Reserve for Loss and Loss Adjustment Expenses

Our reserve for loss and LAE comprises:



	March 31, 2017		December 31, 2016
Reserve for reported loss and LAE	$	1,705,573	$	1,617,956
Reserve for losses incurred but not reported ("IBNR")	1,286,031		1,278,540
Reserve for loss and LAE	$	2,991,604	$	2,896,496

The following table represents a reconciliation of our beginning and ending gross and net loss and LAE reserves:



For the Three Months Ended March 31,	2017			2016
Gross loss and LAE reserves, January 1	$	2,896,496		$	2,510,101
Less: reinsurance recoverable on unpaid losses, January 1	99,936			71,248
Net loss and LAE reserves, January 1	2,796,560			2,438,853
Net incurred losses related to:
Current year	463,729			387,997
Prior years	16,840			15,624
	480,569			403,621
Net paid losses related to:
Current year	(70,899		)	(61,121		)
Prior years	(329,298		)	(309,134		)
	(400,197		)	(370,255		)
Effect of foreign exchange movements	5,895			16,671
Net loss and LAE reserves, March 31	2,882,827			2,488,890
Reinsurance recoverable on unpaid losses, March 31	108,777			83,515
Gross loss and LAE reserves, March 31	$	2,991,604		$	2,572,405

Management believes that its use of both historical experience and industry-wide loss development factors provide a reasonable basis for estimating future losses. In the future, certain events may be beyond the control of management, such as changes in law, judicial interpretations of law, and inflation may favorably or unfavorably impact the ultimate settlement of the Company’s loss and LAE reserves.

The anticipated effect of inflation is implicitly considered when estimating liabilities for loss and LAE. While anticipated changes in claim costs due to inflation are considered in estimating the ultimate claim costs, changes in average severity of claims are caused by a number of factors that vary with the individual type of policy written. Ultimate losses are projected based on historical trends adjusted for implemented changes in underwriting standards, policy provisions, and general economic trends. Those anticipated trends are monitored based on actual development and are modified if necessary. Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves in previous calendar years. The development reflects changes in management's best estimate of the ultimate losses under the relevant reinsurance policies after review of changes in actuarial assessments.

During the first three months ended March 31, 2017, the Company recognized approximately $16,840 (2016 - $15,624) of adverse development in both the Diversified Reinsurance and AmTrust Reinsurance segments.

For the Diversified Reinsurance segment, adverse development was $6,232 (2016 - $13,302) which was largely due a combination of commercial auto liability and international personal auto for the three months ended March 31, 2017 and to commercial auto liability business for the three months ended March 31, 2016. For the AmTrust Reinsurance segment, net adverse development was $10,319 (2016 - favorable development of $449) largely related to general liability and worker's compensation for the period ended March 31, 2017.