LOSS AND LOSS ADJUSTMENT EXPENSE (“LAE”) RESERVES

3 Months Ended

Mar. 31, 2017

LOSS AND LOSS ADJUSTMENT EXPENSE (“LAE”) RESERVES [Abstract]

LOSS AND LOSS ADJUSTMENT EXPENSE (“LAE”) RESERVES

6.  LOSS AND LOSS ADJUSTMENT EXPENSE (“LAE”) RESERVES

The liability for loss and LAE reserves is determined on an individual-case basis for all claims reported. The liability also includes amounts for unallocated expenses, consideration for anticipated subrogation recoveries that will offset future loss payments, anticipated future claim development and incurred but not yet reported (“IBNR”).

Activity in the liability for loss and LAE reserves is summarized as follows:

	Three Months Ended
	March 31,
	2017		2016
	(in thousands)
Gross reserves, beginning of period	$	158,110	$	97,340
Less: reinsurance recoverable (1)		(41,079)		(7,496)
Net reserves, beginning of period		117,031		89,844
Incurred loss, net of reinsurance, related to:
Current year		50,674		30,093
Prior years		157		(548)
Total incurred loss and LAE, net of reinsurance		50,831		29,545
Paid loss, net of reinsurance, related to:
Current year		15,461		9,221
Prior years		33,945		19,710
Total paid loss and LAE, net of reinsurance		49,406		28,931
Net reserves, end of period		118,456		90,458
Plus: reinsurance recoverable (1)		35,881		11,157
Gross reserves, end of period	$	154,337	$	101,615

(1) Reinsurance recoverable in this table includes only ceded loss and LAE reserves.

The establishment of loss reserves is an inherently uncertain process and changes in loss reserve estimates are expected as such estimates are subject to the outcome of future events. The factors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurred losses from historical trends are frequently subject to multiple interpretations. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made.

During the three months ended March 31, 2017, the Company experienced unfavorable loss and LAE reserve development of $0.2 million.

The favorable development in the first quarter of 2016 is primarily a result of continued favorable loss experience (mostly caused by decreased severity in reported claims) in the Company’s all other peril homeowners coverage caused in part by the absence of severe weather events in the state of Florida. Specifically, we had experienced better severity than expected on the 2014 and 2013 accident years.