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Reserve for Losses and Loss Adjustment Expenses | 12 Months Ended
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Dec. 31, 2020
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] |
Reserve for losses and loss adjustment expenses | The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Reserve for losses and loss adjustment expenses at beginning of year | $ | 13,891,842 |  |  | $ | 11,853,297 |  |  | $ | 11,383,792 |
Unpaid losses and loss adjustment expenses recoverable | 4,082,650 |  |  | 2,814,291 |  |  | 2,464,910 |
Net reserve for losses and loss adjustment expenses at beginning of year | 9,809,192 |  |  | 9,039,006 |  |  | 8,918,882 |
Net incurred losses and loss adjustment expenses relating to losses occurring in: |  |  |  |  |
Current year | 4,851,051 |  |  | 3,297,037 |  |  | 3,162,818 |
Prior years | (161,452) |  |  | (163,585) |  |  | (272,712) |
Total net incurred losses and loss adjustment expenses | 4,689,599 |  |  | 3,133,452 |  |  | 2,890,106 |
Net losses and loss adjustment expense reserves of acquired business (1) | — |  |  | 209,486 |  |  | — |
Retroactive reinsurance transactions | 182,210 |  |  | (225,500) |  |  | (420,404) |
Foreign exchange (gains) losses and other | 179,190 |  |  | 36,003 |  |  | (143,414) |
Net paid losses and loss adjustment expenses relating to losses occurring in: |  |  |  |  |
Current year | (661,529) |  |  | (621,202) |  |  | (524,048) |
Prior years | (1,999,588) |  |  | (1,762,053) |  |  | (1,682,116) |
Total net paid losses and loss adjustment expenses | (2,661,117) |  |  | (2,383,255) |  |  | (2,206,164) |
Net reserve for losses and loss adjustment expenses at end of year | 12,199,074 |  |  | 9,809,192 |  |  | 9,039,006 |
Unpaid losses and loss adjustment expenses recoverable | 4,314,855 |  |  | 4,082,650 |  |  | 2,814,291 |
Reserve for losses and loss adjustment expenses at end of year | $ | 16,513,929 |  |  | $ | 13,891,842 |  |  | $ | 11,853,297 |
(1) Primarily related to the acquisition of Barbican. See Note 2. Development on Prior Year Loss Reserves Year Ended December 31, 2020 During 2020, the Company recorded estimated net favorable development on prior year loss reserves of $161.5 million, which consisted of net favorable development of $7.8 million from the insurance segment, $134.0 million from the reinsurance segment, $19.0 million from the mortgage segment, and $0.7 million from the ‘other’ segment. The insurance segment’s net favorable development of $7.8 million, or 0.3 points of net earned premium, consisted of $83.0 million of net favorable development in short-tailed and long-tailed lines partially offset by $75.2 million of net adverse development from medium-tailed lines. Net favorable development of $33.6 million in short-tailed lines reflected $21.6 million of favorable development from property (excluding marine), primarily from the 2015 to 2018 accident years, (i.e., the year in which a loss occurred) and $8.4 million of favorable development on travel and accident, primarily from the 2019 accident year. Net favorable development of $49.4 million in long-tailed lines included $38.8 million of favorable development related to other business, including alternative markets and excess workers’ compensation, across all accident years, and $9.3 million of favorable development related to construction business. Net adverse development in medium-tailed lines reflected $37.9 million of adverse development in surety business, primarily from the 2019 accident year, $23.1 million in contract binding business, primarily from the 2016 to 2019 accident years, and $16.0 million in program business, primarily from the 2016 to 2019 accident years. The reinsurance segment’s net favorable development of $134.0 million, or 6.2 points of net earned premium, consisted of $155.9 million of net favorable development from short-tailed and medium-tailed lines, partially offset by $21.9 million of net adverse development from long-tailed lines. Net favorable development of $144.0 million in short-tailed lines reflected $87.7 million related to property catastrophe and property other than property catastrophe business, primarily from the 2015 to 2019 underwriting years (i.e., losses attributable to contracts having an inception or renewal date within the given twelve-month period), and $53.6 million from other specialty lines, across most underwriting years. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during 2020. Adverse development in long-tailed lines reflected an increase in casualty reserves, primarily from the 2012 to 2015 underwriting years. The mortgage segment’s net favorable development of $19.0 million, or 1.4 points of net earned premium, included $16.2 million of favorable development on U.S. primary mortgage insurance business. Such development was primarily driven by subrogation recoveries on second lien business and student loan business. Year Ended December 31, 2019 During 2019, the Company recorded estimated net favorable development on prior year loss reserves of $163.6 million, which consisted of net favorable development of $15.8 million from the insurance segment, $46.4 million from the reinsurance segment and $125.2 million from the mortgage segment, partially offset by $23.8 million of net adverse development from the ‘other’ segment. The insurance segment’s net favorable development of $15.8 million, or 0.7 points of net earned premium, consisted of $54.9 million of net favorable development from short-tailed lines and $39.1 million of net adverse development from medium-tailed and long-tailed lines. Net favorable development in short-tailed lines primarily resulted from lenders products and property (including special risk other than marine) reserves across all accident years, partially offset by net adverse development in travel business, primarily from the 2018 accident year. Net adverse development in medium-tailed and long-tailed lines of $39.1 million was primarily due to net adverse development of $33.6 million in contract binding business, primarily from the 2013 to 2017 accident years, and $30.1 million in programs, primarily from the 2014 and 2018 accident years. Such amounts were partially offset by net favorable development of $19.3 million in professional liability business, primarily from the 2013 to 2016 accident years, and $15.8 million in surety business, primarily from the 2014 to 2016 accident years. The reinsurance segment’s net favorable development of $46.4 million, or 3.2 points of net earned premium, consisted of $70.5 million of net favorable development from short-tailed lines and $16.0 million of net favorable development from medium-tailed lines, partially offset by $40.1 million of net adverse development from long-tailed lines. Favorable development in short-tailed lines included $33.7 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2017 and 2018 underwriting years and $40.8 million in other specialty, primarily from 2016 to 2018 underwriting years. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during 2019. Net favorable development of $16.0 million in medium-tailed lines included reductions in marine and aviation reserves, primarily from the 2011 to 2017 underwriting years. Net adverse development in long-tailed lines of $40.1 million was primarily due to net adverse development of $44.5 million in casualty business, primarily from the 2013 to 2018 underwriting years. The mortgage segment’s net favorable development of $125.2 million, or 9.2 points of net earned premium, included $117.1 million of favorable development on U.S. primary mortgage insurance business. Such development was primarily driven by lower than expected claim rates on first lien business and subrogation recoveries on second lien business. Year Ended December 31, 2018 During 2018, the Company recorded estimated net favorable development on prior year loss reserves of $272.7 million, which consisted of $24.4 million from the insurance segment, $138.5 million from the reinsurance segment, $107.6 million from the mortgage segment and $2.2 million from the ‘other’ segment. The insurance segment’s net favorable development of $24.4 million, or 1.1 points of net earned premium, consisted of $48.4 million of net favorable development from short-tailed lines and $26.3 million of net favorable development from long-tailed lines, partially offset by $50.3 million of net adverse development from medium-tailed lines. Favorable development in short-tailed lines predominantly consisted of $50.1 million of net favorable development in property lines, primarily from the 2010 to 2017 accident years, partially offset by $5.0 million of adverse development on travel, accident and health business from the 2013 to 2017 accident years. Net favorable development in long-tailed lines of $26.3 million included $19.7 million of net favorable development on executive assurance business, primarily from the 2015 accident year, and $1.4 million of net favorable development in casualty business, primarily from the 2009 to 2015 accident years. Net adverse development in medium tailed lines of $50.3 million was primarily due to net adverse development in contract binding business for accident years 2013 to 2017. The reinsurance segment’s net favorable development of $138.5 million, or 11.0 points of net earned premium, consisted of $110.4 million from short-tailed lines and $28.1 million from medium-tailed and long-tailed lines. Favorable development in short-tailed lines included $80.8 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2008 to 2017 underwriting years. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during 2018. Net favorable development of $28.1 million in medium-tailed and long-tailed lines included reductions in casualty reserves of $12.5 million, primarily from the 2002 to 2010 underwriting years, and in marine and aviation reserves of $15.6 million, spread across most underwriting years. The mortgage segment’s net favorable development of $107.6 million, or 9.1 points of net earned premium, included $103.4 million of favorable development on U.S. primary mortgage insurance business. Such development was primarily driven by lower than expected claim rates on first lien business and subrogation recoveries on second lien business. Retroactive Reinsurance Transactions In 2020, the Company entered into a reinsurance-to-close agreement related to a third party arrangement covering the 2017 and prior years of account for certain London syndicate business. In 2019, the Company entered into a retroactive reinsurance transaction with third party reinsurer to reinsure run-off liabilities associated with certain U.S. insurance exposures, which was commuted in 2020. In 2018, the Company entered into a retroactive reinsurance transaction with third party reinsurers to reinsure run-off liabilities associated with certain U.S. insurance exposures.

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- Definition The entire disclosure for liabilities related to future policy benefits and unpaid claims and claim adjustments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 40 -URI http://asc.fasb.org/subtopic&trid=2560295 + Details
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