Loss and Loss Adjustment Expenses

12 Months Ended

Dec. 31, 2018

Insurance [Abstract]

Loss and Loss Adjustment Expenses

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 2009 through 2018.  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, 2018
	(Dollars in thousands)																				Total IBNR
																					Plus
																					Expected		Cumulative
																					Development		Number of
Accident	Unaudited (1)																				on Reported		Claims
Year	2009		2010		2011		2012		2013		2014		2015		2016		2017		2018		Claims		Reported
2009	$	185,359	$	188,746	$	188,462	$	187,943	$	184,006	$	182,274	$	177,795	$	176,586	$	177,015	$	174,731	$	3,407		5,372
2010		—		179,156		202,479		208,035		205,769		198,861		193,029		191,000		189,403		189,040		5,612		5,970
2011		—		—		196,384		199,522		199,163		198,213		195,262		192,988		191,126		189,327		7,045		6,043
2012		—		—		—		222,549		222,075		212,738		193,515		184,460		182,859		180,387		7,454		5,749
2013		—		—		—		—		241,810		241,811		233,656		220,457		214,701		210,588		10,210		5,763
2014		—		—		—		—		—		268,846		268,846		249,097		235,058		226,933		12,576		5,833
2015		—		—		—		—		—		—		262,573		262,573		252,514		235,471		22,038		5,510
2016		—		—		—		—		—		—		—		250,491		250,491		241,406		19,874		5,378
2017		—		—		—		—		—		—		—		—		244,094		244,098		9,887		5,178
2018		—		—		—		—		—		—		—		—		—		250,487		15,423		5,186
																	Total		$	2,142,468	$	113,526

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
	(Dollars in thousands)
Accident	Unaudited (1)																				Claim
Year	2009		2010		2011		2012		2013		2014		2015		2016		2017		2018		Frequency (2)
2009	$	42,332	$	96,173	$	123,946	$	142,667	$	150,925	$	155,365	$	158,214	$	159,345	$	160,580	$	162,253		19.82
2010		—		47,520		108,714		141,029		156,974		165,834		169,565		172,426		175,019		176,663		24.93
2011		—		—		53,329		111,029		140,831		153,968		161,639		165,967		167,757		169,994		22.81
2012		—		—		—		50,579		107,467		133,658		149,161		154,553		157,207		159,807		18.73
2013		—		—		—		—		51,396		119,507		150,304		165,994		172,479		177,724		16.54
2014		—		—		—		—		—		53,060		119,820		153,320		169,736		180,683		14.97
2015		—		—		—		—		—		—		54,141		121,599		151,818		170,461		14.23
2016		—		—		—		—		—		—		—		52,238		115,713		143,016		14.19
2017		—		—		—		—		—		—		—		—		56,951		122,552		14.58
2018		—		—		—		—		—		—		—		—		—		62,061		14.42
																	Total			1,525,214
All outstanding claim liabilities before 2008, net of reinsurance																				73,939
Liabilities for claims and claim adjustment expenses, net of reinsurance																				691,193
(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 claims by age, net of reinsurance, for workers’ compensation and general liability as of December 31, 2018 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 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
24.6%	29.9%	14.6%	8.2%	4.1%	2.2%	1.4%	1.1%	0.8%	1.0%

The following table provides a reconciliation of the beginning and ending reserve balances, net of related amounts recoverable from reinsurers, for 2018, 2017 and 2016:

	Year Ended December 31,
	2018			2017			2016
	(in thousands)
Balance, beginning of period	$	771,845		$	742,776		$	718,033
Less amounts recoverable from reinsurers    on unpaid loss and loss adjustment expenses		84,889			78,256			64,858
Net balance, beginning of period		686,956			664,520			653,175
Add incurred related to:
Current accident year		250,487			244,094			250,337
Prior accident years		(45,596	)		(34,770	)		(51,306	)
Total incurred		204,891			209,324			199,031
Less paid related to:
Current accident year		62,061			56,951			52,085
Prior accident years		138,593			129,937			135,601
Total paid		200,654			186,888			187,686
Net balance, end of period		691,193			686,956			664,520
Add amounts recoverable from reinsurers    on unpaid loss and loss adjustment expenses		107,216			84,889			78,256
Balance, end of period	$	798,409		$	771,845		$	742,776

The foregoing reconciliation reflects favorable development of the net reserves at December 31, 2018, 2017 and 2016. The favorable development reduced loss and loss adjustment expenses incurred by $45.6 million in 2018, driven primarily by accident years 2014, 2015 and 2016 of $8.1 million, $17.0 million and $9.1 million, respectively. In 2017 and 2016, the Company recorded favorable development of $34.8 million and $51.3 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,
	2018			2017			2016
	(in thousands)
Reserves for loss and LAE at beginning of year	$	1,748		$	1,487		$	958
Incurred losses and LAE during the current year		108			556			816
Loss and LAE payments		(301	)		(295	)		(287	)
Reserves for loss and LAE at end of year	$	1,555		$	1,748		$	1,487

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.