The liability for losses and loss adjustment expenses (“LAE”) is determined on an individual case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claims development and losses incurred but not reported.

The Company primarily writes insurance in states which could be exposed to hurricanes or other natural catastrophes. The occurrence of a major catastrophe could have a significant effect on the Company’s quarterly results and cause a temporary disruption of the normal operations of the Company. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

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


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net balance, beginning of period*	$	243,586		$	196,414		$	246,546		$	172,410
Incurred, net of reinsurance, related to:
Current period		58,621			126,486			176,287			275,010
Prior periods		8,105			13,308			12,894			24,318
Total incurred, net of reinsurance		66,726			139,794			189,181			299,328
Paid, net of reinsurance, related to:
Current period		(36,299	)		(45,732	)		(74,514	)		(102,155	)
Prior periods		(27,782	)		(27,489	)		(114,982	)		(106,596	)
Total paid, net of reinsurance		(64,081	)		(73,221	)		(189,496	)		(208,751	)
Net balance, end of period		246,231			262,987			246,231			262,987
Add: reinsurance recoverable before allowance for credit losses		462,858			938,855			462,858			938,855
Gross balance, end of period	$	709,089		$	1,201,842		$	709,089		$	1,201,842

* Net balance represents beginning-of-period liability for unpaid losses and LAE less beginning-of-period reinsurance recoverable for unpaid losses and LAE.

The establishment of loss and LAE reserves is an inherently uncertain process and changes in loss and LAE reserve estimates are expected as these estimates are subject to the outcome of future events. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such estimates are adjusted. During the three and nine months ended September 30, 2023, the Company recognized losses related to prior periods of $8,105 and $12,894, respectively, primarily to increase reserves in response to litigation. Losses and LAE for the three and nine months ended September 30, 2023 included net estimated losses of approximately $16,225 and $51,560, respectively, related to United policies assumed, renewed and/or replaced. Lower losses and LAE for the three and nine months ended September 30, 2023 primarily resulted from a decrease in claims and litigation related to Florida policies. During the third quarter of 2022, the Company incurred approximately $65,000 of losses resulting from Hurricane Ian.