9.	Loss and Loss Adjustment Expenses

The following development tables provide the incurred and paid claims and allocated claim adjustment expenses, net of reinsurance, for workers’ compensation and general liability for accident years 2007 through 2016. The incurred but not reported (“IBNR”) claims and claims frequency is included for each accident year presented.

	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				As of
	For the Years Ended December 31,																				December 31,2016
	(Dollars in thousands)
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		Total IBNR plus Expected Development on Reported Claims		Cumulative Number of Claims Reported
2007	$	208,480	$	218,448	$	206,044	$	196,773	$	185,225	$	181,633	$	180,229	$	179,373	$	178,608	$	178,582	$	1,620		7,122
2008		-		196,923		200,371		195,619		190,905		187,695		184,547		182,846		183,608		182,901		2,751		6,486
2009		-		-		185,359		188,746		188,462		187,943		184,006		182,274		177,795		176,586		3,199		5,371
2010		-		-		-		179,156		202,479		208,035		205,769		198,861		193,029		191,000		5,786		5,970
2011		-		-		-		-		196,384		199,522		199,163		198,213		195,262		192,988		7,461		6,040
2012		-		-		-		-		-		222,549		222,075		212,738		193,515		184,460		7,798		5,743
2013		-		-		-		-		-		-		241,810		241,811		233,656		220,457		11,868		5,761
2014		-		-		-		-		-		-		-		268,846		268,846		249,097		21,004		5,815
2015		-		-		-		-		-		-		-		-		262,573		262,573		28,658		5,477
2016		-		-		-		-		-		-		-		-		-		250,491		34,737		5,104
																	Total		$	2,089,136	$	124,882

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
	(Dollars in thousands)
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		Claim Frequency		*
2007	$	43,470	$	97,657	$	128,254	$	141,595	$	152,136	$	158,056	$	162,903	$	164,970	$	166,734	$	167,996		21.77
2008		-		47,685		103,057		132,515		147,377		157,388		163,933		166,814		170,347		171,496		20.98
2009		-		-		42,332		96,173		123,946		142,667		150,925		155,365		158,214		159,345		19.82
2010		-		-		-		47,520		108,714		141,029		156,974		165,834		169,565		172,426		24.93
2011		-		-		-		-		53,329		111,029		140,831		153,968		161,639		165,967		22.80
2012		-		-		-		-		-		50,579		107,467		133,658		149,161		154,553		18.71
2013		-		-		-		-		-		-		51,396		119,507		150,304		165,994		16.54
2014		-		-		-		-		-		-		-		53,060		119,820		153,320		14.93
2015		-		-		-		-		-		-		-		-		54,141		121,599		14.15
2016		-		-		-		-		-		-		-		-		-		52,238		13.47
																	Total			1,484,933
All outstanding claim liabilities before 2007, net of reinsurance																				60,317
Liabilities for claims and claim adjustment expenses, net of reinsurance																				664,520

*Frequency, as calculated above, refers to reported claims divided by gross premium earned

The average annual percentage payout of incurred claims by age, net of reinsurance, for workers’ compensation and general liability as of December 31, 2016 is summarized below. Since workers’ compensation has long payout periods, the table below shows less than 100% in the years disclosed.

Average Annual Percentage Payout of Incurred Claims 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
	24.0%		29.7%		15.4%		8.1%		4.6%		2.7%		1.9%		1.2%		0.8%		0.7%

The following table provides a reconciliation of the beginning and ending reserve balances, net of related amounts recoverable from reinsurers, for 2016, 2015 and 2014:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of period	$	718,033		$	687,602		$	614,557
Less amounts recoverable from reinsurers on unpaid loss and loss adjustment expenses		64,858			59,334			48,699
Net balance, beginning of period		653,175			628,268			565,858
Add incurred related to:
Current accident year		250,337			262,387			268,633
Prior accident years		(51,306	)		(47,814	)		(23,717	)
Total incurred		199,031			214,573			244,916
Less paid related to:
Current accident year		52,085			53,955			52,848
Prior accident years		135,601			135,711			129,658
Total paid		187,686			189,666			182,506
Net balance, end of period		664,520			653,175			628,268
Add amounts recoverable from reinsurers on unpaid loss and loss adjustment expenses		78,256			64,858			59,334
Balance, end of period	$	742,776		$	718,033		$	687,602

The foregoing reconciliation reflects favorable development of the net reserves at December 31, 2016, 2015 and 2014. The favorable development reduced loss and loss adjustment expense incurred by $51.3 million in 2016 driven primarily by accident years 2012, 2013 and 2014 of $9.1 million, $13.2 million and $19.7 million, respectively. In 2015 and 2014, the Company recorded favorable development of $47.8 million and $23.7 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 have included the exposure to occupational disease or accidents related to asbestos or environmental claims. The exposure to asbestos claims emanate 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,
	2016			2015			2014
	(in thousands)
Reserves for loss and LAE at beginning of year	$	958		$	819		$	219
Incurred losses and LAE during the current year		816			444			882
Loss and LAE payments		(287	)		(305	)		(282	)
Reserves for loss and LAE at end of year	$	1,487		$	958		$	819

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. Average severities are projected based on historical trends adjusted for implemented changes in underwriting standards, policy provisions and general economic trends. These anticipated trends are monitored based on actual development and are modified if necessary.