Reserve for Unpaid Losses

6 Months Ended

Jun. 30, 2015

Insurance [Abstract]

Reserve for Unpaid Losses

NOTE 10. RESERVE FOR UNPAID LOSSES

The Company determines the reserve for unpaid losses on an individual-case basis for all incidents reported. The liability also includes amounts which are commonly referred to as incurred but not reported, or “IBNR”, claims as of the balance sheet date.

The table below summarizes the activity related to the Company’s reserve for unpaid losses:

	Three Month Ended June 30,				Six Months Ended June 30,
	2015		2014		2015			2014
	(In thousands)				(In thousands)
Balance, beginning of period	$	61,846	$	28,456	$	51,469		$	19,344
Less: reinsurance recoverable on paid losses		—		—		—			—
Net balance, beginning of period		61,846		28,456		51,469			19,344
Incurred related to:
Current year		33,760		19,027		70,812			39,582
Prior years		149		217		(4,364	)		249
Total incurred		33,909		19,244		66,448			39,831
Paid related to:
Current year		18,580		11,085		28,395			16,326
Prior years		7,046		2,082		19,393			8,316
Total paid		25,626		13,167		47,788			24,642
Net balance, end of period		70,129		34,533		70,129			34,533
Plus: reinsurance recoverable on unpaid losses		—		—		—			—
Balance, end of period	$	70,129	$	34,533	$	70,129		$	34,533

The significant increase in the Company’s reserves for unpaid losses in 2015 from 2014 is primarily due to the increase in policy count.

The Company writes insurance in the state of Florida, which could be exposed to hurricanes or other natural catastrophes. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, such an event is unlikely to be so material as to disrupt our overall normal operations. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter. The Company believes that the reserve for unpaid losses reasonably represents the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

The Company’s losses incurred during the three and six months ended of fiscal year 2015 reflect a prior year deficiency/(redundancy) of $149,000 and ($4.4) million, respectively, due to changes in the Company’s estimate of ultimate losses on claims incurred in prior years not attributable to any specific trend or claims handling dynamic. The Company’s losses incurred related to the prior year reflect a reserve deficiency of $217,000 and $249,000 for the three and six months ended June 30, 2014, respectively.