Policy and Claim Reserves

12 Months Ended

Dec. 31, 2012

Policy and Claim Reserves [Abstract]

Policy and Claim Reserves

POLICY AND CLAIM RESERVES

The Company regularly updates its reserve estimates as new information becomes available and events occur that may impact the resolution of unsettled claims. Changes in prior years' reserve estimates are reflected in the results of operations in the year such changes are determined.

The following table is a reconciliation of beginning and ending property and casualty reserve balances for claims and claim adjustment expense (dollars in thousands):

	Year ended December 31,
	2012			2011
Summary of claims and claim adjustment expense reserves
Balance, beginning of year	$	14,386		$	13,184
Less reinsurance recoverable on unpaid losses	2,381			1,329
Net balances at beginning of year	12,005			11,855
Net losses:
Provision for claims and claim adjustment expenses for claims arising in current year	30,569			39,292
Estimated claims and claim adjustment expenses for claims arising in prior years	(1,476		)	59
Total increases	29,093			39,351
Claims and claim adjustment expense payments for claims arising in:
Current year	26,272			33,012
Prior years	4,841			6,189
Total payments	31,113			39,201
Net balance at end of year	9,985			12,005
Plus reinsurance recoverable on unpaid losses	1,229			2,381
Claims and claim adjustment expense reserves at end of year	$	11,214		$	14,386

The 2012 decrease in property and casualty benefit loss reserves was primarily due to a reduction in claim and claim adjustment expense estimates arising in prior years primarily attributable to reductions in loss reserves associated with the now discontinued private passenger auto line of business.

The Company has a geographic exposure to catastrophe losses in certain areas of the country. Catastrophes can be caused by various events including hurricanes, windstorms, earthquakes, hail, severe winter weather, explosions and fires, and the incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophe losses are restricted to small geographic areas; however, hurricanes and earthquakes may produce significant damage in large, heavily populated areas. The Company generally seeks to reduce its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance. At December 31, 2012, the Company's estimate of unpaid losses and adjustment expenses for claims incurred in prior years related to catastrophes that exceeded our retention totaled $958,000 before reinsurance ($1,793,000 in 2011). Because the Company has exhausted its catastrophe coverage limits available for Hurricane Katrina any additional development will not be covered by reinsurance. The Company maintains case reserves of $390,000 for losses in excess of catastrophe reinsurance ($266,000 in 2011).