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Liability for Loss and LAE
 9 Months Ended
Sep. 30, 2017
Liability for Loss and LAE

5. Liability for Loss and LAE

(a) Liability Rollforward

The following table presents the activity in the liability for loss and LAE in the nine months ended September 30, 2017 and 2016:

 

    

Nine Months Ended

September 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    
  

 

 

     

 

 

  

Other adjustments

      (0.7)         3.2    
  

 

 

     

 

 

  

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

      

Current year

      3,099.0          2,460.2    

Prior years

      (173.0)         (261.7)   
  

 

 

     

 

 

  

Total incurred loss and LAE, net of reinsurance

      2,926.0          2,198.5    
  

 

 

     

 

 

  

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

      

Current year

      390.6          206.0    

Prior years

      1,743.2          1,702.7    
  

 

 

     

 

 

  

Total paid loss and LAE, net of reinsurance

      2,133.8          1,908.7    
  

 

 

     

 

 

  

Foreign exchange effect

      120.5          (22.6)   
  

 

 

     

 

 

  

Net reserves as of September 30

      10,763.0          9,900.3    

Reinsurance recoverables as of September 30(1)

      1,693.4          1,157.8    
  

 

 

     

 

 

  

Reserves as of September 30

      $     12,456.4          $     11,058.1    
  

 

 

     

 

 

  

 

(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 and reinsurance recoverables as of September 30, 2017 increased from December 31, 2016, primarily reflecting significant catastrophe losses. Catastrophe losses, net of reinsurance, in the third quarter and first nine months of 2017 included $264.6 million related to Hurricane Harvey in August 2017, $312.0 million related to Hurricane Irma in September 2017, and $170.3 million related to Hurricane Maria in September 2017.

 

(b) Liability Development

The following table presents the (favorable) unfavorable prior accident year loss reserve development for the three and nine months ended September 30, 2017 and 2016:

 

    Three Months Ended
September 30,		    

Nine Months Ended

September 30,

  
    2017     2016     2017     2016  
    ($ in millions)  

Reinsurance Segment

        

 

Property:

        

 

Catastrophe events

    $ (7.8)  (1)      $ (1.2)  (2)      $ (12.2)  (1)      $ (9.0)  (2) 

 

Non-catastrophe

     (0.3)        (9.6)  (3)      (50.4)  (4)      (70.3)  (3) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total property

     (8.1)        (10.8)        (62.6)        (79.3)   
 

 

 

    

 

 

    

 

 

    

 

 

  

Casualty & other:

        

 

Malpractice Treaties(5)

     -             (2.0)        (2.0)        (10.8)   

 

Ogden rate impact(6)

     -             -             24.4         -        

 

Other

     (41.7)  (7)      (56.2)  (8)      (100.6)  (9)      (127.9)  (8) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total casualty & other

     (41.7)        (58.2)        (78.2)        (138.7)   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Reinsurance Segment

     (49.8)        (69.0)        (140.8)        (218.0)   
 

 

 

    

 

 

    

 

 

    

 

 

  

Insurance Segment

        

 

RSUI:

        

 

Casualty

     (6.9)  (10)      (11.9)  (11)      (28.5)  (10)      (32.1)  (11) 

 

Property and other

     (1.7)  (12)      (4.6)  (13)      1.2   (14)      (8.4)  (13) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total RSUI

     (8.6)        (16.5)        (27.3)        (40.5)   
 

 

 

    

 

 

    

 

 

    

 

 

  

CapSpecialty:

        

 

Asbestos-related illness and environmental impairment  liability

     -             -             -             (2.0)   

 

Other

     (2.3)  (15)      (0.9)  (16)      (3.1)  (15)      (1.2)  (16) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total CapSpecialty

     (2.3)        (0.9)        (3.1)        (3.2)   
 

 

 

    

 

 

    

 

 

    

 

 

  

PacificComp

     (0.8)  (17)      -             (1.8)  (17)      -        
 

 

 

    

 

 

    

 

 

    

 

 

  

Total incurred related to prior years

    $       (61.5)        $       (86.4)        $       (173.0)        $       (261.7)   
 

 

 

    

 

 

    

 

 

    

 

 

  

 

(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 2015 accident years.
(4) Reflects favorable prior accident year loss reserve development primarily related to the 2013 through 2016 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 negative 0.75 percent.
(7) Primarily reflects favorable prior accident year loss reserve development in longer-tailed U.S. professional liability lines of business related to older accident years and shorter-tailed casualty lines of business in the U.K. related to recent accident years.
(8) Generally reflects favorable prior accident year loss reserve development in a variety of casualty & other lines of business primarily related to the 2005, 2006 and 2008 through 2015 accident years.
(9) Primarily reflects favorable prior accident year loss reserve development in longer-tailed U.S. professional liability lines of business related to the 2005 through 2014 accident years, partially offset by net unfavorable prior accident year loss reserve development in shorter-tailed casualty lines of business related to the 2015 accident year in the U.S. and the U.K.
(10) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines 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 unallocated LAE development.
(13) Primarily reflects favorable prior accident year loss reserve development in the non-catastrophe property lines of business in recent accident years.
(14) 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, partially offset by favorable catastrophe prior accident year loss reserve development related to the 2016 accident year.
(15) Primarily reflects favorable prior accident year loss reserve development in the casualty lines of business related to the 2010, 2014, 2015 and 2016 accident years.
(16) Primarily reflects favorable prior accident year loss reserve development in the surety lines of business related to the 2015 accident year.
(17) Primarily reflects favorable prior accident year loss reserve development related to the 2013 and prior accident years.