| Liability for Unpaid Losses and Loss Adjustment Expenses |
7. Liability for Unpaid Losses and Loss Adjustment
Expenses
Activity in the liability for unpaid losses and loss adjustment
expenses is summarized as follows:
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Quarters Ended September 30, |
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Nine Months Ended September 30, |
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| (Dollars in
thousands) |
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2015 |
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2014 |
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2015 |
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2014 |
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Balance at beginning of period
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$ |
769,299 |
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$ |
754,595 |
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$ |
675,472 |
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$ |
779,466 |
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Less: Ceded reinsurance receivables
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|
138,497 |
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|
178,998 |
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|
123,201 |
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|
192,491 |
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Net balance at beginning of period
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630,802 |
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|
575,597 |
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|
552,271 |
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|
586,975 |
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Purchased reserves, gross
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1,119 |
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— |
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89,489 |
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— |
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Less: Purchased reserves ceded
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(1,119 |
) |
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— |
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(12,800 |
) |
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— |
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Purchased reserves, net
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— |
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— |
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76,689 |
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— |
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Incurred losses and loss adjustment expenses related to:
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Current year
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86,203 |
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|
36,501 |
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|
244,041 |
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119,464 |
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Prior years
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(8,512 |
) |
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|
153 |
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(17,171 |
) |
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(5,969 |
) |
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Total incurred losses and loss adjustment expenses
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77,691 |
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36,654 |
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226,870 |
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113,495 |
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Paid losses and loss adjustment expenses related to:
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Current year
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53,512 |
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15,480 |
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113,573 |
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39,472 |
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Prior years
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56,385 |
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28,704 |
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143,661 |
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92,931 |
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Total paid losses and loss adjustment expenses
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109,897 |
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44,184 |
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257,234 |
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132,403 |
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Net balance at end of period
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598,596 |
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568,067 |
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598,596 |
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568,067 |
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Plus: Ceded reinsurance receivables
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|
130,913 |
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|
171,864 |
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130,913 |
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171,864 |
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Balance at end of period
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$ |
729,509 |
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$ |
739,931 |
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$ |
729,509 |
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$ |
739,931 |
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When analyzing loss reserves and prior year development, the
Company considers many factors, including the frequency and
severity of claims, loss trends, case reserve settlements that may
have resulted in significant development, and any other additional
or pertinent factors that may impact reserve estimates.
In the third quarter of 2015, the Company decreased its prior
accident year loss reserves by $8.5 million, which consisted of a
$7.3 million decrease related to Commercial Lines and a $1.2
million decrease related to Reinsurance Operations.
The $7.3 million decrease related to Commercial Lines primarily
consisted of the following:
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• |
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Professional: A $3.5 million
decrease in aggregate primarily related to better than anticipated
loss emergence in accident years 2006 through 2012. |
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• |
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General Liability: A $3.8
million decrease in aggregate primarily related to accident years
1999 through 2013 primarily due to better than anticipated
frequency and severity in construction defect. |
The $1.2 million decrease in aggregate related to Reinsurance
Operations was primarily due to improved results reported by the
Company’s cedants on property catastrophe contracts for
accident years 2009 to 2013.
In the third quarter of 2014, the Company increased its prior
accident year loss reserves by $0.2 million, which consisted of a
$0.02 million increase related to Commercial Lines and a $0.1
million increase related to Reinsurance Operations.
The $0.02 million increase related to Commercial Lines primarily
consisted of the following:
| |
• |
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General Liability: A $5.4
million increase primarily due to higher than anticipated loss
emergence in recent accident years. |
| |
• |
|
Professional: A $6.4 million
reduction is primarily due to lower than expected severity from
accident years 2007 through 2011. |
| |
• |
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Property: A $0.5 million
increase primarily due to increased severity in accident years 2011
through 2013. |
| |
• |
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Asbestos: $0.2 million
increase primarily related to accident years prior to 1990 due to
recent development on several claims. |
| |
• |
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Other: A $0.3 million increase
primarily due to accident years 2011 through 2013. |
The $0.1 million increase related to Reinsurance Operations
primarily consisted of the following:
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• |
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Property: A $3.4 million
reduction is due to less catastrophe losses than anticipated
primarily from accident year 2013. |
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• |
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Commercial Auto: A $0.5
million increase due to increased severity primarily from accident
years 2009 and 2010. |
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• |
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Marine: A $3.0 million
increase is primarily related to increased severity on accident
years 2011 and 2012. These treaties are in runoff. Several claims
have recently settled for amounts higher than expected. |
In the first nine months of 2015, the Company decreased its prior
accident year loss reserves by $17.2 million, which consisted of a
$12.9 million decrease related to Commercial Lines and a $4.3
million decrease related to Reinsurance Operations.
The $12.9 million decrease related to Commercial Lines primarily
consisted of the following:
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• |
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Property: A $0.8 million
decrease in aggregate primary related to better than anticipated
loss emergence in the 2011 through 2014 accident years. |
| |
• |
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Umbrella: $0.3 million
decrease primarily related to accident years 2003 through 2005 as a
result of better than anticipated loss emergence. |
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• |
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Professional: $6.4 million
decrease in aggregate primarily related to better than anticipated
frequency in accident years 2006 through 2012. |
| |
• |
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General Liability: A $5.7
million decrease in aggregate primarily related to accident years
prior to 2013 due to better than anticipated frequency and severity
in construction defect. |
The $4.3 million decrease in aggregate related to Reinsurance
Operations was primarily due to improved results reported by the
Company’s cedants on property contracts for accident years
2009 through 2014.
In the first nine months of 2014, the Company reduced its prior
accident year loss reserves by $6.0 million, which consisted of a
$5.0 million decrease related to Commercial Lines and a $1.0
million decrease related to Reinsurance Operations.
The $5.0 million decrease related to Commercial Lines primarily
consisted of the following:
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• |
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Property: A $0.7 million
increase primarily due to increased severity in accident years
2007, 2012, and 2013. |
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• |
|
General Liability: A $5.3
million increase primarily due to higher than anticipated loss
emergence in recent accident years. |
| |
• |
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Professional: A $18.1 million
reduction due to lower than expected severity primarily from
accident years 2007 through 2011. |
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• |
|
Asbestos: $7.1 million
increase primarily related to accident years prior to 1990 due to
recent development on several claims. |
The $1.0 million decrease related to Reinsurance Operations
primarily consisted of the following:
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• |
|
Property: A $4.7 million
reduction driven by less catastrophe losses than anticipated
primarily from accident years 2012 and 2013. |
| |
• |
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Marine: A $3.0 million
increase primarily related to increased severity from accident
years 2011 and 2012. These treaties are in runoff. Several claims
have recently settled for amounts higher than expected. |
| |
• |
|
Commercial Auto: $0.7 million
increase is primarily due to increased severity primarily from
accident years 2009 and 2010. |
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