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Reserve For Losses, LAE And Future Policy Benefit Reserve

12 Months Ended

Dec. 31, 2020

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)	2020		2019		2018
Gross reserves beginning of period	$	13,611,313	$	13,119,090		11,884,321
Less reinsurance recoverables		(1,640,712)		(1,619,641)		(1,212,649)
Net reserves beginning of period		11,970,601		11,499,449		10,671,672

Incurred related to:
Current year		6,149,410		4,986,456		5,264,327
Prior years		401,427		(63,558)		387,076
Total incurred losses and LAE		6,550,837		4,922,898		5,651,403

Paid related to:
Current year		2,046,260		2,042,246		1,700,765
Prior years		2,080,816		2,460,825		3,011,175
Total paid losses and LAE		4,127,076		4,503,071		4,711,940

Foreign exchange/translation adjustment		160,944		51,325		(111,686)

Net reserves end of period		14,555,306		11,970,601		11,499,449
Plus reinsurance recoverables		1,843,691		1,640,712		1,619,641
Gross reserves end of period	$	16,398,997	$	13,611,313		13,119,090

(Some amounts may not reconcile due to rounding.)

Current year incurred losses were $6,149,410 thousand, $4,986,456 thousand and $5,264,327 thousand at December 31, 2020, 2019 and 2018, respectively. The increase in current year incurred losses from 2019 to 2020 was primarily due to an increase of $772,399 thousand in current year attritional losses primarily due to higher premiums earned, $511,056 thousand of losses related to COVID-19 in 2020, partially offset by a $120,500 thousand decline in current year catastrophe losses. The decrease in current year incurred losses in 2019 compared to 2018 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 attributable to higher premiums earned in 2019 compared to 2018.

Incurred prior years losses increased by $401,427 thousand in 2020, decreased by $63,558 thousand in 2019 and increased by $387,076 thousand in 2018. The increase for 2020 primarily related to higher ultimate loss

estimates for long-tail casualty business in the reinsurance segment for accident years 2015 to 2018, notably general liability, professional lines, and auto liability. The reserve charge also includes actions on non-CAT property lines, primarily for the 2017 to 2019 accident years and driven by a few large losses to aggregate programs.

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 following is information about incurred and paid claims development as of December 31, 2020, 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, 2019 is presented as supplementary information.

These tables present nine 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.

Reinsurance – Casualty Business

																			At December 31, 2020
																			Total of
																			IBNR Liabilities
	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		2020		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	917,560	$	811,282	$	712,407	$	698,212	$	682,333	$	684,537	$	689,068	$	663,308	$	641,893		43,700		N/A
2013				730,202		821,395		809,631		800,451		770,745		741,873		721,961		721,902		56,597		N/A
2014						780,730		820,870		828,341		805,087		763,611		740,786		753,967		72,825		N/A
2015								805,551		845,303		840,659		837,802		821,513		858,157		113,144		N/A
2016										818,293		895,558		892,576		887,698		963,300		195,650		N/A
2017												903,896		863,306		870,174		951,461		319,560		N/A
2018														1,356,788		1,354,279		1,431,276		639,205		N/A
2019																1,740,245		1,810,434		1,118,428		N/A
2020																		1,963,469		1,497,536		N/A
																	$	10,095,859

(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		2020
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	42,576		99,763		182,550		278,492		358,953		429,165		509,020		543,688		555,736
2013				50,506		125,739		217,243		317,744		392,503		500,316		552,824		579,350
2014						58,833		124,433		216,441		307,587		434,450		511,143		557,209
2015								58,406		165,005		273,896		421,223		511,414		581,942
2016										94,154		196,746		333,163		441,325		558,379
2017												83,286		192,547		327,625		475,472
2018														159,215		299,369		465,181
2019																219,229		354,292
2020																		194,704
																	$	4,322,265
All outstanding liabilities prior to 2012, net of reinsurance																		940,597
Liabilities for claims and claim adjustment expenses, net of reinsurance																	$	6,714,191

(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		9
Casualty	9.5	%	9.7	%	12.9	%	14.1	%	12.4	%	10.9	%	8.4	%	4.5	%	1.9	%

Reinsurance – Property Business

																			At December 31, 2020
																			Total of
																			IBNR Liabilities
	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		2020		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	1,625,024		1,311,752		1,188,304		1,187,096		1,181,200		1,174,224		1,162,252		1,181,653		1,184,476		7,419		N/A
2013				1,326,814		969,175		857,241		801,457		795,978		791,400		798,652		797,047		1,722		N/A
2014						1,388,249		1,230,656		1,080,269		987,401		987,230		988,193		980,449		3,325		N/A
2015								1,420,523		1,090,474		1,014,531		988,469		991,202		983,478		2,384		N/A
2016										1,730,936		1,557,262		1,593,116		1,587,145		1,564,702		20,676		N/A
2017												2,825,218		3,447,971		3,558,713		3,687,487		28,865		N/A
2018														2,684,311		2,559,953		2,561,852		121,379		N/A
2019																2,165,898		2,192,239		434,700		N/A
2020																		2,487,352		1,341,994		N/A
																		16,439,082

(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		2020
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	417,397		723,394		896,372		1,016,689		1,051,968		1,086,813		1,098,004		1,120,273		1,126,302
2013				394,228		567,616		670,369		728,570		749,345		759,925		768,490		770,215
2014						388,263		678,897		812,441		889,561		921,183		931,451		937,437
2015								390,284		633,428		792,018		876,356		905,281		926,388
2016										480,453		986,043		1,269,622		1,394,284		1,447,824
2017												835,042		2,207,048		2,775,818		3,161,267
2018														576,573		1,579,781		1,969,117
2019																770,686		1,250,409
2020																		616,160
																		12,205,119
All outstanding liabilities prior to 2012, net of reinsurance																		105,209
Liabilities for claims and claim adjustment expenses, net of reinsurance																		4,339,172

(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		9
Property	29.6	%	31.3	%	15.4	%	9.2	%	3.1	%	1.9	%	0.9	%	1.2	%	0.5	%

Insurance – Casualty Business

																			At December 31, 2020
																			Total of
																			IBNR Liabilities
	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		2020		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	349,724		351,529		347,068		348,262		353,395		344,008		346,983		351,444		353,945		11,283		15,780
2013				393,710		393,539		392,976		393,148		351,399		344,498		350,947		349,985		20,093		21,385
2014						431,323		457,296		454,827		460,888		397,334		398,153		399,048		38,361		25,221
2015								519,917		528,517		536,155		542,687		469,132		472,125		80,007		26,996
2016										554,253		552,192		581,273		617,051		554,621		138,312		31,673
2017												614,949		605,062		628,149		660,114		180,513		35,020
2018														708,808		715,008		754,053		275,213		34,884
2019																852,767		856,466		444,603		37,597
2020																		990,982		649,288		26,068
																		5,391,340

(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		2020
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	33,194		101,301		157,924		213,488		246,455		272,114		294,444		306,937		311,865
2013				33,314		117,046		176,326		224,633		260,223		285,873		303,786		310,928
2014						41,194		124,937		201,689		256,886		297,762		326,011		339,487
2015								44,317		134,761		218,990		292,115		353,445		382,748
2016										54,740		164,384		269,163		343,020		402,693
2017												53,922		172,476		281,500		381,442
2018														63,614		208,531		319,858
2019																72,399		235,087
2020																		63,878
																		2,747,987
All outstanding liabilities prior to 2012, net of reinsurance																		224,752
Liabilities for claims and claim adjustment expenses, net of reinsurance																	$	2,868,104

(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		9
Casualty	8.5	%	19.6	%	17.0	%	14.6	%	10.8	%	6.9	%	4.9	%	2.8	%	1.4	%

Insurance – Property Business

																			At December 31, 2020
																			Total of
																			IBNR Liabilities
	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		2020		on Reported		Number of
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Reported Claims
(Dollars in thousands)
2012	$	106,364		89,039		81,774		82,476		82,045		81,828		82,006		82,553		82,614		1		N/A
2013				112,083		98,206		91,336		92,224		92,313		92,473		92,328		91,895		29		N/A
2014						131,754		123,745		119,991		119,525		119,346		119,483		119,139		57		N/A
2015								173,062		153,031		144,084		146,934		144,923		146,630		286		N/A
2016										291,370		275,812		280,872		292,986		295,364		308		N/A
2017												498,359		502,935		496,583		499,724		6,358		N/A
2018														409,527		403,294		398,616		5,436		N/A
2019																349,177		352,038		14,100		N/A
2020																		623,267		255,707		N/A
																		2,609,287

(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		2020
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	56,506		81,798		80,496		81,777		81,918		81,708		81,847		82,483		82,613
2013				68,712		93,181		91,921		92,191		91,800		91,840		91,857		91,866
2014						81,853		116,090		118,278		118,271		118,606		118,726		118,801
2015								102,241		141,396		142,563		145,371		146,870		146,958
2016										162,916		250,073		272,583		290,476		293,457
2017												179,432		425,607		460,412		483,178
2018														245,944		359,452		379,937
2019																227,639		317,960
2020																		293,269
																		2,208,038
All outstanding liabilities prior to 2012, net of reinsurance																		39
Liabilities for claims and claim adjustment expenses, net of reinsurance																	$	401,287

(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		9
Property	54.4	%	33.2	%	4.8	%	3.6	%	2.8	%	-	%	0.6	%	0.4	%	0.2	%

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, 2020
(Dollars in thousands)
Net outstanding liabilities
Reinsurance Casualty	$	6,714,191
Reinsurance Property		4,339,172
Insurance Casualty		2,868,104
Insurance Property		401,287
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance		14,322,754

Reinsurance recoverable on unpaid claims
Reinsurance Casualty		399,865
Reinsurance Property		456,062
Insurance Casualty		818,701
Insurance Property		169,062
Total reinsurance recoverable on unpaid claims		1,843,691

Insurance lines other than short-duration		-
Unallocated claims adjustment expenses		194,111
Other		38,441
		232,552

Total gross liability for unpaid claims and claim adjustment expense	$	16,398,997

(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.

Certain reserves, including losses from widespread catastrophic events and COVID-19 related losses, cannot be estimated using traditional actuarial methods. These types of events are reserved for separately using a variety of statistical and actuarial techniques. We estimate losses for these types of events based on information derived from catastrophe models, quantitative and qualitative exposure analyses, reports and communications from ceding companies and development patterns for historically similar events, where available.

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)	2020		2019		2018
Gross basis:
Beginning of period reserves	$	257,921	$	347,495	$	448,994
Incurred losses		1,540		2,070		(2,473)
Paid losses		(40,120)		(91,644)		(99,026)
End of period reserves	$	219,341	$	257,921	$	347,495

Net basis:
Beginning of period reserves	$	228,701	$	261,456	$	318,081
Incurred losses		(772)		-		-
Paid losses		(29,674)		(32,756)		(56,624)
End of period reserves	$	198,255	$	228,701	$	261,456

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 $1,994,555 thousand and $1,763,471 thousand at December 31, 2020 and December 31, 2019, respectively. At December 31, 2020, $699,734 thousand, or 35.1%, was receivable from Mt. Logan Re collateralized segregated accounts and $211,594 thousand, or 10.6% was receivable from Munich Reinsurance America, Inc. (“Munich Re”). 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)	2020		2019		2018
Balance at beginning of year	$	42,592	$	46,778	$	51,014
Liabilities assumed		35		53		110
Adjustments to reserves		(1,113)		350		806
Benefits paid in the current year		(3,791)		(4,589)		(5,151)
Balance at end of year	$	37,723	$	42,592	$	46,778

(Some amounts may not reconcile due to rounding.)