Unpaid losses and loss adjustment expenses

12 Months Ended

Dec. 31, 2022

Insurance [Abstract]

Unpaid losses and loss adjustment expenses

(16)Unpaid losses and loss adjustment expenses

Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. A reconciliation of the changes in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 17), for each of the three years ending December 31, 2022 follows (in millions). The changes in claim liabilities in 2022 within this table include Alleghany’s property and casualty claim liabilities beginning as of the October 19, 2022 acquisition date.

	2022			2021			2020
Balances at beginning of year:
Gross liabilities	$	86,664		$	79,854		$	73,019
Reinsurance recoverable on unpaid losses		(2,960	)		(2,912	)		(2,855	)
Net liabilities		83,704			76,942			70,164
Incurred losses and loss adjustment expenses:
Current accident year		59,463			52,099			43,400
Prior accident years		(2,672	)		(3,116	)		(356	)
Total		56,791			48,983			43,044
Paid losses and loss adjustment expenses:
Current accident year		(27,236	)		(22,897	)		(17,884	)
Prior accident years		(23,083	)		(18,904	)		(18,862	)
Total		(50,319	)		(41,801	)		(36,746	)
Foreign currency effect		(508	)		(420	)		480
Net liabilities of acquired businesses (see Note 2)		12,779			—			—
Balances at December 31:
Net liabilities		102,447			83,704			76,942
Reinsurance recoverable on unpaid losses		5,025			2,960			2,912
Gross liabilities	$	107,472		$	86,664		$	79,854

Incurred losses and loss adjustment expenses shown in the preceding table were recorded in earnings and related to insured events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”). Incurred and paid losses and loss adjustment expenses are net of reinsurance recoveries. Current accident year incurred losses from significant catastrophe events (losses in excess of $150 million per event) were approximately $3.1 billion in 2022 ($2.5 billion from Hurricane Ian), $2.9 billion in 2021 and $950 million in 2020. Significant catastrophe events in 2021 included Hurricane Ida ($1.5 billion), Winter Storm Uri and floods in Europe, while significant catastrophe events in 2020 included losses from Hurricanes Laura and Sally (about $600 million in the aggregate) and U.S. wildfires. Current accident year incurred losses for private passenger auto insurance increased significantly in 2022 and 2021, attributable to increases in claims frequencies and severities.

Notes to Consolidated Financial Statements (Continued)

(16)Unpaid losses and loss adjustment expenses (Continued)

We recorded net reductions of estimated ultimate liabilities for prior accident years of $2.7 billion in 2022, $3.1 billion in 2021 and $356 million in 2020, which produced corresponding reductions in incurred losses and loss adjustment expenses in those periods. These reductions, as percentages of the net liabilities at the beginning of each year, were 3.2% in 2022, 4.0% in 2021 and 0.5% in 2020.

We reduced estimated ultimate liabilities for prior accident years of primary insurance businesses by $1.1 billion in 2022, $2.4 billion in 2021 and $518 million in 2020. The reductions in each year derived primarily from private passenger auto, medical professional liability and workers’ compensation claims, partly offset by increases with respect to other casualty claims. Estimated ultimate liabilities for prior accident years of property and casualty reinsurance businesses were reduced $1.6 billion in 2022 and $718 million in 2021 and increased $162 million in 2020. The reductions in 2022 and 2021 reflected reduced estimates for both property and casualty claims. In 2020, increases in casualty claims estimates were partly offset by reductions in property estimates.

Estimated net claim liabilities for environmental, asbestos and other latent injury exposures were approximately $2.1 billion at December 31, 2022 and 2021. These liabilities are subject to change due to changes in the legal and regulatory environment. We are unable to reliably estimate additional losses or a range of losses that are reasonably possible for these claims.

Disaggregated information concerning our claims liabilities is provided below and in the pages that follow. The accident year data for Alleghany’s primary insurance business is included in Berkshire Hathaway Primary Group (“BH Primary”) and for its reinsurance business is included in Berkshire Hathaway Reinsurance Group (“BHRG”) on a retrospective basis. A reconciliation of the disaggregated net unpaid losses and allocated loss adjustment expenses (the latter referred to as “ALAE”) of GEICO, BH Primary and BHRG to our consolidated unpaid losses and loss adjustment expenses as of December 31, 2022 follows (in millions).

	GEICO				BH Primary				BHRG
	Physical Damage		Auto Liability		Medical Professional Liability		Workers’ Compensation/ Other Casualty		Property		Casualty		Total
Unpaid losses and ALAE, net	$	884	$	20,930	$	8,980	$	18,491	$	16,552	$	31,366	$	97,203
Reinsurance recoverable		5		867		28		1,543		787		1,439		4,669
Unallocated loss adjustment    expenses														2,232
Other losses and loss adjustment    expenses														3,368
Unpaid losses and loss adjustment    expenses													$	107,472

GEICO

GEICO’s claim liabilities predominantly relate to various types of private passenger auto liability and physical damage claims. For such claims, we establish and evaluate unpaid claim liabilities using standard actuarial loss development methods and techniques. The actuarial methods utilize historical claims data, adjusted when deemed appropriate to reflect perceived changes in loss patterns. Claim liabilities include average, case, case development and IBNR estimates.

We establish average liabilities based on expected severities for newly reported physical damage and liability claims prior to establishing individual case reserves when insufficient time or information is available for specific claim estimates and for large volumes of minor physical damage claims that once reported are quickly settled. We establish case loss estimates for liability claims, including estimates for loss adjustment expenses, as the facts and merits of the claim are evaluated.

Claim estimates for liability coverages normally reflect greater uncertainty than physical damage coverages, primarily due to the longer claim-tails, the greater chance of litigation and the time needed to evaluate facts at the time the case estimate is first established. The “claim-tail” is the period between the claim occurrence date and claim settlement or payment date. Consequently, we establish additional case development liabilities, which are usually percentages of the case liabilities. For unreported claims, IBNR liabilities are estimated by projecting the ultimate number of claims expected (reported and unreported) for each significant coverage and deducting reported claims to produce estimated unreported claims. The product of the average cost per unreported claim and the number of unreported claims produces the IBNR liability estimate. We may record supplemental IBNR liabilities in certain situations when actuarial techniques are difficult to apply.

Notes to Consolidated Financial Statements (Continued)

(16)Unpaid losses and loss adjustment expenses (Continued)

GEICO’s net incurred and paid auto physical damage and liability losses and ALAE are summarized by accident year below. IBNR and case development liabilities are as of December 31, 2022. Claim counts are established when accidents that may result in a liability are reported and are based on policy coverage. Each claim event may generate claims under multiple coverages, and thus may result in multiple counts. The “Cumulative Number of Reported Claims” includes the combined number of reported claims for all auto policy coverages. Dollars are in millions.

Physical Damage

	Incurred Losses and ALAE through December 31,							Cumulative Number of
Accident Year		2021*		2022		IBNR and Case Development Liabilities		Reported Claims (in thousands)
2021		$	12,135	$	11,968	$	70		9,141
2022					14,138		610		8,986
	Incurred losses and ALAE			$	26,106
	Cumulative Paid Losses and ALAE through December 31,
Accident Year		2021*		2022
2021		$	11,427	$	11,978
2022					13,251
	Paid losses and ALAE				25,229
	Net unpaid losses and ALAE for 2021 – 2022 accident years				877
	Net unpaid losses and ALAE for accident years before 2021				7
	Net unpaid losses and ALAE			$	884

Auto Liability

	Incurred Losses and ALAE through December 31,												Cumulative Number of
Accident Year	2018*		2019*		2020*		2021*		2022		IBNR and Case Development Liabilities		Reported Claims (in thousands)
2018	$	15,383	$	15,226	$	14,985	$	14,838	$	14,854	$	259		2,720
2019				16,901		16,678		16,191		16,151		566		2,790
2020						14,637		14,024		13,697		1,182		2,111
2021								17,481		17,457		2,994		2,413
2022										19,645		6,275		2,166
	Incurred losses and ALAE								$	81,804
	Cumulative Paid Losses and ALAE through December 31,
Accident Year	2018*		2019*		2020*		2021*		2022
2018	$	6,218	$	10,772	$	12,658	$	13,757	$	14,337
2019				6,742		11,671		13,851		15,084
2020						5,395		9,839		11,794
2021								6,450		12,681
2022										7,614
	Paid losses and ALAE									61,510
	Net unpaid losses and ALAE for 2018 – 2022 accident years									20,294
	Net unpaid losses and ALAE for accident years before 2018									636
	Net unpaid losses and ALAE								$	20,930

* Unaudited required supplemental information

Notes to Consolidated Financial Statements (Continued)

(16)Unpaid losses and loss adjustment expenses (Continued)

BH Primary

BH Primary’s liabilities for unpaid losses and loss adjustment expenses primarily derive from medical professional liability and workers’ compensation and other casualty insurance, which includes commercial auto and general liability insurance. Net incurred and paid losses and ALAE are summarized by accident year in the following tables, disaggregated by medical professional liability coverages and workers’ compensation and other casualty coverages. IBNR and case development liabilities are as of December 31, 2022. The cumulative number of reported claims reflects the number of individual claimants and includes claims that ultimately resulted in no liability or payment. Dollars are in millions.

Medical Professional Liability

We estimate the ultimate expected incurred losses and loss adjustment expenses for medical professional claim liabilities using a variety of commonly accepted actuarial methodologies, such as the paid and incurred development method and Bornhuetter-Ferguson based methods, as well as other techniques that consider insured loss exposures and historical and expected loss trends, among other factors. These methodologies produce loss estimates from which we determine our best estimate. In addition, we study developments in older accident years and adjust initial loss estimates to reflect recent developments based upon claim age, coverage and litigation experience.

	Incurred Losses and ALAE through December 31,																						Cumulative Number of
Accident Year	2013*		2014*		2015*		2016*		2017*		2018*		2019*		2020*		2021*		2022		IBNR and Case Development Liabilities		Reported Claims (in thousands)
2013	$	1,328	$	1,296	$	1,261	$	1,195	$	1,127	$	1,086	$	1,019	$	985	$	978	$	979	$	37		11
2014				1,370		1,375		1,305		1,246		1,218		1,127		1,061		1,033		1,029		74		11
2015						1,374		1,342		1,269		1,290		1,218		1,157		1,093		1,033		84		12
2016								1,392		1,416		1,414		1,394		1,341		1,288		1,216		141		15
2017										1,466		1,499		1,495		1,474		1,382		1,349		228		21
2018												1,602		1,650		1,659		1,580		1,616		289		24
2019														1,670		1,691		1,663		1,614		584		21
2020																1,704		1,751		1,698		959		30
2021																		1,852		1,855		1,444		20
2022																				1,927		1,749		12
	Incurred losses and ALAE																		$	14,316
	Cumulative Paid Losses and ALAE through December 31,
Accident Year	2013*		2014*		2015*		2016*		2017*		2018*		2019*		2020*		2021*		2022
2013	$	15	$	90	$	219	$	368	$	518	$	635	$	743	$	793	$	821	$	853
2014				21		106		238		396		540		671		752		788		840
2015						23		108		218		382		543		663		719		799
2016								22		115		274		461		620		712		822
2017										27		128		300		457		582		739
2018												35		166		367		543		728
2019														39		160		314		536
2020																34		148		321
2021																		36		136
2022																				38
	Paid losses and ALAE																			5,812
	Net unpaid losses and ALAE for 2013 – 2022 accident years																			8,504
	Net unpaid losses and ALAE for accident years before 2013																			476
	Net unpaid losses and ALAE																		$	8,980

* Unaudited required supplemental information

Notes to Consolidated Financial Statements (Continued)

(16)Unpaid losses and loss adjustment expenses (Continued)

Workers’ Compensation and Other Casualty

We periodically evaluate ultimate loss and loss adjustment expense estimates for the workers’ compensation and other casualty claims using a combination of commonly accepted actuarial methodologies such as the Bornhuetter-Ferguson and chain-ladder approaches using paid and incurred loss data. Paid and incurred loss data is segregated and analyzed by state due to the different state regulatory frameworks that may impact certain factors, including the duration and amount of loss payments. We also separately study the various components of liabilities, such as employee lost wages, medical expenses and the costs of claims investigations and administration. We establish case liabilities for reported claims based upon the facts and circumstances of the claim. The excess of the ultimate projected losses, including the expected development of case estimates, and the case-basis liabilities is included in IBNR liabilities. As previously noted, Alleghany was acquired on October 19, 2022. Alleghany’s incurred and paid losses and ALAE are included for all years presented retrospectively.

	Incurred Losses and ALAE through December 31,																						Cumulative Number of
Accident Year	2013*		2014*		2015*		2016*		2017*		2018*		2019*		2020*		2021*		2022		IBNR and Case Development Liabilities		Reported Claims (in thousands)
2013	$	1,602	$	1,574	$	1,541	$	1,491	$	1,462	$	1,435	$	1,407	$	1,376	$	1,360	$	1,340	$	101		78
2014				2,138		2,064		2,036		1,970		1,901		1,906		1,875		1,861		1,829		153		103
2015						2,580		2,539		2,455		2,426		2,428		2,402		2,408		2,393		249		121
2016								2,931		2,848		2,793		2,772		2,815		2,825		2,864		409		125
2017										3,473		3,337		3,299		3,310		3,322		3,320		477		144
2018												3,998		3,886		3,967		4,030		4,091		841		164
2019														4,584		4,623		4,692		4,763		1,057		185
2020																5,030		4,881		4,775		1,858		155
2021																		5,899		5,856		3,105		311
2022																				6,796		4,889		285
	Incurred losses and ALAE																		$	38,027
	Cumulative Paid Losses and ALAE through December 31,
Accident Year	2013*		2014*		2015*		2016*		2017*		2018*		2019*		2020*		2021*		2022
2013	$	210	$	520	$	774	$	941	$	1,049	$	1,111	$	1,147	$	1,173	$	1,194	$	1,209
2014				286		683		1,002		1,269		1,407		1,504		1,557		1,600		1,617
2015						329		804		1,187		1,507		1,766		1,873		1,966		2,041
2016								373		908		1,359		1,765		1,998		2,140		2,303
2017										480		1,133		1,645		2,050		2,279		2,492
2018												583		1,340		1,902		2,324		2,746
2019														725		1,598		2,214		2,898
2020																736		1,498		2,066
2021																		869		1,751
2022																				962
	Paid losses and ALAE																			20,085
	Net unpaid losses and ALAE for 2013 – 2022 accident years																			17,942
	Net unpaid losses and ALAE for accident years before 2013																			549
	Net unpaid losses and ALAE																		$	18,491

* Unaudited required supplemental information

BHRG

We use a variety of methodologies to establish BHRG’s estimates for property and casualty claims liabilities. These methodologies include paid and incurred loss development techniques, incurred and paid loss Bornhuetter-Ferguson techniques and frequency and severity techniques, as well as ground-up techniques when appropriate.

Our claims liabilities are principally a function of reported losses from ceding companies, case development and IBNR liability estimates. Case loss estimates are reported under our contracts either individually or in bulk as provided under the terms of the contracts. We may independently evaluate case losses reported by the ceding company, and if deemed appropriate, we may establish case liabilities based on our estimates.

Notes to Consolidated Financial Statements (Continued)

(16)Unpaid losses and loss adjustment expenses (Continued)

Estimated IBNR liabilities are affected by expected case loss emergence patterns and expected loss ratios, which are evaluated as groups of contracts with similar exposures or on a contract-by-contract basis. Estimated case and IBNR liabilities for major catastrophe events are generally based on a per-contract assessment of the ultimate cost associated with the individual loss event. Claim count data is not provided consistently by ceding companies under our contracts or is otherwise considered unreliable.

Net incurred and paid losses and ALAE of BHRG are disaggregated based on losses that are expected to have shorter claim-tails (property) and losses expected to have longer claim-tails (casualty). Under certain contracts, the coverage can apply to multiple lines of business written by the ceding company, whether property, casualty or combined, and the ceding company may not report loss data by such lines consistently, if at all. In those instances, we allocated losses to property and casualty coverages based on internal estimates. BHRG’s disaggregated incurred and paid losses and ALAE are summarized by accident year. IBNR and case development liabilities are as of December 31, 2022. As previously noted, Alleghany was acquired on October 19, 2022. Alleghany’s incurred and paid losses and ALAE are included for all years presented retrospectively in the tables that follow. Dollars are in millions.

Property

	Incurred Losses and ALAE through December 31,
Accident Year	2013*		2014*		2015*		2016*		2017*		2018*		2019*		2020*		2021*		2022		IBNR and Case Development Liabilities
2013	$	3,654	$	3,460	$	3,092	$	2,980	$	2,946	$	2,885	$	2,828	$	2,811	$	2,808	$	2,796	$	31
2014				3,088		2,847		2,724		2,566		2,509		2,433		2,399		2,393		2,373		31
2015						3,595		3,405		2,838		3,229		3,225		3,244		3,246		3,240		116
2016								3,917		4,508		4,186		4,149		4,144		4,133		4,111		47
2017										6,390		6,093		5,916		5,790		5,711		5,630		100
2018												5,478		5,574		5,433		5,289		5,296		372
2019														4,991		5,116		4,907		4,592		245
2020																6,937		7,217		6,857		1,025
2021																		8,080		7,951		1,757
2022																				8,870		4,663
Incurred losses and ALAE																			$	51,716
	Cumulative Paid Losses and ALAE through December 31,
Accident Year	2013*		2014*		2015*		2016*		2017*		2018*		2019*		2020*		2021*		2022
2013	$	621	$	1,674	$	2,190	$	2,414	$	2,540	$	2,623	$	2,663	$	2,694	$	2,718	$	2,710
2014				571		1,518		1,899		2,059		2,135		2,187		2,218		2,242		2,272
2015						669		1,799		2,204		2,422		2,531		2,713		2,799		2,852
2016								914		2,211		2,673		3,162		3,431		3,626		3,736
2017										1,347		3,508		4,583		4,936		5,171		5,364
2018												1,208		3,089		3,733		4,019		4,265
2019														1,010		2,852		3,578		3,905
2020																1,253		3,583		4,632
2021																		1,622		4,083
2022																				1,815
Paid losses and ALAE																				35,634
Net unpaid losses and ALAE for 2013 – 2022 accident years																				16,082
Net unpaid losses and ALAE for accident years before 2013																				470
Net unpaid losses and ALAE																			$	16,552

* Unaudited required supplemental information

Notes to Consolidated Financial Statements (Continued)

(16)Unpaid losses and loss adjustment expenses (Continued)

Casualty

	Incurred Losses and ALAE through December 31,
Accident Year	2013*		2014*		2015*		2016*		2017*		2018*		2019*		2020*		2021*		2022		IBNR and Case Development Liabilities
2013	$	3,752	$	3,897	$	3,894	$	3,703	$	3,634	$	3,571	$	3,453	$	3,345	$	3,301	$	3,235	$	337
2014				3,492		3,653		3,596		3,535		3,436		3,451		3,427		3,315		3,280		480
2015						3,408		3,607		3,647		3,561		3,420		3,383		3,346		3,291		426
2016								3,775		3,980		3,884		3,854		3,803		3,760		3,731		491
2017										4,026		4,453		4,332		4,226		4,158		4,147		639
2018												4,871		5,515		5,457		5,328		5,257		942
2019														5,555		6,019		5,890		5,727		1,548
2020																6,216		6,228		6,045		2,294
2021																		6,287		6,256		3,139
2022																				6,063		4,726
	Incurred losses and ALAE																		$	47,032
	Cumulative Paid Losses and ALAE through December 31,
Accident Year	2013*		2014*		2015*		2016*		2017*		2018*		2019*		2020*		2021*		2022
2013	$	576	$	1,120	$	1,585	$	1,881	$	2,088	$	2,284	$	2,396	$	2,492	$	2,563	$	2,598
2014				428		997		1,385		1,657		1,911		2,096		2,303		2,396		2,484
2015						445		991		1,426		1,725		1,997		2,190		2,338		2,473
2016								653		1,356		1,796		2,144		2,414		2,607		2,782
2017										606		1,307		1,824		2,472		2,720		2,937
2018												693		1,736		2,785		3,251		3,629
2019														840		1,865		2,415		3,182
2020																867		1,901		2,710
2021																		765		1,780
2022																				621
	Paid losses and ALAE																			25,196
	Net unpaid losses and ALAE for 2013 – 2022 accident years																			21,836
	Net unpaid losses and ALAE for accident years before 2013																			9,530
	Net unpaid losses and ALAE																		$	31,366

* Unaudited required supplemental information

Required supplemental unaudited average historical claims duration information based on the net losses and ALAE incurred and paid accident year data in the preceding tables follows. The percentages show the average portions of net losses and ALAE paid by each succeeding year, with year 1 representing the current accident year.

Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
In Year	1	2	3	4	5	6	7	8	9	10
GEICO Physical Damage	97%	3%
GEICO Auto Liability	41%	31%	13%	8%	4%
BH Primary Medical Professional Liability	2%	7%	12%	14%	13%	11%	8%	6%	4%	3%
BH Primary Workers’ Compensation and Other Casualty	15%	19%	15%	13%	9%	5%	4%	3%	1%	1%
BHRG Property	22%	36%	15%	8%	4%	4%	2%	1%	1%	0%
BHRG Casualty	14%	18%	13%	11%	7%	6%	5%	3%	2%	1%