Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2019

Note 11 — Losses and Loss Adjustment Expenses

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

The Company primarily writes insurance in the state of Florida, 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 unpaid losses and loss adjustment expenses is summarized as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net balance, beginning of period*	$	98,453		$	91,403		$	94,826		$	97,818
Incurred, net of reinsurance, related to:
Current period		21,416			20,917			45,737			40,407
Prior period		2,877			886			5,552			1,051

Total incurred, net of reinsurance		24,293			21,803			51,289			41,458

Paid, net of reinsurance, related to:
Current period		(13,778	)		(9,710	)		(17,708	)		(14,157	)
Prior period		(13,623	)		(14,107	)		(33,062	)		(35,730	)

Total paid, net of reinsurance		(27,401	)		(23,817	)		(50,770	)		(49,887	)

Net balance, end of period		95,345			89,389			95,345			89,389
Add: reinsurance recoverable		58,897			82,998			58,897			82,998

Gross balance, end of period	$	154,242		$	172,387		$	154,242		$	172,387

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

The establishment of loss reserves is an inherently uncertain process and changes in loss 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 six months ended June 30, 2019, the Company recognized losses related to prior periods of $2,877 and $5,552, respectively, which were primarily attributable to unfavorable development resulting from litigation. Included in adverse development for the three and six months ended June 30, 2019 were losses related to Hurricane Matthew of $242 and $1,052, respectively. Losses for the 2019 loss year included estimated losses of $5,250 related to one severe storm event during the first quarter.