XML 129 R10.htm IDEA: XBRL DOCUMENT

Reserve For Losses, LAE And Future Policy Benefit Reserve

12 Months Ended

Dec. 31, 2019

Reserve For Losses LAE And Future Policy Benefit Reserve [Abstract]

Reserve For Losses LAE And Future Policy Benefit Reserve

3. RESERVE FOR LOSSES, LAE AND FUTURE POLICY BENEFIT RESERVE

Reserves for losses and LAE.

Activity in the reserve for losses and LAE is summarized for the periods indicated:

	Years Ended December 31,
(Dollars in thousands)	2019		2018		2017
Gross reserves beginning of period	$	13,119,090	$	11,884,321		10,312,313
Less reinsurance recoverables		(1,619,641)		(1,212,649)		(990,862)
Net reserves beginning of period		11,499,449		10,671,672		9,321,451

Incurred related to:
Current year		4,986,456		5,264,327		4,815,967
Prior years		(63,558)		387,076		(293,386)
Total incurred losses and LAE		4,922,898		5,651,403		4,522,581

Paid related to:
Current year		2,042,246		1,700,765		1,280,605
Prior years		2,460,825		3,011,175		2,062,634
Total paid losses and LAE		4,503,071		4,711,940		3,343,239

Foreign exchange/translation adjustment		51,325		(111,686)		170,879

Net reserves end of period		11,970,601		11,499,449		10,671,672
Plus reinsurance recoverables		1,640,712		1,619,641		1,212,649
Gross reserves end of period	$	13,611,313	$	13,119,090		11,884,321

(Some amounts may not reconcile due to rounding.)

Current year incurred losses were $4,986,456 thousand, $5,264,327 thousand and $4,815,967 thousand at December 31, 2019, 2018 and 2017, respectively. The decrease in current year incurred losses from 2018 to 2019 was primarily due to $693,458 thousand of lower catastrophe losses in 2019 compared to 2018, partially offset by $415,585 thousand of additional attritional losses related to higher premiums earned in 2019 compared to 2018.

Incurred prior years losses decreased by $63,558 thousand in 2019, increased by $387,076 thousand in 2018 and decreased by $293,386 thousand in 2017. The decrease for 2019 primarily related to reserve reductions associated short-tail lines of business and worker’s compensation.

The increase for 2018 was mainly due to $561,197 thousand of adverse development on prior years catastrophe losses, primarily related to Hurricanes Harvey, Irma and Maria, as well as the 2017 California wildfires. The

increase in loss estimates for Hurricanes Harvey, Irma and Maria was mostly driven by re-opened claims, loss inflation from higher than expected loss adjustment expenses and in particular, their impact on aggregate covers. This reserve increase was partially offset by $174,121 thousand of favorable development on prior years attritional losses which mainly related to U.S. and international property and casualty reinsurance business, as well as favorable development in the Insurance segment which largely related to workers’ compensation business.

The decrease for 2017 was attributable to favorable development in the reinsurance segments of $238,378 thousand, related primarily to property and short-tail business in the U.S. and Bermuda as well as favorable development on prior year catastrophe losses, partially offset by $37,137 thousand of adverse development on A&E reserves. The insurance segment also experienced favorable development on prior year reserves of $55,007 thousand mainly on its workers compensation business, which is largely written in California.

The following is information about incurred and paid claims development as of December 31, 2019, net of reinsurance, as well as cumulative claim frequency and the total of incurred but not reported liabilities (IBNR) plus expected development on reported claims included within the net incurred claims amounts. Each of the Company’s financial reporting segments has been disaggregated into casualty and property business. The casualty and property segregation results in groups that have homogeneous loss development characteristics and are large enough to represent credible trends. Generally, casualty claims take longer to be reported and settled, resulting in longer payout patterns and increased volatility. Property claims on the other hand, tend to be reported and settled quicker and therefore tend to exhibit less volatility. The property business is more exposed to catastrophe losses, which can result in year over year fluctuations in incurred claims depending on the frequency and severity of catastrophes claims in any one accident year.

The information about incurred and paid claims development for the years ended December 31, 2012 to December 31, 2018 is presented as supplementary information.

These tables present eight years of incurred and paid claims development as it is impracticable to retrospectively create the tables for ten years. For the reinsurance groups, for the years prior to 2012, the total of IBNR plus expected development on reported claims was not prepared on an accident year basis. The Company calculated these IBNR amounts in the aggregate for each business unit in total as of prior year end points in time. While business written in the United States would have been allocated to accident year for regulatory reporting purposes, business written outside of the United States would not have been similarly allocated. Attempting to allocate the non-U.S. business IBNR reserves to accident year currently for older year end valuations would require making assumptions and estimates which may not be in line with assumptions that would have been made at the time. A similar situation applies to insurance where the accumulation of the business lines reported in the regulatory filings are not consistent with the breakout of the tables presented below. As a result of not being able to present the information prior to 2012, prospectively an additional year will be added to the tables each reporting year until a ten year table is presented.

The Cumulative Number of Reported Claims is shown only for Insurance Casualty as it is impracticable to provide the information for the remaining groups. The reinsurance groups each include pro rata contracts for which ceding companies provide only summary information via a bordereau. This summary information does not include the number of reported claims underlying the paid and reported losses. Therefore, it is not possible to provide this information. The Insurance Property group includes Accident & Health insurance business. This business is written via a master contract and individual claim counts are not provided. This business represents a significant enough portion of the business in the Insurance Property group so that including the number of reported claims for the remaining business would distort any analytics performed on the group.

The Cumulative Number of Reported Claims shown for the Insurance Casualty is determined by claim and line of business. For example, a claim event with three claimants in the same line of business is a single claim. However, a claim event with a single claimant that spans two lines of business contributes two claims.

The following tables present the ultimate loss and ALAE and the paid loss and ALAE, net of reinsurance for casualty and property, as well as the average annual percentage payout of incurred claims by age, net of reinsurance for each of our disclosed lines of business.

U.S. Reinsurance – Casualty Business

																	At December 31, 2019
																	Total of
																	IBNR Liabilites
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																Plus Expected
	Years Ended December 31,																Development		Cumulative
	2012		2013		2014		2015		2016		2017		2018		2019		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	401,018	$	395,794	$	329,084	$	325,134	$	321,099	$	320,958	$	324,139	$	312,483		1,539		N/A
2013				310,935		388,323		385,643		388,287		372,409		362,781		355,118		3,851		N/A
2014						367,492		383,657		392,379		375,404		357,608		351,033		2,232		N/A
2015								326,346		354,265		352,983		350,790		337,332		10,184		N/A
2016										330,362		354,822		355,804		343,004		56,353		N/A
2017												346,836		347,147		342,896		105,550		N/A
2018														484,218		472,532		259,800		N/A
2019																767,529		488,182		N/A
															$	3,281,926

(Some amounts may not reconcile due to rounding.)

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	9,986	$	38,496	$	82,995	$	143,510	$	187,286	$	218,653	$	272,046	$	286,409
2013				14,842		48,929		108,801		170,868		211,273		285,756		310,168
2014						18,809		54,255		110,249		164,552		254,077		294,533
2015								19,902		53,621		107,458		206,397		257,511
2016										18,927		58,310		137,219		193,804
2017												25,800		73,023		142,335
2018														63,140		104,690
2019																103,453
															$	1,692,901
All outstanding liabilities prior to 2012, net of reinsurance																607,385
Liabilities for claims and claim adjustment expenses, net of reinsurance															$	2,196,410

(Some amounts may not reconcile due to rounding.)

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8
Casualty	8.4	%	10.3	%	17.7	%	19.6	%	16.6	%	14.4	%	11.7	%	4.6	%

U.S. Reinsurance – Property Business

																	At December 31, 2019
																	Total of
																	IBNR Liabilites
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																Plus Expected
	Years Ended December 31,																Development		Cumulative
	2012		2013		2014		2015		2016		2017		2018		2019		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	937,720	$	723,851	$	723,151	$	715,961	$	713,237	$	706,782	$	692,079	$	694,576		1,112		N/A
2013				622,108		405,338		352,687		314,637		310,942		308,557		310,199		1,099		N/A
2014						603,258		516,189		437,409		402,129		396,641		397,683		2,674		N/A
2015								673,913		534,178		476,348		451,694		456,195		5,655		N/A
2016										972,881		816,765		797,339		788,551		10,293		N/A
2017												1,564,165		2,117,747		2,231,384		16,538		N/A
2018														1,728,705		1,572,138		88,063		N/A
2019																970,831		329,576		N/A
															$	7,421,556

(Some amounts may not reconcile due to rounding.)

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				(unaudited)
(Dollars in thousands)
2012	$	242,315	$	402,305	$	520,244	$	598,289	$	621,013	$	646,572	$	651,550	$	666,768
2013				234,464		250,850		269,014		289,130		296,074		300,708		302,756
2014						189,598		289,430		338,030		362,825		373,060		375,988
2015								225,655		320,310		378,235		405,614		419,757
2016										291,462		582,985		681,502		735,678
2017												545,551		1,422,328		1,744,822
2018														409,225		1,064,431
2019																568,556
															$	5,878,758
All outstanding liabilities prior to 2012, net of reinsurance																29,929
Liabilities for claims and claim adjustment expenses, net of reinsurance															$	1,572,727

(Some amounts may not reconcile due to rounding.)

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8
Property	36.5	%	34.0	%	13.6	%	7.7	%	2.9	%	2.4	%	0.7	%	2.2	%

International – Casualty Business

																	At December 31, 2019
																	Total of
																	IBNR Liabilites
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																Plus Expected
	Years Ended December 31,																Development		Cumulative
	2012		2013		2014		2015		2016		2017		2018		2019		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	224,614	$	146,421	$	135,234	$	135,230	$	117,350	$	118,941	$	116,283		101,872		6,225		N/A
2013				184,497		168,277		164,973		144,869		141,645		138,355		130,124		13,641		N/A
2014						195,753		187,451		168,865		166,576		166,605		158,117		27,302		N/A
2015								193,714		179,392		172,811		172,061		167,290		30,299		N/A
2016										184,267		180,284		177,979		178,255		46,648		N/A
2017												191,492		139,214		150,276		48,308		N/A
2018														309,673		319,752		148,582		N/A
2019																291,237		189,506		N/A
															$	1,496,922

(Some amounts may not reconcile due to rounding.)

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	18,875	$	30,090	$	46,015	$	56,420	$	66,234	$	76,921	$	83,253	$	88,278
2013				17,865		41,481		54,619		67,605		75,964		86,851		95,799
2014						25,910		44,805		62,508		73,955		86,607		99,522
2015								24,237		48,806		69,674		82,465		96,180
2016										26,446		50,824		70,108		87,191
2017												26,541		52,774		77,614
2018														57,962		97,222
2019																52,808
															$	694,615
All outstanding liabilities prior to 2012, net of reinsurance																116,104
Liabilities for claims and claim adjustment expenses, net of reinsurance															$	918,411

(Some amounts may not reconcile due to rounding.)

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8
Casualty	16.7	%	13.9	%	12.6	%	8.8	%	8.0	%	8.8	%	6.6	%	4.9	%

International – Property Business

																	At December 31, 2019
																	Total of
																	IBNR Liabilites
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																Plus Expected
	Years Ended December 31,																Development		Cumulative
	2012		2013		2014		2015		2016		2017		2018		2019		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	437,946	$	397,747	$	338,496	$	346,116	$	342,251	$	340,618	$	344,626	$	358,428		754		N/A
2013				473,767		413,959		374,216		366,182		365,106		362,370		369,876		920		N/A
2014						589,489		541,484		497,317		443,210		445,914		446,412		3,613		N/A
2015								545,360		393,027		388,795		384,816		385,980		4,466		N/A
2016										539,447		543,428		593,567		595,512		15,930		N/A
2017												857,100		954,835		970,874		15,997		N/A
2018														544,258		574,521		84,717		N/A
2019																879,698		389,242		N/A
															$	4,581,301

(Some amounts may not reconcile due to rounding.)

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	126,001	$	230,203	$	279,611	$	303,002	$	311,706	$	319,112	$	324,936	$	355,887
2013				121,461		246,893		294,024		325,155		337,087		341,831		354,102
2014						162,647		295,731		360,679		392,731		410,715		416,735
2015								127,511		235,921		299,773		334,271		345,693
2016										159,425		316,190		447,094		481,029
2017												247,895		641,832		773,790
2018														90,429		330,681
2019																151,893
															$	3,209,811
All outstanding liabilities prior to 2012, net of reinsurance																54,040
Liabilities for claims and claim adjustment expenses, net of reinsurance															$	1,425,530

(Some amounts may not reconcile due to rounding.)

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8
Property	25.9	%	34.1	%	15.6	%	7.2	%	3.2	%	1.5	%	2.5	%	8.6	%

Bermuda – Casualty Business

																	At December 31, 2019
																	Total of
																	IBNR Liabilites
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																Plus Expected
	Years Ended December 31,																Development		Cumulative
	2012		2013		2014		2015		2016		2017		2018		2019		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	284,509	$	262,122	$	240,949	$	230,441	$	236,883	$	237,315	$	241,312	$	241,631		30,273		N/A
2013				228,258		258,432		252,704		261,259		250,627		234,668		230,654		33,689		N/A
2014						211,439		244,163		261,523		257,904		234,196		226,434		48,168		N/A
2015								273,468		301,791		307,957		308,042		309,983		82,925		N/A
2016										292,353		351,182		349,522		357,169		114,651		N/A
2017												354,391		365,767		365,823		181,139		N/A
2018														547,267		546,367		376,744		N/A
2019																667,150		551,529		N/A
															$	2,945,212

(Some amounts may not reconcile due to rounding.)

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	12,864	$	29,660	$	51,278	$	75,680	$	102,019	$	130,159	$	149,629	$	164,775
2013				16,996		33,951		52,270		77,270		102,866		124,708		144,010
2014						13,580		24,915		42,872		67,716		91,981		115,098
2015								13,643		58,956		93,220		127,930		153,080
2016										45,671		84,152		121,553		155,397
2017												29,904		64,197		103,915
2018														36,678		93,727
2019																61,239
															$	991,242
All outstanding liabilities prior to 2012, net of reinsurance																356,351
Liabilities for claims and claim adjustment expenses, net of reinsurance															$	2,310,321

(Some amounts may not reconcile due to rounding.)

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8
Casualty	7.8	%	9.7	%	9.8	%	10.5	%	10.0	%	10.5	%	8.2	%	6.3	%

Bermuda – Property Business

																	At December 31, 2019
																	Total of
																	IBNR Liabilites
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																Plus Expected
	Years Ended December 31,																Development		Cumulative
	2012		2013		2014		2015		2016		2017		2018		2019		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	238,152	$	180,775	$	119,168	$	117,221	$	117,909	$	118,999	$	117,734	$	120,824		593		N/A
2013				217,531		142,666		124,191		115,029		114,252		114,800		112,900		272		N/A
2014						186,492		164,139		138,381		134,776		137,389		136,813		1,092		N/A
2015								192,520		157,711		143,625		146,196		143,266		2,204		N/A
2016										206,279		181,593		186,735		187,607		4,619		N/A
2017												393,969		365,405		346,472		10,115		N/A
2018														394,542		396,488		85,786		N/A
2019																343,602		184,640		N/A
															$	1,787,971

(Some amounts may not reconcile due to rounding.)

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	45,573	$	85,175	$	90,147	$	108,172	$	111,772	$	113,508	$	113,816	$	116,429
2013				34,745		64,560		101,614		108,535		110,378		111,655		111,833
2014						32,813		86,611		106,564		126,552		129,891		131,455
2015								33,814		73,041		109,401		131,387		134,862
2016										26,737		78,499		130,319		167,562
2017												38,106		137,127		250,661
2018														72,580		170,831
2019																66,370
															$	1,150,003
All outstanding liabilities prior to 2012, net of reinsurance																26,236
Liabilities for claims and claim adjustment expenses, net of reinsurance															$	664,204

(Some amounts may not reconcile due to rounding.)

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8
Property	19.6	%	28.5	%	25.2	%	14.9	%	2.4	%	1.2	%	0.2	%	2.2	%

Insurance – Casualty Business

																	At December 31, 2019
																	Total of
																	IBNR Liabilites
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																Plus Expected
	Years Ended December 31,																Development		Cumulative
	2012		2013		2014		2015		2016		2017		2018		2019		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	349,597	$	351,402	$	346,953	$	348,180	$	353,320	$	343,931	$	346,882	$	351,320		20,199		15,769
2013				393,539		393,390		392,827		393,035		351,295		344,388		350,815		23,120		21,350
2014						431,068		457,043		454,576		460,642		397,061		397,834		38,872		25,188
2015								519,509		528,050		535,671		542,176		468,584		54,740		26,896
2016										553,437		551,321		580,323		615,168		166,117		31,517
2017												612,967		602,985		625,039		226,898		34,701
2018														705,789		711,001		353,806		33,817
2019																850,832		653,255		30,144
															$	4,370,593

(Some amounts may not reconcile due to rounding.)

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	33,185	$	101,288	$	157,897	$	213,451	$	246,407	$	272,055	$	294,380	$	306,833
2013				33,311		117,037		176,312		224,611		260,184		285,822		303,726
2014						41,190		124,915		201,646		256,807		297,644		325,856
2015								44,311		134,730		218,853		291,943		353,232
2016										54,731		164,225		268,909		342,325
2017												53,898		172,200		280,797
2018														63,492		208,081
2019																72,375
															$	2,193,224
All outstanding liabilities prior to 2012, net of reinsurance																300,347
Liabilities for claims and claim adjustment expenses, net of reinsurance															$	2,477,716

(Some amounts may not reconcile due to rounding.)

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8
Casualty	9.1	%	19.8	%	17.4	%	14.0	%	10.9	%	7.2	%	6.7	%	3.3	%

Insurance – Property Business

																	At December 31, 2019
																	Total of
																	IBNR Liabilites
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																Plus Expected
	Years Ended December 31,																Development		Cumulative
	2012		2013		2014		2015		2016		2017		2018		2019		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	106,325	$	89,000	$	81,747	$	82,448	$	82,019	$	81,802	$	81,979	$	82,526		68		N/A
2013				112,037		98,106		91,251		92,144		92,233		92,393		92,246		471		N/A
2014						131,679		123,668		119,928		119,464		119,282		119,413		407		N/A
2015								172,904		152,895		143,944		146,780		144,769		405		N/A
2016										290,264		275,154		280,170		291,672		736		N/A
2017												496,905		501,407		494,844		13,043		N/A
2018														407,855		401,900		14,862		N/A
2019																348,590		81,655		N/A
															$	1,975,961

(Some amounts may not reconcile due to rounding.)

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	56,504	$	81,772	$	80,469	$	81,749	$	81,891	$	81,682	$	81,820	$	82,457
2013				68,695		93,110		91,841		92,110		91,720		91,759		91,777
2014						81,827		116,037		118,220		118,211		118,545		118,660
2015								102,170		141,280		142,437		145,225		146,719
2016										162,548		249,517		271,938		289,194
2017												178,666		424,181		458,811
2018														244,772		358,324
2019																227,387
															$	1,773,329
All outstanding liabilities prior to 2012, net of reinsurance																644
Liabilities for claims and claim adjustment expenses, net of reinsurance															$	203,277

(Some amounts may not reconcile due to rounding.)

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8
Property	56.8	%	35.0	%	4.7	%	3.0	%	0.4	%	-	%	0.1	%	-	%

Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid Claims and Claim Adjustment Expenses

The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated statement of financial position is as follows.

	December 31, 2019
(Dollars in thousands)
Net outstanding liabilities
U.S. Reinsurance Casualty	$	2,196,410
U.S. Reinsurance Property		1,572,727
International Casualty		918,411
International Property		1,425,530
Bermuda Casualty		2,310,321
Bermuda Property		664,204
Insurance Casualty		2,477,716
Insurance Property		203,277
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance		11,768,596

Reinsurance recoverable on unpaid claims
U.S. Reinsurance Casualty		363,925
U.S. Reinsurance Property		207,967
International Casualty		91,193
International Property		149,803
Bermuda Casualty		9,975
Bermuda Property		68,639
Insurance Casualty		631,827
Insurance Property		117,382
Total reinsurance recoverable on unpaid claims		1,640,712

Insurance lines other than short-duration		-
Unallocated claims adjustment expenses		163,563
Other		38,442
		202,005

Total gross liability for unpaid claims and claim adjustment expense	$	13,611,313

(Some amounts may not reconcile due to rounding.)

Reserving Methodology

The Company maintains reserves equal to our estimated ultimate liability for losses and loss adjustment expense (LAE) for reported and unreported claims for our insurance and reinsurance businesses. Because reserves are based on estimates of ultimate losses and LAE by underwriting or accident year, the Company uses a variety of statistical and actuarial techniques to monitor reserve adequacy over time, evaluate new information as it becomes known, and adjust reserves whenever an adjustment appears warranted. The Company considers many factors when setting reserves including: (1) exposure base and projected ultimate premium; (2) expected loss ratios by product and class of business, which are developed collaboratively by underwriters and actuaries; (3) actuarial methodologies and assumptions which analyze loss reporting and payment experience, reports from ceding companies and historical trends, such as reserving patterns, loss

payments, and product mix; (4) current legal interpretations of coverage and liability; and (5) economic conditions. Insurance and reinsurance loss and LAE reserves represent the Company’s best estimate of its ultimate liability. Actual loss and LAE ultimately paid may deviate, perhaps substantially, from such reserves. Net income (gain or loss) will be impacted in a period in which the change in estimated ultimate loss and LAE is recorded.

The detailed data required to evaluate ultimate losses for the Company’s insurance business is accumulated from its underwriting and claim systems. Reserving for reinsurance requires evaluation of loss information received from ceding companies. Ceding companies report losses in many forms depending on the type of contract and the agreed or contractual reporting requirements. Generally, pro rata contracts require the submission of a monthly/quarterly account, which includes premium and loss activity for the period with corresponding reserves as established by the ceding company. This information is recorded into the Company’s records. For certain pro rata contracts, the Company may require a detailed loss report for claims that exceed a certain dollar threshold or relate to a particular type of loss. Excess of loss and facultative contracts generally require individual loss reporting with precautionary notices provided when a loss reaches a significant percentage of the attachment point of the contract or when certain causes of loss or types of injury occur. Experienced claims staff handles individual loss reports and supporting claim information. Based on evaluation of a claim, the Company may establish additional case reserves in addition to the case reserves reported by the ceding company. To ensure ceding companies are submitting required and accurate data, Everest’s Underwriting, Claim, Reinsurance Accounting, and Internal Audit Departments perform various reviews of ceding companies, particularly larger ceding companies, including on-site audits.

The Company segments both reinsurance and insurance reserves into exposure groupings for actuarial analysis. The Company assigns business to exposure groupings so that the underlying exposures have reasonably homogeneous loss development characteristics and are large enough to facilitate credible estimation of ultimate losses. The Company periodically reviews its exposure groupings and may change groupings over time as business changes. The Company currently uses approximately 200 exposure groupings to develop reserve estimates. One of the key selection characteristics for the exposure groupings is the historical duration of the claims settlement process. Business in which claims are reported and settled relatively quickly are commonly referred to as short tail lines, principally property lines. On the other hand, casualty claims tend to take longer to be reported and settled and casualty lines are generally referred to as long tail lines. Estimates of ultimate losses for shorter tail lines, with the exception of loss estimates for large catastrophic events, generally exhibit less volatility than those for the longer tail lines.

The Company uses a variety of actuarial methodologies, such as the expected loss ratio method, chain ladder methods, and Bornhuetter-Ferguson methods, supplemented by judgment where appropriate, to estimate ultimate loss and LAE for each exposure group.

Expected Loss Ratio Method: The expected loss ratio method uses earned premium times an expected loss ratio to calculate ultimate losses for a given underwriting or accident year. This method relies entirely on expectation to project ultimate losses with no consideration given to actual losses. As such, it may be appropriate for an immature underwriting or accident year where few, if any, losses have been reported or paid, but less appropriate for a more mature year.

Chain Ladder Method: Chain ladder methods use a standard loss development triangle to project ultimate losses. Age-to-age development factors are selected for each development period and combined to calculate age-to-ultimate development factors which are then applied to paid or reported losses to project ultimate losses. This method relies entirely on actual paid or reported losses to project ultimate losses. No other factors such as changes in pricing or other expectations are taken into account. It is most appropriate for groups with homogeneous, stable experience where past development patterns are expected to continue in the future. It is least appropriate for groups which have changed significantly over time or which are more volatile.

Bornhuetter-Ferguson Method: The Bornhuetter-Ferguson method is a combination of the expected loss ratio method and the chain ladder method. Ultimate losses are projected based partly on actual paid or reported losses and partly on expectation. Incurred but not reported (IBNR) reserves are calculated using earned premium, an a priori loss ratio, and selected age-to-age development factors and added to actual reported (paid) losses to determine ultimate losses. It is more responsive to actual reported or paid development than the expected loss ratio method but less responsive than the chain ladder method. The reliability of the method depends on the accuracy of the selected a priori loss ratio.

Although the Company uses similar actuarial methods for both short tail and long tail lines, the faster reporting of experience for the short tail lines allows the Company to have greater confidence in its estimates of ultimate losses for short tail lines at an earlier stage than for long tail lines. As a result, the Company utilizes, as well, exposure-based methods to estimate its ultimate losses for longer tail lines, especially for immature underwriting or accident years. For both short and long tail lines, the Company supplements these general approaches with analytically based judgments.

Key actuarial assumptions contain no explicit provisions for reserve uncertainty nor does the Company supplement the actuarially determined reserves for uncertainty.

Carried reserves at each reporting date are the Company’s best estimate of ultimate unpaid losses and LAE at that date. The Company completes detailed reserve studies for each exposure group annually for both reinsurance and insurance operations. The completed annual reserve studies are “rolled-forward” for each accounting period until the subsequent reserve study is completed. Analyzing the roll-forward process involves comparing actual reported losses to expected losses based on the most recent reserve study. The Company analyzes significant variances between actual and expected losses and post adjustments to its reserves as warranted.

The Company continues to receive claims under expired insurance and reinsurance contracts asserting injuries and/or damages relating to or resulting from environmental pollution and hazardous substances, including asbestos. Environmental claims typically assert liability for (a) the mitigation or remediation of environmental contamination or (b) bodily injury or property damage caused by the release of hazardous substances into the land, air or water. Asbestos claims typically assert liability for bodily injury from exposure to asbestos or for property damage resulting from asbestos or products containing asbestos.

The Company’s reserves include an estimate of the Company’s ultimate liability for A&E claims. The Company’s A&E liabilities emanate from Mt. McKinley’s direct insurance business and Everest Re’s assumed reinsurance business. All of the contracts of insurance and reinsurance, under which the Company has received claims during the past three years, expired more than 20 years ago. There are significant uncertainties surrounding the Company’s reserves for its A&E losses.

A&E exposures represent a separate exposure group for monitoring and evaluating reserve adequacy. The following table summarizes incurred losses with respect to A&E reserves on both a gross and net of reinsurance basis for the periods indicated:

	At December 31,
(Dollars in thousands)	2019		2018		2017
Gross basis:
Beginning of period reserves	$	347,495	$	448,994	$	441,111
Incurred losses		2,070		(2,473)		90,009
Paid losses		(91,644)		(99,026)		(82,126)
End of period reserves	$	257,921	$	347,495	$	448,994

Net basis:
Beginning of period reserves	$	261,456	$	318,081	$	319,072
Incurred losses		-		-		37,137
Paid losses		(32,756)		(56,624)		(38,128)
End of period reserves	$	228,701	$	261,456	$	318,081

In 2015, the Company sold Mt. McKinley, a Delaware domiciled insurance company and wholly-owned subsidiary of the Company to Clearwater Insurance Company, a Delaware domiciled insurance company. Concurrently with the closing, the Company entered into a retrocession treaty with an affiliate of Clearwater Insurance Company. Per the retrocession treaty, the Company retroceded 100% of the liabilities associated with certain Mt. McKinley policies, which related entirely to A&E business and had been reinsured by Bermuda Re. As consideration for entering into the retrocession treaty, Everest Re Bermuda transferred cash of $140,279 thousand, an amount equal to the net loss reserves as of the closing date. The maximum liability retroceded under the retrocession treaty will be $440,279 thousand, equal to the retrocession payment plus $300,000 thousand. The Company will retain liability for any amounts exceeding the maximum liability retroceded under the retrocession treaty.

On December 20, 2019, the retrocession treaty was amended and included a partial commutation. As a result of this amendment and partial commutation, gross A&E reserves and correspondingly reinsurance receivable were reduced by $43,362 thousand. In addition, the maximum liability permitted to be retroceded increased to $,450298 thousand.

Reinsurance Receivables.

Reinsurance receivables for both paid and recoverable on unpaid losses totaled $1,763,471 thousand and $1,787,648 thousand at December 31, 2019 and December 31, 2018, respectively. At December 31, 2019, $682,845 thousand, or 38.7%, was receivable from Mt. Logan Re collateralized segregated accounts; $147,807 thousand, or 8.4% was receivable from Munich Reinsurance America, Inc. (“Munich Re”); and $95,481 thousand, or 5.4%, was receivable from Zurich Versicherungs Gesellschaft (“Zurich”). No other retrocessionaire accounted for more than 5% of our receivables.

Future Policy Benefit Reserve.

Activity in the reserve for future policy benefits is summarized for the periods indicated:

	At December 31,
(Dollars in thousands)	2019		2018		2017
Balance at beginning of year	$	46,778	$	51,014	$	55,074
Liabilities assumed		53		110		115
Adjustments to reserves		350		806		(437)
Benefits paid in the current year		(4,589)		(5,151)		(3,738)
Balance at end of year	$	42,592	$	46,778	$	51,014

(Some amounts may not reconcile due to rounding.)