Liability for Loss and LAE

6 Months Ended

Jun. 30, 2017

Liability for Loss and LAE

5. Liability for Loss and LAE

(a) Liability Rollforward

Activity in liability for loss and LAE in the six months ended June 30, 2017 and 2016 is summarized as follows:

	Six Months Ended June 30,
	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		1,545.6		1,655.3
Prior years		(111.4)		(175.3)
Total incurred loss and LAE, net of reinsurance		1,434.2		1,480.0
Paid loss and LAE, net of reinsurance, related to:(2)
Current year		242.7		115.0
Prior years		1,190.1		1,123.0
Total paid loss and LAE, net of reinsurance		1,432.8		1,238.0
Foreign exchange effect		55.4		20.8
Net reserves as of June 30		9,907.8		9,892.7
Reinsurance recoverables as of June 30(1)		1,152.4		1,151.1
Reserves as of June 30	$	11,060.2	$	11,043.8

(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 June 30, 2017 decreased slightly from December 31, 2016, primarily reflecting a decrease at the insurance segment due to favorable prior accident year loss reserve development and the impact of lower net premiums earned at RSUI, partially offset by the impact of higher net premiums earned at PacificComp and CapSpecialty.

(b) Liability Development

The (favorable) unfavorable prior accident year loss reserve development for the three and six months ended June 30, 2017 and 2016 is summarized as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	($ in millions)
Reinsurance Segment
Property:
Catastrophe events	$	(4.0)	(1)	$	(6.7)	(2)	$	(4.4)	(1)	$	(7.7)	(2)
Non-catastrophe		(18.9)	(3)		(28.6)	(4)		(50.0)	(3)		(60.8)	(4)
Total property		(22.9)			(35.3)			(54.4)			(68.5)
Casualty & other:
Malpractice Treaties(5)		(2.0)			(2.0)			(2.0)			(8.9)
Ogden rate impact(6)		-			-			24.4			-
Other		(27.7)	(7)		(40.7)	(8)		(58.9)	(7)		(71.6)	(9)
Total casualty & other		(29.7)			(42.7)			(36.5)			(80.5)
Total Reinsurance Segment		(52.6)			(78.0)			(90.9)			(149.0)
Insurance Segment
RSUI:
Casualty		(9.5)	(10)		(10.4)	(11)		(21.6)	(10)		(20.2)	(11)
Property and other		(0.8)			(0.8)	(12)		2.9	(13)		(3.8)	(12)
Total RSUI		(10.3)			(11.2)			(18.7)			(24.0)
CapSpecialty:
Asbestos-related illness and environmental impairment liability		-			-			-			(2.0)
Other		(0.2)	(14)		(0.8)	(15)		(0.8)	(14)		(0.3)	(15)
Total CapSpecialty		(0.2)			(0.8)			(0.8)			(2.3)
PacificComp		(0.5)	(16)		-			(1.0)	(16)		-
Total incurred related to prior years	$	(63.6)		$	(90.0)		$	(111.4)		$	(175.3)

(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 2013 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) Primarily reflects favorable prior accident year loss reserve development in longer-tailed U.S. professional liability business related to the 2005 through 2014 accident years, partially offset by net adverse development in shorter-tailed casualty lines in the 2015 accident year in the U.S. and the U.K.

(8) Generally reflects favorable prior accident year loss reserve development in a variety of casualty & other lines of business primarily from the 2009, 2013 and 2015 accident years.

(9) Generally reflects favorable prior accident year loss reserve development in a variety of casualty & other lines of business primarily from the 2009 and 2015 accident years.

(10) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess line of business related to the 2005 through 2011 accident years.

(11) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess, general liability and professional liability lines of business related to the 2006 through 2012 accident years.

(12) Primarily reflects favorable prior accident year loss reserve development in the non-catastrophe property lines of business in recent accident years.

(13) Primarily reflects unfavorable prior accident year property loss reserve development in the binding authority lines of business primarily related to the 2015 and 2016 accident years.

(14) Primarily reflects favorable prior accident year loss reserve development in the casualty lines of business related to the 2015 and 2010 accident years.

(15) Primarily reflects favorable prior accident year loss reserve development in the surety lines of business related to the 2015 accident year.

(16) Primarily reflects favorable prior accident year loss reserve development related to the 2013 and prior accident years.