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Liability for Loss and LAE
 3 Months Ended
Mar. 31, 2017
Liability for Loss and LAE

5. Liability for Loss and LAE

(a) Liability Rollforward

Activity in liability for loss and LAE in the three months ended March 31, 2017 and 2016 is summarized as follows:

 

   

Three Months Ended

March 31,

  
    2017     2016  
    ($ in millions)  

Reserves as of January 1

     $ 11,087.2          $ 10,799.2     

Less: reinsurance recoverables(1)

     1,236.2          1,169.3     
 

 

 

    

 

 

  

Net reserves as of January 1

     9,851.0          9,629.9     
 

 

 

    

 

 

  

Incurred loss and LAE, net of reinsurance, related to:

    

Current year

     747.0          749.9     

Prior years

     (47.7)        (85.3)   
 

 

 

    

 

 

  

Total incurred loss and LAE, net of reinsurance

     699.3          664.6     
 

 

 

    

 

 

  

Paid loss and LAE, net of reinsurance, related to:(2)

    

Current year

     114.0          25.9     

Prior years

     647.2          600.1     
 

 

 

    

 

 

  

Total paid loss and LAE, net of reinsurance

     761.2          626.0     
 

 

 

    

 

 

  

Foreign exchange effect

     (12.2)        (21.9)   
 

 

 

    

 

 

  

Net reserves as of March 31

     9,776.9          9,646.6     

Reinsurance recoverables as of March 31(1)

     1,213.0          1,112.1     
 

 

 

    

 

 

  

Reserves as of March 31

     $     10,989.9          $     10,758.7     
 

 

 

    

 

 

  

 

 

(1) Reinsurance recoverables in this table include only ceded loss and LAE reserves.
(2) Includes paid losses, net of reinsurance, related to commutations.

Gross loss and LAE reserves as of March 31, 2017 decreased from December 31, 2016, primarily reflecting a decrease at the reinsurance segment due to favorable prior accident year loss reserve development, the impact of lower net premiums earned and the impact of changes in foreign currency exchange rates.

 

(b) Liability Development

The (favorable) unfavorable prior accident year loss reserve development for the three months ended March 31, 2017 and 2016 is summarized as follows:

 

   

Three Months Ended

March 31,

  
    2017     2016  
    ($ in millions)  

Reinsurance Segment

    

Property:

    

Catastrophe events

     $ (0.4) (1)      $ (1.0) (2) 

Non-catastrophe

     (31.1) (3)      (32.2) (4) 
 

 

 

    

 

 

  

Total property

     (31.5)       (33.2)  
 

 

 

    

 

 

  

Casualty & other:

    

Malpractice Treaties(5)

     -            (6.9)  

Ogden rate impact(6)

     24.4         -       

Other

     (31.2) (7)      (30.9) (8) 
 

 

 

    

 

 

  

Total casualty & other

     (6.8)       (37.8)  
 

 

 

    

 

 

  

Total Reinsurance Segment

     (38.3)       (71.0)  
 

 

 

    

 

 

  

Insurance Segment

    

RSUI:

    

Casualty

     (12.2) (9)      (9.8) (10) 

Property and other

     3.8( 11)      (3.0) (12) 
 

 

 

    

 

 

  

Total RSUI

     (8.4)       (12.8)  
 

 

 

    

 

 

  

CapSpecialty:

    

Asbestos-related illness and environmental impairment liability

     -            (2.0)  

Other

     (0.5) (13)      0.5    
 

 

 

    

 

 

  

Total CapSpecialty

     (0.5)       (1.5)  
 

 

 

    

 

 

  

PacificComp

     (0.5) (14)      -       
 

 

 

    

 

 

  

Total incurred related to prior years

     $      (47.7)       $      (85.3)  
 

 

 

    

 

 

  

 

 

(1) Reflects favorable prior accident year loss reserve development from several catastrophes that occurred in the 2010 through 2016 accident years.
(2) Reflects favorable prior accident year loss reserve development from several catastrophes that occurred in the 2010 through 2015 accident years.
(3) Reflects favorable prior accident year loss reserve development primarily related to the 2014 through 2016 accident years.
(4) Reflects favorable prior accident year loss reserve development primarily related to the 2014 and 2015 accident years.
(5) Represents certain medical malpractice treaties pursuant to which the increased underwriting profits created by the favorable prior accident year loss reserve development are largely retained by the cedants. As a result, the favorable prior accident year loss reserve development is largely offset by an increase in profit commission expense incurred when such favorable prior accident year loss reserve development occurs.
(6) Represents unfavorable prior accident year loss reserve development arising from the U.K. Ministry of Justice’s decision to significantly reduce the discount rate, referred to as the Ogden rate, used to calculate lump-sum bodily injury payouts in personal injury insurance claims in the U.K. As of March 20, 2017, the Ogden rate changed from +2.50 percent to (0.75) percent.
(7) Generally reflects favorable prior accident year loss reserve development in a variety of casualty & other lines of business primarily from the 2010 through 2016 accident years.
(8) Generally reflects favorable prior accident year loss reserve development in a variety of casualty & other lines of business primarily from the 2009, 2014 and 2015 accident years, partially offset by unfavorable prior accident year loss reserve development from the 2013 accident year.
(9) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines of business related to the 2011 through 2005 accident years.
(10) Primarily reflects favorable prior accident year loss reserve development in the general liability, umbrella/excess and professional liability lines of business related to the 2006 through 2012 accident years.
(11) Primarily reflects unfavorable prior accident year property loss reserve development in the binding authority lines of business related to the 2016 and 2015 accident years.
(12) Primarily reflects favorable prior accident year loss reserve development in non-catastrophe property lines of business in recent accident years.
(13) Primarily reflects favorable prior accident year loss reserve development in the casualty lines of business related to the 2012, 2006 and 2005 accident years.
(14) Primarily reflects favorable prior accident year loss reserve development related to 2013 accident year.