LOSS AND LOSS ADJUSTMENT EXPENSE (“LAE”) RESERVES

6 Months Ended

Jun. 30, 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:

	Six Months Ended
	June 30,
	2017		2016
	(in thousands)
Gross reserves, beginning of period	$	158,476	$	97,340
Less: reinsurance recoverable (1)		(41,079)		(7,496)
Net reserves, beginning of period		117,397		89,844
Incurred loss, net of reinsurance, related to:
Current year		105,443		69,290
Prior years		3,279		10,953
Total incurred loss and LAE, net of reinsurance		108,722		80,243
Paid loss, net of reinsurance, related to:
Current year		47,463		27,707
Prior years		55,144		32,191
Total paid loss and LAE, net of reinsurance		102,607		59,898
Net reserves, end of period		123,512		110,189
Plus: reinsurance recoverable (1)		33,461		10,534
Gross reserves, end of period	$	156,973	$	120,723

(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 six months ended June 30, 2017, the Company experienced $3.3 million of unfavorable loss and LAE reserve development on prior accident years in our Homeowners and Automobile lines of business.  The Homeowners’ unfavorable development of $1.8 million primarily relates to the continued impact from assignment of benefits and related ligation costs in the state of Florida.  The Automobile’s unfavorable development of $1.5 million relates to the 2016 accident year from our auto program in the state of Georgia.

During the six months ended June 30, 2016, the Company experienced $10.5 million of unfavorable loss and LAE reserve development on prior year accident years primarily in our Homeowners’ line of business in the state of Florida. The deficiency primarily relates to higher severity above the expected development factor anticipated at December 31, 2015 which was driven by the impact from assignment of benefits and related ligation costs.