12 UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES

The establishment of the provision for unpaid loss and loss adjustment expenses is based on known facts and interpretation of circumstances and is, therefore, a complex and dynamic process influenced by a large variety of factors. These factors include the Company's experience with similar cases and historical trends involving loss payment patterns, pending levels of unpaid loss and loss adjustment expenses, product mix or concentration, loss severity and loss frequency patterns.

Other factors include the continually evolving and changing regulatory and legal environment; actuarial studies; professional experience and expertise of the Company's claims departments' personnel and independent adjusters retained to handle individual claims; the quality of the data used for projection purposes; existing claims management practices including claims-handling and settlement practices; the effect of inflationary trends on future loss settlement costs; court decisions; economic conditions; and public attitudes.

Consequently, the process of determining the provision for unpaid loss and loss adjustment expenses necessarily involves risks that the actual loss and loss adjustment expenses incurred by the Company will deviate, perhaps materially, from the estimates recorded.

The Company's evaluation of the adequacy of unpaid loss and loss adjustment expenses includes a re-estimation of the liability for unpaid loss and loss adjustment expenses relating to each preceding financial year compared to the liability that was previously established.

The results of this comparison and the changes in the provision for unpaid loss and loss adjustment expenses, net of amounts recoverable from reinsurers, as of June 30, 2018 and June 30, 2017 were as follows:



(in thousands)	June 30, 2018			June 30, 2017
Balance at beginning of period, gross	$	1,329		$	2,202
Less reinsurance recoverable related to unpaid loss and loss adjustment expenses	72			354
Balance at beginning of period, net	1,257			1,848
Incurred related to:
Current year	—			—
Prior years	1,647			(1		)
Paid related to:
Current year	—			—
Prior years	(410		)	(379		)
Balance at end of period, net	2,494			1,468
Plus reinsurance recoverable related to unpaid loss and loss adjustment expenses	100			332
Balance at end of period, gross	$	2,594		$	1,800

The Company reported unfavorable development on unpaid loss and loss adjustment expenses of $1.6 million and favorable development of $0.0 million for the six months ended June 30, 2018 and June 30, 2017, respectively. The unfavorable development for the six months ended June 30, 2018 was related to an increase in loss adjustment expenses at Kingsway Amigo Insurance Company ("Amigo").