The incurred but not reported (IBNR) losses and claims frequency is included for each accident year presented.


	Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance																					As of
	For the Years Ended December 31,																					December 31, 2022
	(Dollars in thousands)																				Total IBNR
																					Plus
																					Expected				Cumulative
																					Development				Number of
Accident	Unaudited (1)																				on Reported				Claims
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022		Claims				Reported
2013	$	241,810	$	241,811	$	233,656	$	220,457	$	214,701	$	210,588	$	209,184	$	207,304	$	205,421	$	204,026		$	6,435			5,768
2014		—		268,846		268,846		249,097		235,058		226,933		218,386		212,417		210,811		210,096			4,510			5,841
2015		—		—		262,573		262,573		252,514		235,471		220,965		211,758		207,929		207,086			4,415			5,516
2016		—		—		—		250,491		250,491		241,406		218,005		209,214		202,820		201,604			4,452			5,393
2017		—		—		—		—		244,094		244,098		234,587		220,096		211,964		208,360			4,939			5,212
2018		—		—		—		—		—		250,487		250,487		235,641		217,369		208,517			5,268			5,471
2019		—		—		—		—		—		—		241,344		241,344		227,246		214,123			8,550			5,218
2020		—		—		—		—		—		—		—		220,710		220,710		214,500			17,039			4,387
2021		—		—		—		—		—		—		—		—		222,715		222,715			(5,162	)		4,273
2022		—		—		—		—		—		—		—		—		—		192,907			6,863			3,886
																	Total		$	2,083,934		$	57,308


	Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
	(Dollars in thousands)

Accident	Unaudited (1)																				Claim
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022		Frequency (2)
2013	$	51,396	$	119,507	$	150,304	$	165,994	$	172,479	$	177,724	$	180,614	$	182,465	$	183,365	$	184,500		16.56
2014		—		53,060		119,820		153,320		169,736		180,683		186,129		191,394		192,169		193,192		14.99
2015		—		—		54,141		121,599		151,818		170,461		182,053		185,657		188,145		189,339		14.25
2016		—		—		—		52,238		115,713		143,016		156,860		166,887		172,133		174,134		14.23
2017		—		—		—		—		56,951		122,552		151,427		166,448		175,733		183,696		14.68
2018		—		—		—		—		—		62,061		126,057		152,328		172,423		181,081		15.21
2019		—		—		—		—		—		—		58,884		120,512		154,391		168,448		15.26
2020		—		—		—		—		—		—		—		50,113		109,882		137,411		13.94
2021		—		—		—		—		—		—		—		—		52,292		130,288		14.92
2022		—		—		—		—		—		—		—		—		—		50,954		13.77
																	Total			1,593,043
All outstanding liabilities before 2013, net of reinsurance																				92,591
Liabilities for loss and loss adjustment expenses, net of reinsurance																				583,482

(1) Data presented for these calendar years is required supplementary information, which is unaudited.
(2) Frequency, as calculated above, refers to reported claims divided by gross premium earned.

The average annual percentage payout of incurred losses by age, net of reinsurance, for workers’ compensation and general liability as of December 31, 2022 is summarized below. Since workers’ compensation has long payout periods, the table below shows less than 100% in the years disclosed. This is required supplementary information, which is unaudited.


Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance (Unaudited)
Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8	Year 9	Year 10
26.0%	31.5%	14.3%	7.8%	4.6%	2.7%	1.5%	0.6%	0.5%	0.6%

The following table provides a reconciliation of the beginning and ending reserve balances, net of related amounts recoverable from reinsurers, for 2022, 2021 and 2020:


	Year Ended December 31,
	2022			2021			2020
	(in thousands)
Balance, beginning of period	$	745,278		$	760,561		$	772,887
Less amounts recoverable from reinsurers on unpaid loss and loss adjustment expenses		119,266			105,707			95,343
Net balance, beginning of period		626,012			654,854			677,544
Add incurred related to:
Current accident year		192,907			222,715			220,710
Prior accident years		(40,591	)		(61,917	)		(63,484	)
Total incurred		152,316			160,798			157,226
Less paid related to:
Current accident year		50,954			52,292			50,113
Prior accident years		143,892			137,348			129,803
Total paid		194,846			189,640			179,916
Net balance, end of period		583,482			626,012			654,854
Add amounts recoverable from reinsurers on unpaid loss and loss adjustment expenses		112,555			119,266			105,707
Balance, end of period	$	696,037		$	745,278		$	760,561

The final resolution of the estimated loss reserve liability may be different from that anticipated at the reporting date because of the inherent uncertainty in loss reserve estimates, including, but not limited to, the future settlement environment. Consequently, actual paid losses in the future may result in a significantly different amount than currently reserved, favorable or unfavorable.

The difference between currently estimated losses and losses estimated for a prior period at a prior valuation date is known as development. Development is unfavorable when the losses ultimately settle for more than they were reserved for or future estimates suggest that reserves should be increased on unresolved claims. Development is favorable when the losses ultimately settle for less than they were reserved for or future estimates suggest that reserves should be decreased on unresolved claims. Favorable or unfavorable development of loss reserves are reflected in our results of operations in the period the estimates are changed.

The foregoing reconciliation reflects favorable development of the net reserves at December 31, 2022, 2021 and 2020. The favorable development reduced loss and loss adjustment expenses incurred by $40.6 million in 2022, driven primarily by accident years 2017 through 2020. In 2021 and 2020, the Company recorded favorable development of $61.9 million and $63.5 million, respectively. The revisions to the Company’s reserves reflect new information gained by claims adjusters in the normal course of adjusting claims and is reflected in the financial statements when the information becomes available. It is typical for more serious claims to take several years or longer to settle and the Company continually revises estimates as more information about claimants’ medical conditions and potential disability becomes known and the claims get closer to being settled. Multiple factors can cause loss development both unfavorable and favorable. The favorable loss development we experienced across accident years was largely due to favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement.

Reserves established for workers’ compensation insurance includes the exposure to occupational disease or accidents related to asbestos or environmental claims. The exposure to asbestos claims emanates from the direct sale of workers’ compensation insurance. These claims resulted from industry workers who were exposed to tremolite asbestos dust and electricians and carpenters who were exposed to products that contained asbestos. There has been no known exposure to asbestos claims arising from assumed business. The emergence of these claims is slow and highly unpredictable. The Company estimates full impact of the asbestos exposure by establishing full case basis reserves on all known losses. Reserves for losses incurred but not reported (IBNR) include a provision for development of reserves on reported losses. Reserves are established for loss adjustment expenses (LAE) associated with these case and IBNR loss reserves.

The following table details our exposures to various asbestos related claims:


	Year Ended December 31,
	2022			2021			2020
	(in thousands)
Reserves for loss and LAE at beginning of year	$	260		$	318		$	1,323
Incurred losses and LAE during the current year		(2	)		(44	)		(936	)
Loss and LAE payments		(10	)		(14	)		(69	)
Reserves for loss and LAE at end of year	$	248		$	260		$	318

The Company has historically written general liability coverages that are reported in other liability lines of business. These coverages may be associated with the property and casualty industry’s exposure to environmental claims. However, the Company has not been notified by any insured for which exposure exists due to these types of claims. Company management believes potential exposure to environmental claims to be remote. Therefore, the Company has no loss or loss adjustment expense reserves for such liabilities.

The anticipated effect of inflation is implicitly considered when estimating liabilities for loss and loss adjustment expenses. In establishing our reserves for loss and loss adjustment expenses, we review the results of analyses using individual case-base valuations and statistical and actuarial methods that utilize historical loss data from our more than 37 years of underwriting workers’ compensation insurance. The actuarial analysis of our historical data provides some of the factors we use in estimating our loss reserves. These factors are primarily measures over time of the number of claims paid and reported, average paid and incurred claim amounts, claim closure rates and claim payment patterns. In evaluating the results of our analyses, management also uses substantial judgment in considering other factors that are not considered in these actuarial analyses, including changes in business mix, claims management, regulatory issues, medical trends, employment and wage patterns, insurance policy coverage interpretations, judicial determinations and other subjective factors. Due to the inherent uncertainty associated with these estimates, and the cost of incurred but unreported claims, our actual liabilities may vary significantly from our original estimates. These anticipated trends are monitored