Unpaid Losses And Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2023

Liability for Unpaid Claims and Claims Adjustment Expense, Incurred Claims [Abstract]

Unpaid Losses And Loss Adjustment Expenses

Unpaid Losses and Loss Adjustment Expenses

The following table presents a reconciliation of consolidated beginning and ending reserves for losses and loss adjustment expenses.


	Nine Months Ended September 30,
(dollars in thousands)	2023		2022
Gross reserves for losses and loss adjustment expenses, beginning of year	$	20,947,898	$	18,178,894
Reinsurance recoverables on unpaid losses, beginning of year	7,994,884		6,876,317
Net reserves for losses and loss adjustment expenses, beginning of year	12,953,014		11,302,577
Effect of foreign currency rate changes on beginning of year balance	16,246		(275,364)
Adjusted net reserves for losses and loss adjustment expenses, beginning of year	12,969,260		11,027,213
Incurred losses and loss adjustment expenses:
Current accident year	3,934,969		3,420,906
Prior accident years	(169,754)		(204,411)
Total incurred losses and loss adjustment expenses	3,765,215		3,216,495
Payments:
Current accident year	419,998		350,684
Prior accident years	2,018,199		1,880,471
Total payments	2,438,197		2,231,155
Effect of foreign currency rate changes on current year activity	416		(7,499)
Change in net reserves for losses and loss adjustment expenses of Markel CATCo Re (see note 11)	(146,895)		375,222
Reinsurance recoverable for retroactive reinsurance transaction	(125,067)		—

Net reserves for losses and loss adjustment expenses, end of period	14,024,732		12,380,276
Reinsurance recoverables on unpaid losses	8,119,634		7,814,098
Gross reserves for losses and loss adjustment expenses, end of period	$	22,144,366	$	20,194,374

For the nine months ended September 30, 2023, current accident year losses and loss adjustment expenses included $46.2 million of net losses and loss adjustment expenses attributed to the Hawaiian wildfires and Hurricane Idalia (2023 Catastrophes). The net losses and loss adjustment expenses attributed to the 2023 Catastrophes as of September 30, 2023 represent the Company's best estimate based upon information currently available. The estimate for these losses is based on preliminary industry loss estimates and output from industry, broker and proprietary models, as well as policy level reviews. This estimate is based on various assumptions about coverage and liability and is therefore subject to change. While the Company believes its net reserves for the 2023 Catastrophes as of September 30, 2023 are adequate, it continues to closely monitor reported claims and may adjust the estimate of net losses as new information becomes available.

During 2023, the Company also recognized losses on its intellectual property collateral protection insurance product written within the Insurance segment's professional liability product line. These losses reflect higher than anticipated levels of claims and loss experience, as well as the recognition of $25.0 million of credit losses in connection with a $50.0 million fraudulent letter of credit that was provided by an affiliate of Vesttoo Ltd. as collateral for reinsurance purchased on one of the policies that resulted in a claim during the quarter. An affiliate of Vesttoo Ltd. is also the counterparty to a second ceded reinsurance contract on this product line with an aggregate limit of $77.8 million for which the underlying letter of credit was also deemed to be fraudulent. Although a loss has not yet been incurred under this policy, the Company believes the potential for a covered loss event is reasonably possible. The Company is actively pursuing remedies to make recoveries on the reinsurance recoverable impacted by the fraudulent letter of credit and to mitigate the potential for additional losses resulting from the second fraudulent letter of credit if a claim is made under the related contract. The Company does not have any other ceded reinsurance contracts with Vesttoo Ltd. or its affiliates.

For the nine months ended September 30, 2023, prior accident years losses and loss adjustment expenses included $169.8 million of favorable development on prior years loss reserves, which included $239.8 million of favorable development on the Company's professional liability, property, marine and energy, workers' compensation and personal lines product lines within its Insurance segment and $34.1 million of favorable development on the Company's professional liability and property product lines within its Reinsurance segment. Favorable development on prior years loss reserves for the nine months ended September 30, 2023 was partially offset by $70.5 million of adverse development on the Company's general liability product lines within its Insurance segment and $60.9 million of adverse development on the Company's public entity and general liability product lines within its Reinsurance segment.

In March 2023, the Company completed a retroactive reinsurance transaction to cede its portfolio of policies comprised of liabilities for its run-off book of United Kingdom motor casualty business in exchange for payments totaling $125.1 million, which approximated the carrying value of the Company's reserves for losses and loss adjustment expenses on the ceded policies.

For the nine months ended September 30, 2022, current accident year losses and loss adjustment expenses included $70.0 million and $35.0 million of net losses and loss adjustment expenses attributed to Hurricane Ian and the Russia-Ukraine conflict, respectively.

For the nine months ended September 30, 2022, prior accident years losses and loss adjustment expenses included $204.4 million of favorable development on prior years loss reserves, which included $155.0 million of favorable development on the Company's workers' compensation, property, marine and energy and programs product lines within the Insurance segment and $41.7 million of favorable development on the Company's property and credit and surety product lines within its Reinsurance segment.