Short Duration Contracts

12 Months Ended

Dec. 31, 2023

Short Duration Contracts Disclosure [Abstract]

The Company’s reserves for losses and loss adjustment expenses primarily relate to short-duration contracts with various characteristics (e.g., type of coverage, geography, claims duration). The Company considered such information in determining the level of disaggregation for disclosures related to its short-duration contracts, as detailed in the table below:

Reportable segment

Level of disaggregation

Included lines of business

Insurance

Property energy, marine and aviation

Third party occurrence business

Excess and surplus casualty (excluding contract binding); construction and national accounts; and other (including alternative market risks, excess workers’ compensation and employer’s liability insurance coverages)

Third party claims-made business

Professional lines

Multi-line and other specialty

Programs; contract binding (part of excess and surplus casualty); travel, accident and health; warranty and lenders solutions; and other (contract and commercial surety coverages)

Reinsurance

Casualty

Property catastrophe

Property excluding property catastrophe

Marine and aviation

Other specialty

Mortgage

Direct mortgage insurance in the U.S.

Mortgage insurance on U.S. primary exposures

The Company determined the following to be insignificant for disclosure purposes: (i) certain mortgage business, including non-U.S. primary business, second lien and student loan exposures, global mortgage reinsurance and participation in various GSE credit risk-sharing products and (ii) certain reinsurance business, including casualty clash and non-traditional lines. Such amounts are included as reconciling items.

The Company is required to establish reserves for losses and loss adjustment expenses (“Loss Reserves”) that arise from the business the Company underwrites. Loss Reserves for the insurance, reinsurance and mortgage segments represent estimates of future amounts required to pay losses and loss adjustment expenses for insured or reinsured events which have occurred at or before the balance sheet date. Loss Reserves do not reflect contingency reserve allowances to account for future loss occurrences. Losses arising from future events will be estimated and recognized at the time the losses are incurred and could be substantial.

Insurance Segment

Loss Reserves for the insurance segment are comprised of estimated amounts for (1) reported losses (“case reserves”) and (2) incurred but not reported losses (“IBNR reserves”). Generally, claims personnel determine whether to establish a case reserve for the estimated amount of the ultimate settlement of individual claims. The estimate reflects the judgment of claims personnel based on general corporate reserving practices, the experience and knowledge of such personnel regarding the nature and value of the specific type of claim and, where appropriate, advice of counsel. The Company also contracts with a number of outside third party administrators in the claims process who, in certain cases, have limited authority to establish case reserves. The work of such administrators is reviewed and monitored by our claims personnel. Loss Reserves are also established to provide for loss adjustment expenses and represent the estimated expense of settling claims, including legal and other fees and the general expenses of administering the claims adjustment process. Periodically, adjustments to the case reserves may be made as additional information is reported or payments are made. IBNR reserves are established to provide for incurred claims which have not yet been reported at the balance sheet date as well as to adjust for any projected variance in case reserving. Actuaries estimate ultimate losses and loss adjustment expenses using various generally accepted actuarial methods applied to known losses and other relevant information. Like case reserves, IBNR reserves are adjusted as additional information becomes known or payments are made. The process of estimating reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain.

Ultimate losses and loss adjustment expenses are generally determined by projection of claim emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future. In forecasting ultimate losses and loss adjustment expenses with respect to any line of business, past experience with respect to that line of business is the primary resource, developed through both industry and company experience, but cannot be relied upon in isolation. Uncertainties in estimating ultimate losses and loss adjustment expenses are magnified by the length of the time lag between when a claim actually occurs and when it is reported and settled. This time lag is sometimes referred to as the “claim-tail.” During this period additional facts regarding coverages written in prior accident years, as well as about actual claims and trends, may become known and, as a result, may lead to adjustments of the related Loss Reserves. If the Company determines that an adjustment is appropriate, the adjustment is recorded in the accounting period in which such determination is made. Accordingly, should Loss Reserves need to be increased or decreased in the future from amounts currently established, future results of operations would be negatively or positively impacted respectively. The

Company authorizes managing general agents, general agents and other producers to write program business on the Company’s behalf within prescribed underwriting authorities. This delegated authority process introduces additional complexity to the actuarial determination of unpaid future losses and loss adjustment expenses. In order to monitor adherence to the underwriting guidelines given to such parties, the Company periodically performs underwriting and claims due diligence reviews.

In determining ultimate losses and loss adjustment expenses, the cost to indemnify claimants, provide needed legal defense and other services for insureds and administer the investigation and adjustment of claims are considered. These claim costs are influenced by many factors that change over time, such as expanded coverage definitions as a result of new court decisions, inflation in costs to repair or replace damaged property, inflation in the cost of medical services and legislated changes in statutory benefits, as well as by the particular, unique facts that pertain to each claim. As a result, the rate at which claims arose in the past and the costs to settle them may not always be representative of what will occur in the future. The factors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurred losses from historical trends are frequently subject to multiple and conflicting interpretations. Changes in coverage terms or claims handling practices may also cause future experience and/or development patterns to vary from the past. A key objective of actuaries in developing estimates of ultimate losses and loss adjustment expenses, and resulting IBNR reserves, is to identify aberrations and systemic changes occurring within historical experience and adjust for them so that the future can be projected more reliably. Because of the factors previously discussed, this process requires the substantial use of informed judgment and is inherently uncertain.

Although Loss Reserves are initially determined based on underwriting and pricing analyses, the Company’s insurance segment applies several generally accepted actuarial methods, as discussed below, on a quarterly basis to evaluate the Loss Reserves, in addition to the expected loss method, in particular for Loss Reserves from more mature accident years (the year in which a loss occurred). Each quarter, as part of the reserving process, the segments’ actuaries reaffirm that the assumptions used in the reserving process continue to form a sound basis for the projection of liabilities. If actual loss activity differs substantially from expectations based on historical information, an adjustment to Loss Reserves may be supported. The Company places more or less reliance on a particular actuarial method based on the facts and circumstances at the time the estimates of Loss Reserves are made.

These methods generally fall into one of the following categories or are hybrids of one or more of the following categories:

•Expected loss methods - these methods are based on the assumption that ultimate losses vary proportionately with premiums. Expected loss and loss adjustment expense ratios are typically developed based upon the information derived by underwriters and actuaries during the initial pricing of the business, supplemented by industry data available from organizations, such as statistical bureaus and consulting firms, where appropriate. These ratios consider, among other things, rate increases and changes in terms and conditions that have been observed in the market. Expected loss methods are useful for estimating ultimate losses and loss adjustment expenses in the early years of long-tailed lines of business, when little or no paid or incurred loss information is available, and is commonly applied when limited loss experience exists for a company.

•Historical incurred loss development methods - these methods assume that the ratio of losses in one period to losses in an earlier period will remain constant in the future. These methods use incurred losses (i.e., the sum of cumulative historical loss payments plus outstanding case reserves) over discrete periods of time to estimate future losses. Historical incurred loss development methods may be preferable to historical paid loss development methods because they explicitly take into account open cases and the claims adjusters’ evaluations of the cost to settle all known claims. However, historical incurred loss development methods necessarily assume that case reserving practices are consistently applied over time. Therefore, when there have been significant changes in how case reserves are established, using incurred loss data to project ultimate losses may be less reliable than other methods.

•Historical paid loss development methods - these methods, like historical incurred loss development methods, assume that the ratio of losses in one period to losses in an earlier period will remain constant. These methods use historical loss payments over discrete periods of time to estimate future losses and necessarily assume that factors that have affected paid losses in the past, such as inflation or the effects of litigation, will remain constant in the future. Because historical paid loss development methods do not use incurred losses to estimate ultimate losses, they may be more reliable than the other methods that use incurred losses in situations where there are significant changes in how incurred losses are established by a company’s claims adjusters. However, historical paid loss development methods are more leveraged (meaning that small changes in payments have a larger impact on estimates of ultimate losses) than

actuarial methods that use incurred losses because cumulative loss payments take much longer to equal the expected ultimate losses than cumulative incurred amounts. In addition, and for similar reasons, historical paid loss development methods are often slow to react to situations when new or different factors arise than those that have affected paid losses in the past.

•Adjusted historical paid and incurred loss development methods - these methods take traditional historical paid and incurred loss development methods and adjust them for the estimated impact of changes from the past in factors such as inflation, the speed of claim payments or the adequacy of case reserves. Adjusted historical paid and incurred loss development methods are often more reliable methods of predicting ultimate losses in periods of significant change, provided the actuaries can develop methods to reasonably quantify the impact of changes. As such, these methods utilize more judgment than historical paid and incurred loss development methods.

•Bornhuetter-Ferguson (“B-F”) paid and incurred loss methods - these methods utilize actual paid and incurred losses and expected patterns of paid and incurred losses, taking the initial expected ultimate losses into account to determine an estimate of expected ultimate losses. The B-F paid and incurred loss methods are useful when there are few reported claims and a relatively less stable pattern of reported losses.

•Frequency-Severity methods - These methods utilize actual paid and incurred claim experience, but break the data down into its component pieces: claim counts, often expressed as a ratio to exposure or premium (frequency), and average claim size (severity). The component pieces are projected to an ultimate level and multiplied together to result in an estimate of ultimate loss. These methods are especially useful when the severity of claims can be confined to a relatively stable range of estimated ultimate average claim value.

•Additional analyses - other methodologies are often used in the reserving process for specific types of claims or events, such as catastrophic or other specific major events. These include vendor catastrophe models, which are typically used in the estimation of Loss Reserves at the early stage of known catastrophic events before information has been reported to an insurer or reinsurer.

In the initial reserving process for short-tail insurance lines (consisting of property, energy, marine and aviation and other exposures including travel, accident and health, and warranty and lenders solutions), the Company relies on a combination of the reserving methods discussed above. For catastrophe-exposed business, the reserving process also includes the usage of catastrophe models for known events

and a heavy reliance on analysis of individual catastrophic events and management judgment. The development of losses on short-tail business can be unstable, especially for policies characterized by high severity, low frequency losses. As time passes, for a given accident year, additional weight is given to the paid and incurred B-F loss development methods and eventually to the historical paid and incurred loss development methods in the reserving process. The Company makes a number of key assumptions in their reserving process, including that historical paid and reported development patterns are stable, catastrophe models provide useful information about our exposure to catastrophic events that have occurred and underwriters’ judgment as to potential loss exposures can be relied on. The expected loss ratios used in the initial reserving process for short-tail business have varied over time due to changes in pricing, reinsurance structure, estimates of catastrophe losses, policy changes (such as attachment points, class and limits) and geographical distribution. As losses in short-tail lines are reported relatively quickly, expected loss ratios are selected for the current accident year based upon actual attritional loss ratios for earlier accident years, adjusted for rate changes, inflation, changes in reinsurance programs and expected attritional losses based on modeling. Furthermore, ultimate losses for short-tail business are known in a reasonably short period of time.

In the initial reserving process for medium-tail and long-tail insurance lines (consisting of third party occurrence business, third party claims made business, and other exposures including surety, programs and contract binding exposures), the Company primarily relies on the expected loss method. The development of the Company’s medium-tail and long-tail business may be unstable, especially if there are high severity major events, as a portion of the Company’s casualty business is in high excess layers. As time passes, for a given accident year, additional weight is given to the paid and incurred B-F loss development methods and historical paid and incurred loss development methods in the reserving process. The Company makes a number of key assumptions

in reserving for medium-tail and long-tail lines, including that the pricing loss ratio is the best estimate of the ultimate loss ratio at the time the policy is entered into, that the loss development patterns, which are based on a combination of company and industry loss development patterns and adjusted to reflect differences in the insurance segment’s mix of business, are reasonable and that claims personnel and underwriters analyses of our exposure to major events are assumed to be the best estimate of exposure to the known claims on those events. The expected loss ratios used in the initial reserving process for medium-tail and long-tail business for recent accident years have varied over time, in some cases significantly, from earlier accident years. As the credibility of historical experience for earlier accident years increases, the experience from these accident years will be given a greater weighting in the actuarial analysis to determine future accident year expected loss ratios, adjusted for changes in pricing, loss trends, terms and conditions and reinsurance structure.

From time to time, the Company enters into loss portfolio transfer and adverse development cover reinsurance agreements accounted for as retroactive reinsurance. These agreements transfer Loss Reserves and future favorable or adverse development on certain runoff programs and certain third party occurrence business, within multi-line and other specialty business (the “Covered Lines”). As incurred losses and allocated loss adjustment expenses for the Covered Lines are ceded to the reinsurer, the Company is not exposed to changes in the amount, timing and uncertainty of cash flows arising from the Covered Lines. To avoid distortion, the incurred losses and allocated loss adjustment expenses and cumulative paid losses and loss adjustment expenses for the Covered Lines are excluded entirely from the tables below. Unpaid loss and loss adjustment expenses recoverable at December 31, 2023 included $225 million related to such reinsurance agreements.

The following tables present information on the insurance segment’s short-duration insurance contracts:


Property, energy, marine and aviation (in millions except claim count)
Incurred losses and allocated loss adjustment expenses, net of reinsurance																					December 31, 2023
																					Total of IBNR liabilities plus expected development on reported claims		Cumulative number of reported claims
	Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited		2023
2014	$	148	$	146	$	147	$	136	$	132	$	134	$	135	$	135	$	134	$	133	$	2	3,871
2015			112		110		104		102		98		92		92		91		89		2		4,530
2016					104		101		105		100		96		92		88		88		—		6,171
2017							281		246		236		230		231		225		225		1		6,475
2018									181		186		174		170		170		172		5		5,077
2019											179		179		165		161		159		(1)		7,018
2020													359		329		336		333		9		8,212
2021															427		429		423		41		8,807
2022																	522		495		74		13,274
2023																			571		275		13,682
																	Total		$	2,688

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	$	26	$	54	$	78	$	84	$	88	$	98	$	115	$	122	$	123	$	125
2015			24		65		76		86		88		86		87		88		86
2016					25		83		98		97		95		91		87		87
2017							30		140		196		212		216		218		220
2018									30		102		135		143		150		154
2019											26		105		134		139		148
2020													56		194		251		293
2021															90		268		343
2022																	100		276
2023																			146
									Total										1,878
									All outstanding liabilities before 2014, net of reinsurance										14
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	824


Third party occurrence business (in millions except claim count)
	Incurred losses and allocated loss adjustment expenses, net of reinsurance																				December 31, 2023
																					Total of IBNR liabilities plus expected development on reported claims		Cumulative number of reported claims
	Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited		2023
2014	$	330	$	336	$	339	$	343	$	339	$	344	$	343	$	343	$	345	$	344	$	49	75,679
2015			359		392		399		392		391		382		386		379		377		66		78,689
2016					390		394		406		399		375		368		363		352		77		78,883
2017							417		418		422		412		407		406		405		100		84,687
2018									430		453		451		451		459		462		127		78,320
2019											456		487		481		471		470		154		86,139
2020													607		616		640		632		226		92,279
2021															622		663		659		290		92,672
2022																	688		726		513		92,564
2023																			877		750		72,833
																	Total		$	5,304

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	$	9	$	40	$	71	$	113	$	162	$	191	$	211	$	224	$	237	$	257
2015			11		45		88		139		182		212		227		249		268
2016					12		42		88		137		165		195		215		231
2017							13		52		100		135		165		221		247
2018									17		64		115		154		200		247
2019											18		73		122		173		214
2020													24		77		155		235
2021															26		91		174
2022																	24		85
2023																			32
									Total										1,990
									All outstanding liabilities before 2014, net of reinsurance										287
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	3,601


Third party claims-made business (in millions except claim count)
Incurred losses and allocated loss adjustment expenses, net of reinsurance																					December 31, 2023
																					Total of IBNR liabilities plus expected development on reported claims		Cumulative number of reported claims
	Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited		2023
2014	$	264	$	279	$	299	$	279	$	281	$	297	$	291	$	288	$	296	$	287	$	14	14,494
2015			259		277		276		260		255		252		268		267		274		13		13,932
2016					275		291		308		314		322		327		330		327		18		14,912
2017							270		286		312		308		323		317		338		48		15,473
2018									273		314		320		336		347		367		44		17,098
2019											289		317		317		322		330		66		15,879
2020													383		413		423		446		118		15,239
2021															515		518		499		254		16,323
2022																	669		655		448		18,563
2023																			811		641		20,494
																	Total		$	4,334

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	$	14	$	63	$	129	$	173	$	207	$	229	$	243	$	249	$	260	$	266
2015			9		52		100		126		174		193		217		221		242
2016					11		68		127		158		205		242		257		296
2017							9		68		113		143		196		233		258
2018									12		68		118		158		208		258
2019											12		65		122		155		197
2020													17		87		152		215
2021															23		90		163
2022																	25		100
2023																			64
									Total										2,059
									All outstanding liabilities before 2014, net of reinsurance										77
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	2,352


Multi-line and other specialty (in millions except claim count)
Incurred losses and allocated loss adjustment expenses, net of reinsurance																					December 31, 2023
																					Total of IBNR liabilities plus expected development on reported claims		Cumulative number of reported claims
	Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited		2023
2014	$	302	$	326	$	318	$	318	$	317	$	313	$	310	$	309	$	311	$	310	$	4	148,702
2015			335		358		357		365		357		349		347		345		345		5		180,468
2016					409		431		428		416		410		408		409		406		7		192,955
2017							482		501		491		501		504		513		516		9		235,539
2018									512		565		563		565		565		565		14		260,995
2019											567		612		640		651		657		21		252,766
2020													618		569		515		517		44		166,357
2021															635		619		614		76		114,447
2022																	678		642		157		143,264
2023																			817		450		118,241
																	Total		$	5,389

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	$	108	$	197	$	234	$	267	$	281	$	292	$	293	$	295	$	296	$	297
2015			138		236		278		306		321		327		330		331		333
2016					176		305		342		363		379		385		390		392
2017							181		342		381		423		446		472		480
2018									212		389		443		480		509		527
2019											212		386		487		549		577
2020													172		309		359		406
2021															157		335		428
2022																	177		371
2023																			254
									Total										4,065
									All outstanding liabilities before 2014, net of reinsurance										24
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	1,348

The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance, as of December 31, 2023:


	Average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
Property, energy, marine and aviation	20.5	%	43.7	%	18.1	%	6.0	%	2.2	%	1.0	%	2.6	%	1.9	%	(0.4)	%	1.5	%
Third party occurrence business	3.5	%	9.4	%	11.5	%	11.4	%	9.9	%	9.8	%	5.6	%	4.6	%	4.4	%	5.6	%
Third party claims-made business	4.1	%	15.5	%	16.5	%	11.1	%	14.3	%	10.1	%	6.3	%	5.2	%	5.7	%	2.0	%
Multi-line and other specialty	34.0	%	29.3	%	11.3	%	8.2	%	4.5	%	2.9	%	1.1	%	0.4	%	0.4	%	0.5	%

Reinsurance Segment

Loss Reserves for the Company’s reinsurance segment are comprised of (1) case reserves, (2) additional case reserves (“ACRs”) and (3) IBNR reserves. The Company receives reports of claims notices from ceding companies and records case reserves based upon the amount of reserves recommended by the ceding company. Case reserves may be supplemented by ACRs, which may be estimated by the Company’s claims personnel ahead of official notification from the ceding company, or when judgment regarding the size or severity of the known event differs from the ceding company. In certain instances, the Company establishes ACRs even when the ceding company does not report any liability on a known event. In addition, specific claim information reported by ceding companies or obtained through claim audits can alert the Company to emerging trends such as changing legal interpretations of coverage and liability, claims from unexpected sources or classes of business, and significant changes in the frequency or severity of individual claims. Such information is often used in the process of estimating IBNR reserves. IBNR reserves are established to provide for incurred claims which have not yet been reported at the balance sheet date as well as to adjust for any projected variance in case reserving. Actuaries estimate ultimate losses and loss adjustment expenses using various generally accepted actuarial methods applied to known losses and other relevant information. Like case reserves, IBNR reserves are adjusted as additional information becomes known or payments are made. The process of estimating Loss Reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain.

The estimation of Loss Reserves for the reinsurance segment is subject to the same risk factors as the estimation of Loss Reserves for the insurance segment. In addition, the inherent uncertainties of estimating such reserves are even greater for reinsurers, due primarily to the following factors: (1) the claim-tail for reinsurers is generally longer because claims are first reported to the ceding company and then to the reinsurer through one or more intermediaries, (2) the reliance on premium estimates, where reports have not been received from the ceding company, in the reserving process, (3) the potential for writing a number of reinsurance contracts with different ceding companies with the same exposure to a single loss event, (4) the diversity of loss development

patterns among different types of reinsurance contracts, (5) the necessary reliance on the ceding companies for information regarding reported claims and (6) the differing reserving practices among ceding companies.

Ultimate losses and loss adjustment expenses are generally determined by projection of claim emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future. As with the insurance segment, the process of estimating Loss Reserves for the reinsurance segment involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain. As discussed above, such uncertainty is greater for reinsurers compared to insurers. As a result, our reinsurance operations obtain information from numerous sources to assist in the process. Pricing actuaries from the reinsurance segment devote considerable effort to understanding and analyzing a ceding company’s operations and loss history during the underwriting of the business, using a combination of ceding company and industry statistics. Such statistics normally include historical premium and loss data by class of business, individual claim information for larger claims, distributions of insurance limits provided, loss reporting and payment patterns, and rate change history. This analysis is used to project expected loss ratios for each treaty during the upcoming contract period.

As mentioned above, there can be a considerable time lag from the time a claim is reported to a ceding company to the time it is reported to the reinsurer. The lag can be several years in some cases and may be attributed to a number of reasons, including the time it takes to investigate a claim, delays associated with the litigation process, the deterioration in a claimant’s physical condition many years after an accident occurs, the case reserving approach of the ceding company, etc. In the reserving process, the Company assumes that such lags are predictable, on average, over time and therefore the lags are contemplated in the loss reporting patterns used in their actuarial methods. This means that the reinsurance segment must rely on estimates for a longer period of time than does an insurance company. Backlogs in the recording of assumed reinsurance can also complicate the accuracy of loss reserve estimation. As of December 31, 2023 there were no significant backlogs related to the processing of assumed reinsurance information at our reinsurance operations.

The reinsurance segment relies heavily on information reported by ceding companies, as discussed above. In order to determine the accuracy and completeness of such information, underwriters, actuaries, and claims personnel often perform audits of ceding companies and regularly review information received from ceding companies for unusual or unexpected results. Material findings are usually discussed with the ceding companies. The Company sometimes encounters situations where they determine that a claim presentation from a ceding company is not in accordance with contract terms. In these situations, the Company attempts to resolve the dispute with the ceding company. Most situations are resolved amicably and without the need for litigation or arbitration. However, in the infrequent situations where a resolution is not possible, the Company will vigorously defend its position in such disputes.

Although Loss Reserves are initially determined based on underwriting and pricing analysis, the Company applies several generally accepted actuarial methods, as discussed above, on a quarterly basis to evaluate its Loss Reserves in addition to the expected loss method, in particular for reserves from more mature underwriting years (the year in which business is underwritten). Each quarter, as part of the reserving process, the Company’s actuaries reaffirm that the assumptions used in the reserving process continue to form a sound basis for projection of liabilities. If actual loss activity differs substantially from expectations based on historical information, an adjustment to Loss Reserves may be supported. Estimated Loss Reserves for more mature underwriting years are now based more on actual loss activity and historical patterns than on the initial assumptions based on pricing indications. More recent underwriting years rely more heavily on internal pricing assumptions. The Company places more or less reliance on a particular actuarial method based on the facts and circumstances at the time the estimates of Loss Reserves are made.

In the initial reserving process for short-tail reinsurance lines (consisting of property excluding property catastrophe and property catastrophe exposures), the Company relies on a combination of the reserving methods discussed above. For known catastrophic events, the reserving process also includes the usage of catastrophe models and a heavy reliance on analysis which includes ceding company inquiries and management judgment. The development of property losses may be unstable, especially where there is high catastrophic exposure, may be characterized by high severity, low frequency losses for excess and catastrophe-exposed business and may be highly correlated across contracts. As time passes, for a given underwriting year, additional weight is given to the paid and incurred B-F loss development methods and historical paid and incurred loss development

methods in the reserving process. The Company makes a number of key assumptions in reserving for short-tail lines, including that historical paid and reported development patterns are stable, catastrophe models provide useful information about our exposure to catastrophic events that have occurred and our underwriters’ judgment and guidance received from ceding companies as to potential loss exposures may be relied on. The expected loss ratios used in the initial reserving process for property exposures have varied over time due to changes in pricing, reinsurance structure, estimates of catastrophe losses, terms and conditions and geographical distribution. As losses in property lines are reported relatively quickly, expected loss ratios are selected for the current underwriting year incorporating the experience for earlier underwriting years, adjusted for rate changes, inflation, changes in reinsurance programs, expectations about present and future market conditions and expected attritional losses based on modeling. Due to the short-tail nature of property business, reported loss experience emerges quickly and ultimate losses are known in a reasonably short period of time.

In the initial reserving process for medium-tail and long-tail reinsurance lines (consisting of casualty, other specialty, marine and aviation and other exposures), the Company primarily relies on the expected loss method. The development of medium-tail and long-tail business may be unstable, especially if there are high severity major events, with business written on an excess of loss basis typically having a longer tail than business written on a pro rata basis. As time passes, for a given underwriting year, additional weight is given to the paid and incurred B-F loss development methods and eventually to the historical paid and incurred loss development methods in the reserving process. Our reinsurance operations make a number of key assumptions in reserving for medium-tail and long-tail lines, including that the pricing loss ratio is the best estimate of the ultimate loss ratio at the time the contract is entered into, historical paid and reported development patterns are stable and claims personnel and underwriters’ analyses of our exposure to major events are our best estimate of our exposure to the known claims on those events. The expected loss ratios used in our reinsurance operations’ initial reserving process for medium-tail and long-tail contracts have varied over time due to changes in pricing, terms and conditions and reinsurance structure. As the credibility of historical experience for earlier underwriting years increases, the experience from these underwriting years is used in the actuarial analysis to determine future underwriting year expected loss ratios, adjusted for changes in pricing, loss trends, terms and conditions and reinsurance structure.

The following tables present information on the reinsurance segment’s short-duration insurance contracts:


Casualty (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance																					December 31, 2023
																					Total of IBNR liabilities plus expected development on reported claims		Cumulative number of reported claims
	Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited		2023
2014	$	215	$	220	$	217	$	230	$	227	$	237	$	237	$	234	$	234	$	241	$	33	N/A
2015			220		219		228		235		239		246		249		251		260		44		N/A
2016					212		224		247		262		269		268		272		281		45		N/A
2017							267		254		270		297		309		316		330		53		N/A
2018									276		289		281		286		298		308		50		N/A
2019											330		341		367		379		400		84		N/A
2020													382		371		354		372		163		N/A
2021															439		434		425		205		N/A
2022																	547		527		390		N/A
2023																			657		568		N/A
																	Total		$	3,801

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	$	4	$	16	$	41	$	63	$	91	$	114	$	134	$	145	$	153	$	160
2015			4		20		47		71		96		120		137		152		170
2016					6		26		52		87		113		132		157		172
2017							6		30		64		113		137		164		189
2018									8		31		106		129		155		182
2019											16		58		97		130		219
2020													18		50		90		132
2021															15		53		102
2022																	18		61
2023																			18
																	Total		1,405
									All outstanding liabilities before 2014, net of reinsurance										310
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	2,706


Property catastrophe (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance																					December 31, 2023
																					Total of IBNR liabilities plus expected development on reported claims		Cumulative number of reported claims
	Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited		2023
2014	$	44	$	30	$	25	$	22	$	20	$	20	$	19	$	19	$	19	$	19	$	—	N/A
2015			33		18		12		6		4		3		3		3		3		—		N/A
2016					24		17		13		9		7		6		5		5		1		N/A
2017							86		54		50		36		24		21		22		(1)		N/A
2018									71		49		30		17		8		5		3		N/A
2019											20		10		9		1		(7)		2		N/A
2020													269		333		337		326		17		N/A
2021															314		308		294		13		N/A
2022																	303		295		41		N/A
2023																			267		76		N/A
																	Total		$	1,229

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	$	14	$	20	$	18	$	19	$	18	$	19	$	19	$	19	$	19	$	19
2015			(3)		(2)		2		2		2		2		2		2		2
2016					(7)		2		2		3		2		3		3		3
2017							31		32		37		27		14		16		17
2018									27		5		16		(13)		(11)		(9)
2019											4		7		11		(14)		(13)
2020													56		158		207		249
2021															65		171		222
2022																	70		169
2023																			9
																	Total		668
									All outstanding liabilities before 2014, net of reinsurance										2
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	563


Property excluding property catastrophe (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance																					December 31, 2023
																					Total of IBNR liabilities plus expected development on reported claims		Cumulative number of reported claims
	Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited		2023
2014	$	142	$	117	$	98	$	90	$	88	$	84	$	82	$	80	$	79	$	79	$	—	N/A
2015			214		188		184		188		187		176		173		167		167		4		N/A
2016					175		145		137		135		139		136		130		130		6		N/A
2017							268		250		237		230		214		206		202		7		N/A
2018									224		239		235		212		202		203		7		N/A
2019											216		206		195		190		190		3		N/A
2020													368		340		320		320		15		N/A
2021															545		497		491		38		N/A
2022																	742		668		119		N/A
2023																			835		414		N/A
																	Total		$	3,285

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	$	23	$	62	$	71	$	76	$	78	$	78	$	78	$	78	$	78	$	78
2015			75		119		149		160		165		159		159		159		160
2016					33		94		98		104		111		114		115		115
2017							28		125		156		164		179		182		186
2018									30		108		152		167		175		177
2019											43		124		150		162		169
2020													101		207		243		267
2021															136		270		364
2022																	143		361
2023																			152
																	Total		2,029
									All outstanding liabilities before 2014, net of reinsurance										5
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	1,261


Marine and aviation (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance																					December 31, 2023
																					Total of IBNR liabilities plus expected development on reported claims		Cumulative number of reported claims
	Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited		2023
2014	$	31	$	29	$	27	$	25	$	23	$	23	$	22	$	22	$	19	$	18	$	—	N/A
2015			33		37		32		31		30		28		27		25		24		1		N/A
2016					27		23		23		19		17		15		12		11		3		N/A
2017							29		26		24		21		20		17		15		3		N/A
2018									27		26		24		24		21		21		3		N/A
2019											48		55		60		61		62		9		N/A
2020													83		76		79		80		10		N/A
2021															110		96		81		18		N/A
2022																	126		138		59		N/A
2023																			161		127		N/A
																	Total		$	611

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	$	4	$	8	$	11	$	12	$	15	$	15	$	16	$	16	$	17	$	17
2015			—		13		19		21		22		22		22		22		22
2016					(7)		(2)		—		3		6		7		7		7
2017							2		6		9		11		12		12		12
2018									2		7		11		13		14		15
2019											11		21		29		35		43
2020													9		26		42		60
2021															8		24		45
2022																	12		37
2023																			13
																	Total		271
									All outstanding liabilities before 2014, net of reinsurance										17
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	357


Other specialty (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance																					December 31, 2023
																					Total of IBNR liabilities plus expected development on reported claims		Cumulative number of reported claims
	Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited		2023
2014	$	337	$	316	$	318	$	312	$	307	$	308	$	304	$	298	$	296	$	295	$	1	N/A
2015			280		278		276		273		273		270		259		258		255		3		N/A
2016					326		323		316		307		314		309		306		307		6		N/A
2017							398		390		372		372		370		366		363		15		N/A
2018									416		409		404		428		424		423		29		N/A
2019											427		406		400		395		405		40		N/A
2020													593		524		519		539		61		N/A
2021															610		611		613		80		N/A
2022																	953		935		225		N/A
2023																			1,348		817		N/A
																	Total		$	5,483

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	$	96	$	186	$	229	$	248	$	258	$	271	$	275	$	278	$	280	$	282
2015			83		162		197		211		224		236		239		240		241
2016					108		205		242		261		277		283		289		293
2017							136		256		298		313		326		337		346
2018									130		276		315		336		353		376
2019											121		211		277		303		325
2020													134		293		370		405
2021															152		311		432
2022																	182		464
2023																			244
																	Total		3,408
									All outstanding liabilities before 2014, net of reinsurance										19
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	2,094

The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance, as of December 31, 2023:


	Average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
Casualty	2.8	%	7.7	%	12.1	%	10.4	%	11.4	%	8.5	%	7.8	%	5.3	%	5.2	%	2.9	%
Property catastrophe	56.0	%	(17.5)	%	47.2	%	(41.9)	%	(6.2)	%	10.9	%	2.4	%	1.1	%	(1.7)	%	—	%
Property excluding property catastrophe	25.0	%	38.2	%	14.2	%	6.0	%	4.4	%	0.2	%	0.7	%	0.1	%	0.4	%	0.4	%
Marine and aviation	3.0	%	28.8	%	20.0	%	13.0	%	10.6	%	3.4	%	2.2	%	1.0	%	3.8	%	0.4	%
Other specialty	28.6	%	29.9	%	13.9	%	5.7	%	4.5	%	3.9	%	1.7	%	0.9	%	0.6	%	1.0	%

Mortgage Segment

The Company’s mortgage segment includes (1) U.S. primary mortgage insurance (2) U.S. credit risk transfer and other, and (3) international mortgage insurance and reinsurance. The latter two categories along with second lien and student loan exposures are excluded on the basis of insignificance for the purposes of presenting disclosures related to short duration contracts.

For primary mortgage insurance business, the Company establishes case reserves for loans that have been reported as delinquent by loan servicers as well as those that are delinquent but not reported (IBNR reserves). The Company also reserves for the expenses of adjusting claims related to these delinquencies. The trigger that creates a case reserve estimate is that an insured loan is reported to us as being two payments in arrears. The actuarial reviews and

documentation created in the reserving process are completed in accordance with generally accepted actuarial standards. The selected assumptions reflect actuarial judgment based on the analysis of historical data and experience combined with information concerning current underwriting, economic, judicial, regulatory and other influences on ultimate claim settlements.

Because the reserving process requires the Company to forecast future conditions, it is inherently uncertain and requires significant judgment and estimation. The use of different estimates would result in the establishment of different reserve levels. Additionally, changes in estimates are likely to occur from period to period as economic conditions change, and the ultimate liability may vary significantly from the estimates used. Major risk factors include (but are not limited to) changes in home prices and borrower equity, which can limit the borrower’s ability to sell

the property and satisfy the outstanding loan balance, and changes in unemployment, which can affect the borrower’s income and ability to make mortgage payments. The unique nature of the COVID-19 pandemic, with no historical precedent, adds further uncertainty to current reserve estimates.

The lead actuarial methodology used by the Company is a frequency-severity method based on the inventory of pending delinquencies. Each month the loan servicers report the delinquency status of each insured loan. Using the frequency-severity method allows the Company to take advantage of its knowledge of the number of delinquent loans and the coverage provided (“risk size”) on those loans by directly relating the reserves to these amounts. The delinquencies are grouped into homogeneous cohorts for analysis, reflecting the age of delinquency. A claim rate is then developed for each cohort which represents the frequency with which the delinquencies become claims. The claim frequency rates are based on an analysis of the patterns of emerging cure counts and claim counts, the foreclosure status of the pending delinquencies, the product and geographical mix of the delinquencies and our view of future economic and claim conditions, which include trends in home prices and unemployment. Claim rates can vary materially by age of delinquency, depending on the mix of delinquencies and economic conditions.

Claim size severity estimates are determined by examining the risk sizes on the delinquent loans and estimating the portion of risk that will be paid, as well as any expenses. This is done based on a review of historical development patterns, an assessment of economic conditions and the level of equity the borrowers may have in their homes, as well as considering economic conditions and loss mitigation opportunities. Mortgage insurance is generally not subject to large claim sizes, as with some other lines of insurance. A

claim size over $250,000 is rare, and this helps reduce the volatility of claim size estimates.

The claim rate and claim size assumptions generate case reserves for the population of reported delinquencies. The reserve for unreported delinquencies (included in IBNR reserves) is estimated by looking at historical patterns of reporting. Claim rates and claim sizes can then be assigned to estimated unreported delinquencies using assumptions made in the establishment of case reserves.

Mortgage insurance Loss Reserves are short-tail, in the sense that the vast majority of delinquencies are resolved within two years of being reported. Due to the forbearances and foreclosure moratoriums associated with COVID-19, settlement timelines have been extended. While reserves are initially analyzed by reserve cohort, as described above, they are also rolled up by underwriting year to ensure that reserve assumptions are consistent with the performance of the underwriting year. The accuracy of prior reserve assumptions is also checked in hindsight to determine if adjustments to the assumptions are needed.

Loss Reserves for the Company’s mortgage reinsurance business and GSE credit risk sharing transactions are comprised of case reserves and IBNR reserves. The Company’s mortgage reinsurance operations receive reports of delinquent loans and claims notices from ceding companies and record case reserves based upon the amount of reserves recommended by the ceding company. In addition, specific claim and delinquency information reported by ceding companies is used in the process of estimating IBNR reserves.

The following table presents information on the mortgage segment’s short-duration insurance contracts:


U.S. primary mortgage insurance (in millions except claim count)
Incurred losses and allocated loss adjustment expenses, net of reinsurance																							December 31, 2023
																								Total of IBNR liabilities plus expected development on reported claims	Cumulative number of paid claims
Year ended December 31,
Accident year	2014 unaudited		2015 unaudited		2016 unaudited		2017 unaudited		2018 unaudited		2019 unaudited		2020 unaudited		2021 unaudited		2022 unaudited				2023
2014	$	316	$	297	$	279	$	266	$	266	$	261	$	263	$	263	$	261			$	259		—	6,332
2015			223		197		198		195		189		191		191		189				188			—	4,588
2016					184		171		149		141		142		142		137				136			—	3,462
2017							179		132		107		108		109		102				99			—	2,541
2018									132		96		89		88		72				69			—	1,763
2019											108		119		110		63				51			—	1,149
2020													420		374		78				33			—	492
2021															144		77				20			—	211
2022																	173				55			—	135
2023																					182			1	9
																	Total				$	1,092

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2014	20		129		202		234		247		254		256		257		257				258
2015			16		92		151		171		180		183		184		185				186
2016					11		72		113		127		131		132		132				133
2017							9		48		79		87		90		92				93
2018									4		31		50		56		59				60
2019											3		20		29		34				39
2020													1		4		8				13
2021															—		2				5
2022																	—				3
2023																					—
																	Total				790
									All outstanding liabilities before 2014, net of reinsurance										8
							Liabilities for losses and loss adjustment expenses, net of reinsurance												$	310

The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance, as of December 31, 2023:


Average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
U.S. Primary	5.1	%	29.1	%	24.2	%	10.7	%	4.7	%	1.8	%	0.7	%	0.5	%	0.2	%	0.1	%

The following table represents a reconciliation of the disclosures of net incurred and paid loss development tables to the reserve for losses and loss adjustment expenses at December 31, 2023:


	December 31, 2023
Net outstanding liabilities
Insurance
Property, energy, marine and aviation	$	824
Third party occurrence business	3,601
Third party claims-made business	2,352
Multi-line and other specialty	1,348
Reinsurance
Casualty	2,706
Property catastrophe	563
Property excluding property catastrophe	1,261
Marine and aviation	357
Other specialty	2,094
Mortgage
U.S. primary	310
Other short duration lines not included in disclosures	284
Total for short duration lines	15,700

Unpaid losses and loss adjustment expenses recoverable
Insurance
Property, energy, marine and aviation	359
Third party occurrence business	2,025
Third party claims-made business	1,001
Multi-line and other specialty	246
Reinsurance
Casualty	738
Property catastrophe	519
Property excluding property catastrophe	239
Marine and aviation	240
Other specialty	828
Mortgage
U.S. primary	33
Other short duration lines not included in disclosures (1)	468
Intercompany eliminations	(6)
Total for short duration lines	6,690

Lines other than short duration	132
Discounting	(66)
Unallocated claims adjustment expenses	296
	362

Reserve for losses and loss adjustment expenses	$	22,752

(1) Includes unpaid loss and loss adjustment expenses recoverable of $225 million related to the loss portfolio transfer reinsurance agreements.