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Reserve For Losses, LAE And Future Policy Benefit Reserve

12 Months Ended

Dec. 31, 2021

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.

The following table provides a roll forward of the Company’s beginning and ending reserve for losses and LAE is summarized for the periods indicated:

	Years Ended December 31,
(Dollars in thousands)	2021		2020		2019
Gross reserves beginning of period	$	16,322,143	$	13,531,256	$	13,098,158
Less reinsurance recoverables on unpaid losses		(1,843,691)		(1,640,712)		(1,619,641)
Net reserves beginning of period		14,478,452		11,890,544		11,478,517

Incurred related to:
Current year		7,400,303		6,149,410		4,986,456
Prior years		(9,050)		401,427		(63,558)
Total incurred losses and LAE		7,391,253		6,550,837		4,922,898

Paid related to:
Current year		2,490,645		2,046,260		2,042,246
Prior years		2,226,457		2,077,613		2,519,950
Total paid losses and LAE		4,717,102		4,123,873		4,562,196

Foreign exchange/translation adjustment		(89,481)		160,944		51,325

Net reserves end of period		17,063,121		14,478,452		11,890,544
Plus reinsurance recoverables on unpaid losses		1,946,365		1,843,691		1,640,712
Gross reserves end of period	$	19,009,486	$	16,322,143	$	13,531,256

(Some amounts may not reconcile due to rounding.)

Current year incurred losses were $7.4 billion, $6.1 billion and $5.0 billion in 2021, 2020 and 2019, respectively. The increase in current year incurred losses from 2020 to 2021 was primarily related to an increase of $710.0 million in current year catastrophe losses and an increase of $540.9 million in current year attritional losses. The increase in current year attritional losses was mainly due to the growth in premiums earned, partially mitigated by $511.1 million of losses related to COVID-19 in 2020 which did not recur in 2021. The increase in current year incurred losses from 2019 to 2020 was primarily due to an increase of $772.4 million in current year attritional losses primarily due to higher premiums earned and the previously mentioned $511.1 million of losses related to COVID-19 in 2020, partially offset by a $120.5 million decline in current year catastrophe losses.

Incurred prior years losses were ($9.1) million in 2021, $401.4 million in 2020 and ($63.6) million in 2019. The favorable development on prior year reserves of ($9.1) million in 2021 is primarily driven by a commutation and reserve releases within the reinsurance segment. 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 with short-tail lines of business and worker’s compensation.

The following is information about incurred and paid claims development as of December 31, 2021, 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, 2020 is presented as supplementary information.

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, 2021
																					Total of
																					IBNR Liabilities
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																				Plus Expected		Cumulative
	Years Ended December 31,																				Development		Number of
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		on Reported		Reported
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Claims
(Dollars in thousands)
2012	$	913,235	$	806,271	$	707,089	$	692,497	$	676,252	$	677,924	$	682,447	$	656,696	$	635,281	$	626,752		22,382		N/A
2013				726,240		816,634		804,255		794,549		764,362		735,487		715,578		715,519		710,499		21,566		N/A
2014						776,680		815,861		822,646		798,868		757,392		734,567		747,748		745,601		31,868		N/A
2015								795,662		836,303		831,492		828,634		812,346		848,989		849,230		75,907		N/A
2016										808,757		885,069		882,087		877,209		952,811		954,364		129,447		N/A
2017												894,903		854,313		861,180		942,467		950,788		199,152		N/A
2018														1,340,402		1,337,894		1,414,891		1,445,481		466,230		N/A
2019																1,721,440		1,786,629		1,788,763		907,117		N/A
2020																		1,943,096		1,914,757		1,482,711		N/A
2021																				2,513,341		1,951,060		N/A
																			$	12,499,575

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	41,756	$	98,010	$	179,993	$	275,548	$	355,728	$	425,397	$	504,848	$	539,251	$	549,564	$	568,922
2013				49,581		123,813		214,769		314,826		389,143		496,373		548,578		574,706		603,638
2014						57,942		122,673		214,072		304,645		430,751		507,146		553,006		594,417
2015								57,114		160,199		267,841		413,852		503,917		573,637		621,569
2016										90,184		190,818		326,011		433,583		548,345		629,704
2017												81,099		188,542		322,029		464,179		592,780
2018														154,910		290,083		463,099		638,435
2019																210,530		343,081		526,547
2020																		190,530		268,027
2021																				216,969
																			$	5,261,006
All outstanding liabilities prior to 2012, net of reinsurance																				824,128
Liabilities for claims and claim adjustment expenses, net of reinsurance																			$	8,062,697

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8		9		10
Casualty	9.2	%	8.5	%	12.4	%	13.6	%	12.7	%	10.4	%	7.7	%	4.9	%	2.9	%	3.1	%

Reinsurance – Property Business

																					At December 31, 2021
																					Total of
																					IBNR Liabilities
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																				Plus Expected		Cumulative
	Years Ended December 31,																				Development		Number of
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		on Reported		Reported
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Claims
(Dollars in thousands)
2012	$	1,595,581	$	1,282,432	$	1,159,361	$	1,158,272	$	1,152,163	$	1,144,478	$	1,132,514	$	1,151,907	$	1,154,729	$	1,152,601		10,597
2013				1,302,966		954,434		843,829		787,484		781,908		777,334		784,582		782,978		782,285		2,615
2014						1,366,519		1,207,588		1,055,896		963,339		963,168		964,131		956,387		956,892		5,114
2015								1,408,609		1,072,514		996,351		970,290		973,022		965,298		967,102		6,102
2016										1,725,574		1,560,324		1,596,178		1,590,207		1,567,764		1,568,689		19,440
2017												2,799,762		3,422,515		3,533,258		3,662,032		3,707,890		9,592
2018														2,650,359		2,526,001		2,527,900		2,465,788		40,866
2019																2,122,117		2,153,458		2,098,665		176,930
2020																		2,453,269		2,526,034		616,803
2021																				2,802,843		1,445,812
																			$	19,028,789

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	404,621	$	703,440	$	896,790	$	990,221	$	1,024,725	$	1,058,690	$	1,069,836	$	1,092,694	$	1,101,861	$	1,106,461
2013				384,956		530,340		663,255		720,662		741,032		751,190		760,516		761,755		762,225
2014						378,154		670,226		805,888		882,489		911,719		921,984		928,821		931,494
2015								386,340		626,200		787,370		875,529		904,827		926,506		937,534
2016										489,865		1,035,935		1,336,301		1,460,922		1,520,320		1,539,568
2017												850,375		2,277,663		2,858,044		3,259,500		3,477,657
2018														558,319		1,563,718		1,941,282		2,125,022
2019																769,261		1,365,923		1,703,956
2020																		606,518		1,385,266
2021																				687,773
																			$	14,656,957
All outstanding liabilities prior to 2012, net of reinsurance																				519,855
Liabilities for claims and claim adjustment expenses, net of reinsurance																			$	4,891,687

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8		9		10
Property	29.0	%	32.9	%	16.2	%	8.8	%	4.3	%	1.8	%	1.0	%	0.9	%	0.5	%	0.4	%

Insurance – Casualty Business

																					At December 31, 2021
																					Total of
																					IBNR Liabilities
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																				Plus Expected		Cumulative
	Years Ended December 31,																				Development		Number of
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		on Reported		Reported
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Claims
(Dollars in thousands)
2012	$	349,721	$	351,526	$	347,065	$	348,260	$	353,394	$	344,007	$	346,980	$	351,441	$	353,942	$	354,697		31,942		15,782
2013				393,689		393,519		392,955		393,129		351,380		344,479		350,927		349,965		350,107		29,280		21,360
2014						431,297		457,270		454,801		460,862		397,307		398,126		399,021		397,889		44,649		25,265
2015								519,869		528,468		536,106		542,637		469,081		472,079		472,700		56,840		27,044
2016										554,134		552,057		581,114		616,641		554,151		542,750		86,737		31,674
2017												614,528		604,615		627,426		659,359		635,622		156,575		35,627
2018														708,122		714,065		752,894		766,992		193,686		36,041
2019																852,407		855,266		888,280		288,688		39,219
2020																		997,126		1,058,272		620,239		34,983
2021																				1,196,128		782,844		31,679
																			$	6,663,437

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	33,194	$	101,300	$	157,924	$	213,488	$	246,454	$	272,113	$	294,442	$	306,934	$	311,863	$	317,249
2013				33,314		117,046		176,326		224,633		260,222		285,872		303,784		310,927		317,111
2014						41,194		124,936		201,688		256,885		297,760		326,008		339,484		350,976
2015								44,317		134,760		218,987		292,111		353,440		382,743		414,069
2016										54,740		164,357		269,127		342,880		402,518		445,429
2017												53,918		172,415		281,339		381,169		457,197
2018														63,587		208,432		319,559		447,358
2019																72,394		234,915		398,600
2020																		79,658		248,000
2021																				109,311
																			$	3,505,299
All outstanding liabilities prior to 2012, net of reinsurance																				226,081
Liabilities for claims and claim adjustment expenses, net of reinsurance																			$	3,384,219

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8		9		10
Casualty	8.8	%	18.8	%	17.4	%	15.2	%	11.1	%	7.2	%	5.4	%	2.8	%	1.6	%	1.5	%

Insurance – Property Business

																					At December 31, 2021
																					Total of
																					IBNR Liabilities
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance																				Plus Expected		Cumulative
	Years Ended December 31,																				Development		Number of
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		on Reported		Reported
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)				Claims		Claims
(Dollars in thousands)
2012	$	106,363	$	89,038	$	81,773	$	82,475	$	82,045	$	81,828	$	82,005	$	82,552	$	82,613	$	82,685		5		N/A
2013				112,082		98,203		91,334		92,222		92,311		92,472		92,326		91,893		92,035		94		N/A
2014						131,752		123,744		119,989		119,523		119,344		119,481		119,138		119,428		49		N/A
2015								173,059		153,028		144,081		146,930		144,919		146,626		146,559		47		N/A
2016										291,182		275,740		280,797		292,750		295,140		297,417		380		N/A
2017												498,044		502,601		496,195		499,323		493,370		480		N/A
2018														409,168		403,013		398,243		411,160		693		N/A
2019																349,061		351,599		355,692		5,808		N/A
2020																		599,613		507,281		45,162		N/A
2021																				649,738		191,897		N/A
																			$	3,155,364

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Years Ended December 31,
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
Accident Year	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
(Dollars in thousands)
2012	$	56,506	$	81,798	$	80,495	$	81,776	$	81,917	$	81,708	$	81,846	$	82,483	$	82,612	$	82,669
2013				68,711		93,179		91,919		92,189		91,798		91,838		91,855		91,864		91,942
2014						81,853		116,089		118,277		118,270		118,605		118,724		118,799		118,808
2015								102,239		141,394		142,560		145,367		146,866		146,954		147,052
2016										162,906		250,034		272,535		290,278		293,247		294,031
2017												179,403		425,384		460,130		482,817		486,538
2018														245,840		359,276		379,654		404,819
2019																227,630		317,766		339,411
2020																		293,331		415,518
2021																				328,207
																			$	2,708,995
All outstanding liabilities prior to 2012, net of reinsurance																				557
Liabilities for claims and claim adjustment expenses, net of reinsurance																				446,926

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years	1		2		3		4		5		6		7		8		9		10
Property	55.4	%	31.2	%	5.0	%	4.3	%	2.6	%	0.6	%	0.6	%	0.2	%	0.1	%	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, 2021
(Dollars in thousands)
Net outstanding liabilities
Reinsurance Casualty	$	8,062,697
Reinsurance Property		4,891,687
Insurance Casualty		3,384,219
Insurance Property		446,926
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance		16,785,529

Reinsurance recoverable on unpaid claims
Reinsurance Casualty		293,110
Reinsurance Property		507,097
Insurance Casualty		973,182
Insurance Property		172,977
Total reinsurance recoverable on unpaid claims		1,946,365

Insurance lines other than short-duration		-
Unallocated claims adjustment expenses		235,391
Other		42,199
		277,590

Total gross liability for unpaid claims and claim adjustment expense	$	19,009,486

(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 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 Insurance Company’s, a former wholly owned subsidiary that was sold in 2015, 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)	2021		2020		2019
Gross basis:
Beginning of period reserves	$	219,341	$	257,921	$	347,495
Incurred losses		10,862		1,540		2,070
Paid losses		(55,048)		(40,120)		(91,644)
End of period reserves	$	175,155	$	219,341	$	257,921

Net basis:
Beginning of period reserves	$	198,255	$	228,701	$	261,456
Incurred losses		-		(772)		-
Paid losses		(42,139)		(29,674)		(32,756)
End of period reserves	$	156,115	$	198,255	$	228,701

In 2015, the Company sold Mt. McKinley to Clearwater Insurance Company, a subsidiary of Fairfax Financial. 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 $140.3 million, an amount equal to the net loss reserves as of the closing date. The maximum liability retroceded under the retrocession treaty will be $440.3 million, equal to the retrocession payment plus $300.0 million. 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 $43.4 million. In addition, the maximum liability permitted to be retroceded increased to $450.3 million.

Reinsurance Recoverables.

Reinsurance recoverables for both paid unpaid losses totaled $2.1 billion and $2.0 billion at December 31, 2021 and December 31, 2020, respectively. At December 31, 2021, $691.4 million, or 33.7%, was receivable from Mt. Logan Re collateralized segregated accounts; $221.9 million, or 10.8%, was receivable from Munich Reinsurance America, Inc. and $115.1 million, or 5.6%, was recoverable from Endurance Reinsurance Corporation of America. 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)	2021		2020		2019
Balance at beginning of year	$	37,723	$	42,592	$	46,778
Liabilities assumed		27		35		53
Adjustments to reserves		719		(1,113)		350
Benefits paid in the current year		(2,800)		(3,791)		(4,589)
Balance at end of year	$	35,669	$	37,723	$	42,592

(Some amounts may not reconcile due to rounding.)