|
8.Liability for Unpaid Losses and Loss Adjustment Expenses
Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:
|
|
|
Quarters Ended March 31, |
|
|
(Dollars in thousands) |
|
2021 |
|
|
2020 |
|
|
Balance at beginning of period |
|
$ |
662,811 |
|
|
$ |
630,181 |
|
|
Less: Ceded reinsurance receivables |
|
|
82,158 |
|
|
|
76,273 |
|
|
Net balance at beginning of period |
|
|
580,653 |
|
|
|
553,908 |
|
|
Incurred losses and loss adjustment expenses related to: |
|
|
|
|
|
|
|
|
|
Current year |
|
|
94,194 |
|
|
|
78,247 |
|
|
Prior years |
|
|
(3,411 |
) |
|
|
(600 |
) |
|
Total incurred losses and loss adjustment expenses |
|
|
90,783 |
|
|
|
77,647 |
|
|
Paid losses and loss adjustment expenses related to: |
|
|
|
|
|
|
|
|
|
Current year |
|
|
21,719 |
|
|
|
22,034 |
|
|
Prior years |
|
|
53,230 |
|
|
|
48,806 |
|
|
Total paid losses and loss adjustment expenses |
|
|
74,949 |
|
|
|
70,840 |
|
|
Net balance at end of period |
|
|
596,487 |
|
|
|
560,715 |
|
|
Plus: Ceded reinsurance receivables |
|
|
79,421 |
|
|
|
78,753 |
|
|
Balance at end of period |
|
$ |
675,908 |
|
|
$ |
639,468 |
|
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.
During the first quarter of 2021, the Company reduced its prior accident year loss reserves by $3.4 million, which consisted of a $0.4 million decrease related to Commercial Specialty, a $1.6 million decrease related to Specialty Property, a $0.7 million decrease related to Farm, Ranch & Stable, and a $0.6 million decrease related to Reinsurance Operations.
The $0.4 million reduction of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
|
|
• |
Property: A $0.2 million decrease in total reflects decreases of $2.6 million in the 2017 and 2019 through 2020 accident years mainly recognizing better than expected claims severity, mostly offset by an increase in the 2018 accident year, which reflects an increase in the ultimate for Hurricane Michael. |
|
|
• |
Professional: A $0.2 million decrease primarily in the 2019 and 2020 accident years mainly reflecting lower than anticipated claims severity. |
The $1.6 million decrease of prior accident year loss reserves related to Specialty Property primarily consisted of the following:
|
|
• |
General Liability: A $1.2 million reduction mostly in the 2018 accident year primarily reflects lower than anticipated claims severity. |
|
|
• |
Property: A $0.4 million decrease mostly in the non-catastrophe reserve segments. The reductions were primarily in the 2016 through 2019 accident years mainly due to lower than expected claims severity partially offset by an increase in the 2020 accident year driven by higher than anticipated claims severity. |
The $0.7 million reduction of prior accident year loss reserves related to Farm, Ranch & Stable primarily consisted of the following:
|
|
• |
Property: A $0.7 million decrease in total reflects subrogation recoveries of $1.1 million in the catastrophe reserve category from the California Thomas wildfire loss in the 2017 accident year and a decrease of $0.5 million in the 2019 accident year primarily recognizing a lower than expected claims severity. These decreases were partially offset by increases in the 2018 and 2020 accident years mainly due to higher than anticipated claims severity. |
The $0.6 million decrease in prior accident year loss reserves related to Reinsurance Operations were primarily based on a review of the experience reported from cedants. There was a $0.6 million decrease in the property lines mainly in the 2011 and 2017 through 2018 accident years, partially offset by an increase in the 2010 and 2019 accident years. In total, the property catastrophe segments decreased $2.6 million and the other property segments increased $2.0 million.
During the first quarter of 2020, the Company reduced its prior accident year loss reserves by $0.6 million. This reduction consisted of increases and decreases in prior accident year loss reserves in all segments with the primary impact being a $0.6 million decrease related to Reinsurance Operations.
The increases and decreases in prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
|
|
• |
General Liability: An increase of less than $0.3 million primarily in the 2016 through 2018 accident years reflects higher than anticipated claims severity. These increases were mostly offset by decreases mainly in the 2012 through 2015 and 2019 accident years due to lower than expected claims severity. |
|
|
• |
Workers Compensation: A $0.2 million reduction primarily in loss adjustment expense reserves in the 2012 accident year and accident years prior to 2005. |
|
|
• |
Property: A decrease of less than $0.1 million is mainly due to decreases in the 2018 and 2019 accident years primarily recognizing lower than expected claims severity, offset by an increase in the 2016 accident year due to higher than anticipated claims severity. |
The increases and decreases in prior accident year loss reserves related to Specialty Property primarily consisted of the following:
|
|
• |
General Liability: A $0.4 million decrease primarily recognizes lower than expected claims severity in the 2015, 2016 and 2019 accident years. |
|
|
• |
Property: A $0.4 million increase mainly reflects higher than anticipated claims severity in the 2019 accident year, partially offset by a decrease in the 2018 accident year due to lower than expected claims severity. |
Farm, Ranch & Stable had immaterial increases and decreases in prior accident year loss reserves.
The $0.6 million reduction of prior accident year loss reserves related to Reinsurance Operations was from the property lines. Decreases were primarily in the 2014 through 2017 accident years based on a review of the experience reported from cedants, partially offset by an increase in the 2018 accident year mainly due to development on Typhoons Jebi and Trami and an increase in attritional losses in the 2019 accident year.
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