Loss Reserves

3 Months Ended

Mar. 31, 2019

NOTE 7. LOSS RESERVES

We establish reserves for the estimated unpaid ultimate liability for losses and LAE under the terms of our policies and agreements. The determination of Reserves for Losses and LAE is partially dependent upon the receipt of information from agents and brokers. Reserves include estimates for both claims that have been reported and for those that have been incurred but not reported (“IBNR”), and include estimates of expenses associated with processing and settling these claims. Reserves are recorded in Reserves for Losses and LAE in the Consolidated Balance Sheets. Our estimates and judgments may be revised as additional experience and other data become available and are reviewed, as new or improved methodologies are developed, or as laws change. Frequency/severity analyses are also performed for certain books of business. To the extent that reserves are found deficient or redundant, a strengthening or release is recognized as a charge or credit to earnings.

The following table summarizes our Company’s Reserves for Losses and LAE activity for the three months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
amounts in thousands	2019			2018
Net Reserves for Losses and LAE at Beginning of Year	$	1,923,784		$	1,705,380

Provision for Losses and LAE for Claims Occurring in the Current Year		218,029			184,179

Increase (Decrease) in Estimated Losses and LAE for Claims Occurring in Prior Years		52,323			1,966
Incurred Losses and LAE	$	270,352		$	186,145
Losses and LAE Paid for Claims Occurring During:
Current Year		(19,251	)		(9,206	)
Prior Years		(203,287	)		(155,860	)
Losses and LAE Payments	$	(222,538	)	$	(165,066	)
Foreign Currency Adjustment		8,084			4,980

Net Reserves for Losses and LAE at End of Period		1,979,682			1,731,439
Reinsurance Recoverables on Unpaid Losses and LAE		830,732			790,388
Gross Reserves for Losses and LAE at End of Period	$	2,810,414		$	2,521,827

For the three months ended March 31, 2019, our Incurred Losses and LAE increased $84.2 million as compared to the same period in 2018, driven by a $50.4 million increase in net prior AY reserve strengthening, as well as an increase due to growth in Net Earned Premium over the prior year including the impact of additional premium from the NICE Group which was acquired at the end of second quarter 2018.

For the three months ended March 31, 2019, we recognized total net catastrophe losses of $2.0 million, including a loss from the Russian River Flood in California. This compared to no catastrophe losses for the same period in 2018.

For the three months ended March 31, 2019, we recognized $52.3 million of net prior AY reserve strengthening, including the following:

•

$26.6 million from our U.S. Insurance reporting segment driven by $23.4 million of strengthening within Marine mostly related to an increase in our IBNR provision for run-off business for accident years prior to 1988 within our Marine Liability product line, $2.2 million in Professional Liability driven by unfavorable loss emergence on our Real Estate product, and $1.0 million in P&C due to unfavorable loss emergence in our Primary Casualty and Property divisions, partially offset by favorable loss emergence in our Commercial Excess Casualty and Environmental business lines.

•

$16.8 million from our Int’l Insurance reporting segment driven by $15.6 million of strengthening within Professional Liability mostly related to large loss activity within our D&O division and $2.0 million within Marine primarily due to loss development on net prior AY catastrophe losses. This reserve strengthening was partially offset by $0.8 million of release within our P&C operating segment, mostly due to favorable loss emergence on net prior AY catastrophe losses.

•

$8.9 million from our GlobalRe reporting segment driven by $5.6 million and $5.3 million of strengthening within our Specialty Casualty and P&C products, respectively, related to unfavorable loss emergence, as well as development on net prior AY catastrophe losses within P&C, and $1.0 million of strengthening within Marine due to loss development. This reserve strengthening was partially offset by $3.0 million of net prior AY reserve release within our Surety product due to favorable loss emergence.

For the three months ended March 31, 2019, our Losses and LAE Payments increased $57.5 million as compared to the same period in 2018, primarily due to increased claim payments associated with growth in our business.

Our March 31, 2019 Net Reserves for Losses and LAE includes estimated amounts for numerous catastrophe events. We caution that the magnitude and complexity of losses arising from these events inherently increases the level of uncertainty and therefore the level of management judgment involved in arriving at our estimated Net Reserves for Losses and LAE. As a result, our actual losses for these events may ultimately differ materially from our current estimates.