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Liability for Loss and LAE
 12 Months Ended
Dec. 31, 2015
Liability for Loss and LAE

6. Liability for Loss and LAE

Activity in liability for loss and LAE in 2015, 2014 and 2013 is summarized as follows:

 

     Year Ended December 31,  
     2015     2014     2013  
    

($ in millions)

  

Reserves, beginning of period

    $  11,597.2      $  11,952.5      $  12,239.8   

Less: reinsurance recoverables(1)

      1,289.4        1,302.1        1,305.9   
  

 

 

    

 

 

    

 

 

  

Net reserves, beginning of period

      10,307.8        10,650.4        10,933.9   
  

 

 

    

 

 

    

 

 

  

Other adjustments

      (1.9 )      56.9   (2)      -     
  

 

 

    

 

 

    

 

 

  

Incurred loss, net of reinsurance, related to:

       

Current year

      2,555.3        2,709.7        2,682.3   

Prior years

      (215.5 )      (215.2 )      (203.0 ) 
  

 

 

    

 

 

    

 

 

  

Total incurred loss and LAE, net of reinsurance

      2,339.8        2,494.5        2,479.3   
  

 

 

    

 

 

    

 

 

  

Paid loss, net of reinsurance, related to:(3)

       

Current year

      417.6        520.8        518.5   

Prior years

      2,390.4        2,178.1        2,236.8   
  

 

 

    

 

 

    

 

 

  

Total paid loss and LAE, net of reinsurance

      2,808.0        2,698.9        2,755.3   
  

 

 

    

 

 

    

 

 

  

Foreign exchange effect

      (207.8 )      (195.1 )      (7.5 ) 
  

 

 

    

 

 

    

 

 

  

Net reserves, end of period

      9,629.9        10,307.8        10,650.4   

Plus: reinsurance recoverables(1)

      1,169.3        1,289.4        1,302.1   
  

 

 

    

 

 

    

 

 

  

Reserves, end of period

    $  10,799.2      $  11,597.2      $  11,952.5   
  

 

 

    

 

 

    

 

 

  

 

(1) Reinsurance recoverables in this table include only ceded loss and LAE reserves.
(2) Represents reserves acquired in connection with a loss portfolio transfer transaction.
(3) Includes paid losses, net of reinsurance, related to commutations.

Gross loss and LAE reserves as of December 31, 2015 decreased from December 31, 2014, reflecting a decrease in our reinsurance segment loss and LAE reserves, partially offset by an increase at our insurance segment. The decrease in gross loss and LAE reserves in the reinsurance segment primarily reflects favorable prior accident year loss reserve development, loss payments including amounts related to commutations in the fourth quarter of 2015 with certain cedants and the impact of changes in foreign currency exchange rates. The increase in gross loss and LAE reserves in the insurance segment primarily reflects higher current accident year losses.

Gross loss and LAE reserves as of December 31, 2014 decreased from December 31, 2013, reflecting a decrease in the reinsurance segment loss and LAE reserves. The decrease in gross loss and LAE reserves in the reinsurance segment primarily reflects favorable prior accident year loss reserve development, loss payments including amounts related to catastrophe events occurring in prior years, and the impact of changes in foreign currency exchange rates.

 

The (favorable) unfavorable prior accident year development on loss reserves for 2015, 2014 and 2013 is summarized as follows:

 

     Year Ended December 31,  
     2015     2014     2013  
     ($ in millions)  

Reinsurance Segment:

       

Property:

       

Catastrophe events

      $ (28.0 ) (1)      $ (17.3 ) (2)      $ (109.3 ) (3) 

Non-catastrophe

      (48.7 ) (4)      (55.8 ) (5)      (75.4 ) (6) 
  

 

 

    

 

 

    

 

 

  

Total property

      (76.7 )      (73.1 )      (184.7 ) 
  

 

 

    

 

 

    

 

 

  

Casualty & other:

       

The Malpractice Treaties(7)

      (12.1 )      (12.7 )      (35.7 ) 

Commuted A&E Liabilities(8)

      38.2        -          -     

Other

      (157.7 ) (9)      (96.6 ) (10)      (3.7 ) (11) 
  

 

 

    

 

 

    

 

 

  

Total casualty & other

      (131.6 )      (109.3 )      (39.4 ) 
  

 

 

    

 

 

    

 

 

  

Total Reinsurance Segment

      (208.3 )      (182.4 )      (224.1 ) 
  

 

 

    

 

 

    

 

 

  

Insurance Segment:

       

RSUI:

       

Casualty

      (2.9 ) (12)      (30.1 ) (13)      (25.9 ) (14) 

Property and other

      (9.0 ) (15)      (5.3 ) (16)      8.0   (17) 
  

 

 

    

 

 

    

 

 

  

Total RSUI

      (11.9 )      (35.4 )      (17.9 ) 
  

 

 

    

 

 

    

 

 

  

CapSpecialty:

       

Ongoing lines of business

      11.0     (18)      0.2        10.4   (19) 

Terminated Program(20)

      (6.3 )      -          19.4   

Asbestos-related illness and environmental impairment liability

      -          -          (4.0 ) 
  

 

 

    

 

 

    

 

 

  

Total CapSpecialty

      4.7        0.2        25.8   
  

 

 

    

 

 

    

 

 

  

PacificComp(21)

      -          2.4        13.2   
  

 

 

    

 

 

    

 

 

  

Total incurred related to prior years

      $ (215.5 )      $ (215.2 )      $ (203.0 ) 
  

 

 

    

 

 

    

 

 

  

 

(1) Includes favorable prior accident year development on loss reserves of ($27.7) million from Super Storm Sandy in 2012 and various smaller amounts on catastrophes that occurred in the 2010, 2011, 2013 and 2014 accident years, partially offset by unfavorable prior accident year development from the New Zealand earthquake in 2010.
(2) Includes favorable prior accident year development on loss reserves of ($1.6) million from Super Storm Sandy in 2012 and ($15.7) million of net favorable prior accident year development on loss reserves from other catastrophes. The ($15.7) million primarily reflects favorable prior accident year development on loss reserves from several catastrophes that occurred primarily in the 2011 and 2013 accident years, partially offset by unfavorable prior accident year development on loss reserves from the New Zealand earthquake in 2010.
(3) Includes favorable prior accident year development on loss reserves of ($73.7) million from Super Storm Sandy in 2012 and ($35.6) million from other catastrophe losses, principally flooding that took place in Thailand in 2011 and the Tohoku earthquake in Japan in 2011, partially offset by unfavorable prior accident year development on loss reserves from the New Zealand earthquake in 2010.
(4) Reflects favorable prior accident year development on loss reserves primarily related to the 2013 and 2014 accident years.
(5) Reflects favorable prior accident year development on loss reserves primarily related to the 2012 accident year and, to a lesser extent, the 2011 accident year.
(6) Reflects favorable prior accident year development on loss reserves primarily related to the 2011 and 2012 accident years.
(7) Represents certain medical malpractice treaties pursuant to which the increased underwriting profits created by the favorable prior accident year development on loss reserves are retained by the cedants (the “Malpractice Treaties”). As a result, TransRe records an offsetting increase in profit commission expense incurred when such favorable prior accident year development occurs.
(8) Represents unfavorable prior accident year development on loss reserves related to a commutation and release agreement entered into on November 30, 2015 by TransRe with AIG Property Casualty, Inc., National Indemnity Company and Resolute Management, Inc. with respect to certain reinsurance contracts (the “Commutation Agreement”), including contracts covering asbestos-related illness and environmental impairment liabilities for 1986 and prior years (the “Commuted A&E Liabilities”).
(9) Generally reflects favorable prior accident year development on loss reserves in a variety of casualty & other lines of business primarily from the 2005 and 2014 accident years, including ($30.7) million of favorable prior accident year development related to French medical malpractice loss reserves commuted in the fourth quarter of 2015 with a European cedant, partially offset by unfavorable prior accident year development from the 2004 and prior accident years.
(10) Generally reflects favorable prior accident year development on loss reserves in a variety of casualty & other lines of business primarily from the 2003 through 2007 and 2010 through 2011 accident years, partially offset by unfavorable prior accident year development on loss reserves from the 2013 accident year and the 2002 and prior accident years.
(11) Generally reflects favorable prior accident year development on loss reserves in a variety of casualty & other lines of business.
(12) Primarily reflects favorable prior accident year development on loss reserves in the umbrella/excess, general liability and professional liability lines of business related to the 2006 through 2011 accident years, partially offset by unfavorable prior accident year development in the directors’ and officers’ liability line of business related to the 2011 through 2014 accident years.
(13) Primarily reflects favorable prior accident year development on loss reserves in the professional liability, general liability and umbrella/excess lines of business, and primarily related to the 2006 through 2010 accident years, partially offset by unfavorable prior accident year development on loss reserves in the directors’ and officers’ liability line of business in the 2011 and 2012 accident years.
(14) Primarily reflects favorable prior accident year development on loss reserves in the umbrella/excess liability and professional liability lines of business, and primarily related to the 2005 through 2010 accident years.
(15) Primarily reflects favorable prior accident year development of ($4.1) million from Super Storm Sandy in 2012, net of reinsurance, and favorable prior accident year development on loss reserves related to unallocated LAE reserves.
(16) Primarily reflects favorable prior accident year development on unallocated LAE reserves and prior year catastrophe loss reserves from recent accident years.
(17) Includes $8.5 million of unfavorable prior accident year development on loss reserves from Hurricane Katrina, which resulted from a significant claim that settled for more than previously estimated due to an adverse court ruling, partially offset by net favorable prior accident year development on loss reserves with respect to other property reserves.
(18) Primarily reflects unfavorable prior accident year development on loss reserves related to the casualty lines of business from the 2011 through 2013 accident years.
(19) Primarily reflects unfavorable prior accident year development on loss reserves from workers’ compensation and certain other casualty lines of business, and related primarily to unfavorable loss emergence on a few individual claims, partially offset by favorable prior accident year development on loss reserves on surety and property lines of business.
(20) Represents certain specialty classes of business written through a program administrator in connection with a terminated program related to the 2010 and 2009 accident years and reflects (favorable) unfavorable loss emergence compared with loss emergence patterns assumed in earlier periods for such business.
(21) The unfavorable prior accident year development on loss reserves in 2014 and 2013 related primarily to the 2009 and prior accident years.