XML 32 R16.htm IDEA: XBRL DOCUMENT

Reserve for Claims and Claim Expenses

12 Months Ended

Dec. 31, 2020

RESERVE FOR CLAIMS AND CLAIM EXPENSES

The Company believes the most significant accounting judgment made by management is its estimate of claims and claim expense reserves. Claims and claim expense reserves represent estimates, including actuarial and statistical projections at a given point in time, of the ultimate settlement and administration costs for unpaid claims and claim expenses arising from the insurance and reinsurance contracts the Company sells. The Company establishes its claims and claim expense reserves by taking claims reported to the Company by insureds and ceding companies, but which have not yet been paid (“case reserves”), adding estimates for the anticipated cost of claims incurred but not yet reported to the Company, or incurred but not enough reported to the Company (collectively referred to as “IBNR”) and, if deemed necessary, adding costs for additional case reserves which represent the Company’s estimates for claims related to specific contracts previously reported to the Company which it believes may not be adequately estimated by the client as of that date, or adequately covered in the application of IBNR. The Company’s reserving committee, which includes members of the Company’s senior management, reviews, discusses, and assesses the reasonableness and adequacy of the reserving estimates included in our audited financial statements.

The following table summarizes the Company’s claims and claim expense reserves by segment, allocated between case reserves, additional case reserves and IBNR:



At December 31, 2020	Case Reserves		Additional Case Reserves		IBNR		Total
Property	$	1,127,201	$	1,617,003	$	1,627,541	$	4,371,745
Casualty and Specialty	1,651,150		133,843		4,223,692		6,008,685
Other	708		—		—		708
Total	$	2,779,059	$	1,750,846	$	5,851,233	$	10,381,138

At December 31, 2019
Property	$	1,253,406	$	1,631,223	$	1,189,221	$	4,073,850
Casualty and Specialty	1,596,426		129,720		3,583,913		5,310,059
Other	440		—		—		440
Total	$	2,850,272	$	1,760,943	$	4,773,134	$	9,384,349

Activity in the liability for unpaid claims and claim expenses is summarized as follows:



Year ended December 31,	2020		2019		2018
Reserve for claims and claim expenses, net of reinsurance recoverable, as of beginning of period	$	6,593,052	$	3,704,050	$	3,493,778
Net incurred related to:
Current year	3,108,421		2,123,876		1,390,767
Prior years	(183,812)		(26,855)		(270,749)
Total net incurred	2,924,609		2,097,021		1,120,018
Net paid related to:
Current year	412,172		265,649		391,061
Prior years	1,592,456		832,405		503,708
Total net paid	2,004,628		1,098,054		894,769
Foreign exchange (1)	97,273		31,260		(14,977)
Amounts disposed (2)	(155,178)		—		—
Amounts acquired (3)	—		1,858,775		—
Reserve for claims and claim expenses, net of reinsurance recoverable, as of end of period	7,455,128		6,593,052		3,704,050
Reinsurance recoverable as of end of period	2,926,010		2,791,297		2,372,221
Reserve for claims and claim expenses as of end of period	$	10,381,138	$	9,384,349	$	6,076,271

(1) Reflects the impact of the foreign exchange revaluation of the reserve for claims and claim expenses, net of reinsurance recoverable, denominated in non-U.S. dollars as at the balance sheet date.

(2) Represents the fair value of RenaissanceRe UK's reserve for claims and claim expenses, net of reinsurance recoverable, disposed of on August 18, 2020.

(3) Represents the fair value of TMR's reserve for claims and claim expenses, net of reinsurance recoverable, acquired at March 22, 2019. Refer to “Note 3. Acquisition of Tokio Millennium Re” for additional information related to the acquisition of TMR.

The Company’s reserving methodology for each line of business uses a loss reserving process that calculates a point estimate for its ultimate settlement and administration costs for claims and claim expenses. The Company does not calculate a range of estimates and does not discount any of its reserves for claims and claim expenses. The Company uses this point estimate, along with paid claims and case reserves, to record its best estimate of additional case reserves and IBNR in its consolidated financial statements. Under GAAP, the Company is not permitted to establish estimates for catastrophe claims and claim expense reserves until an event occurs that gives rise to a loss.

Reserving involves other uncertainties, such as the dependence on information from ceding companies, the time lag inherent in reporting information from the primary insurer to the Company or to the Company’s ceding companies, and differing reserving practices among ceding companies. The information received from ceding companies is typically in the form of bordereaux, broker notifications of loss and/or discussions with ceding companies or their brokers. This information may be received on a monthly, quarterly or transactional basis and normally includes paid claims and estimates of case reserves. The Company sometimes also receives an estimate or provision for IBNR. This information is updated and adjusted periodically during the loss settlement period as new data or facts in respect of initial claims, client accounts, industry or event trends may be reported or emerge in addition to changes in applicable statutory and case laws.

The Company’s estimates of large losses are based on factors including currently available information derived from claims information from certain customers and brokers, industry assessments of losses, proprietary models, and the terms and conditions of the Company’s contracts. The uncertainty of the Company’s estimates for large losses is also impacted by the preliminary nature of the information available, the magnitude and relative infrequency of the events, the expected duration of the respective claims development period, inadequacies in the data provided to the relevant date by industry participants and the potential for further reporting lags or insufficiencies; and in certain large losses, significant uncertainty as to the form of the claims and legal issues, under the relevant terms of insurance and reinsurance contracts. In addition, a significant portion of the net claims and claim expenses associated with

certain large losses can be concentrated with a few large clients and therefore the loss estimates for these large losses may vary significantly based on the claims experience of those clients. The contingent nature of business interruption and other exposures will also impact losses in a meaningful way, which may give rise to significant complexity in respect of claims handling, claims adjustment and other coverage issues, over time. Given the magnitude of certain events, there can be meaningful uncertainty regarding total covered losses for the insurance industry and, accordingly, several of the key assumptions underlying the Company's loss estimates. Loss reserve estimation in respect of the Company's retrocessional contracts poses further challenges compared to directly assumed reinsurance. In addition, the Company’s actual net losses from these events may increase if the Company’s reinsurers or other obligors fail to meet their obligations.

The Company reevaluates its actuarial reserving techniques on a periodic basis. Typically, the quarterly review procedures include reviewing paid and reported claims in the most recent reporting period, reviewing the development of paid and reported claims from prior periods, and reviewing the Company’s overall experience by underwriting year and in the aggregate. The Company monitors its expected ultimate claims and claim expense ratios and expected claims reporting assumptions on a quarterly basis and compares them to its actual experience. These actuarial assumptions are generally reviewed annually, based on input from the Company’s actuaries, underwriters, claims personnel and finance professionals, although adjustments may be made more frequently if needed. Assumption changes are made to adjust for changes in the pricing and terms of coverage the Company provides, changes in industry results for similar business, as well as its actual experience to the extent the Company has enough data to rely on its own experience. If the Company determines that adjustments to an earlier estimate are appropriate, such adjustments are recorded in the period in which they are identified.

Because of the inherent uncertainties discussed above, the Company has developed a reserving philosophy that attempts to incorporate prudent assumptions and estimates, and the Company has generally experienced favorable net development on prior accident years net claims and claim expenses in the last several years. However, there is no assurance that this favorable development on prior accident years net claims and claim expenses will occur in future periods.

The Company establishes a provision for unallocated loss adjustment expenses ("ULAE") when the related reserve for claims and claim expenses is established. ULAE are expenses that cannot be associated with a specific claim but are related to claims paid or in the process of settlement, such as internal costs of the claims function, and are included in the reserve for claims and claim expenses. The determination of the ULAE provision is subject to judgment.

Incurred and Paid Claims Development and Reserving Methodology

The information provided herein about incurred and paid accident year claims development for the years ended prior to December 31, 2020 on a consolidated basis and by segment is presented as supplementary information. The Company has applied a retrospective approach with respect to its acquisitions, presenting all relevant historical information for all periods presented. In addition, included in the incurred claims and claim expenses and cumulated paid claims and claim expenses tables below are reconciling items that represents the unamortized balance of fair value adjustments recorded in connection with the acquisitions of Platinum Underwriters Holdings, Ltd. (“Platinum”) and TMR to reflect an increase in net claims and claim expenses due to the addition of a market based risk margin that represented the cost of capital required by a market participant to assume the net claims and claim expenses of Platinum and TMR, partially offset by a decrease from discounting in connection with the acquisitions of Platinum and TMR, to reflect the time value of money.

For incurred and paid accident year claims denominated in foreign currency, the Company used the current year-end balance sheet foreign exchange rate for all periods provided, thereby eliminating the effects of changes in foreign currency translation rates from the incurred and paid accident year claims development information included in the tables below.

The following table details the Company’s consolidated incurred claims and claim expenses and cumulative paid claims and claim expenses as of December 31, 2020, net of reinsurance, as well as IBNR plus additional case reserve (“ACR”) included within the net incurred claims amounts.



	Incurred Claims and Claim Expenses, Net of Reinsurance
	For the year ended December 31,																				At December 31, 2020
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		IBNR and ACR
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
2011	$	2,057,531	$	2,003,446	$	1,905,502	$	1,845,827	$	1,814,478	$	1,775,879	$	1,760,870	$	1,753,974	$	1,741,868	$	1,739,044	$	42,682
2012	—		1,142,390		1,026,595		962,397		930,761		902,432		904,408		910,998		916,065		900,001		33,600
2013	—		—		921,455		896,904		845,473		798,648		774,095		755,412		738,973		736,657		22,627
2014	—		—		—		1,010,256		982,016		972,429		948,224		929,248		926,802		892,597		62,812
2015	—		—		—		—		1,146,737		1,151,413		1,167,569		1,136,753		1,132,034		1,145,196		111,924
2016	—		—		—		—		—		1,429,056		1,475,540		1,457,825		1,454,217		1,403,513		136,821
2017	—		—		—		—		—		—		2,966,271		2,761,844		2,691,020		2,685,050		543,257
2018	—		—		—		—		—		—		—		2,225,968		2,380,979		2,394,667		656,507
2019	—		—		—		—		—		—		—		—		2,234,727		2,229,128		1,167,735
2020	—		—		—		—		—		—		—		—		—		2,980,390		2,462,366
Total																			$	17,106,243	$	5,240,331

	Cumulative Paid Claims and Claim Expenses, Net of Reinsurance
	For the year ended December 31,
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
2011	$	370,083	$	766,658	$	1,204,812	$	1,398,853	$	1,521,666	$	1,566,774	$	1,606,091	$	1,626,868	$	1,642,690	$	1,654,513
2012	—		268,952		419,242		525,208		599,696		651,403		726,192		758,265		789,281		798,486
2013	—		—		133,356		345,709		440,266		503,603		562,764		596,950		625,156		645,255
2014	—		—		—		231,666		438,641		561,274		637,889		699,620		747,069		777,240
2015	—		—		—		—		263,046		499,116		664,213		780,987		877,359		948,787
2016	—		—		—		—		—		288,221		629,894		837,022		978,676		1,089,800
2017	—		—		—		—		—		—		748,714		1,077,845		1,377,696		1,732,228
2018	—		—		—		—		—		—		—		589,357		819,173		1,257,609
2019	—		—		—		—		—		—		—		—		288,435		701,982
2020	—		—		—		—		—		—		—		—		—		390,725
Total																			$	9,996,625
Outstanding liabilities from accident year 2010 and prior, net of reinsurance																			365,294
Claims and claim expenses, net of reinsurance, from the Company's former Bermuda-based insurance operations																			508
Adjustment for unallocated loss adjustment expenses																			57,538
Unamortized fair value adjustments recorded in connection with acquisitions																			(77,830)

Liability for claims and claim expenses, net of reinsurance																			$	7,455,128

Property Segment

Within the Property segment, the Company writes property catastrophe excess of loss reinsurance contracts to insure insurance and reinsurance companies against natural and man-made catastrophes. Under these contracts, the Company indemnifies an insurer or reinsurer when its aggregate paid claims and claim expenses from a single occurrence of a covered peril exceeds the attachment point specified in the contract, up to an amount per loss specified in the contract. Generally, the Company's most significant exposure is to losses from hurricanes, earthquakes and other windstorms, although the Company is also exposed to claims arising from other man-made and natural catastrophes, such as tsunamis, winter storms, freezes, floods, fires, tornadoes, explosions and acts of terrorism. The Company's predominant exposure under such coverage is to property damage. However, other risks, including business interruption and other non-property losses, may also be covered under the Company's catastrophe contracts when arising from a covered peril. The Company's coverages are offered on either a worldwide basis or are limited to selected geographic areas.

Coverage can also vary from “all property” perils to limited coverage on selected perils, such as “earthquake only” coverage. The Company also enters into retrocessional contracts that provide property catastrophe coverage to other reinsurers or retrocedants. This coverage is generally in the form of excess of loss retrocessional contracts and may cover all perils and exposures on a worldwide basis or be limited in scope to selected geographic areas, perils and/or exposures. The exposures the Company assumes from retrocessional business can change within a contract term as the underwriters of a retrocedant may alter their book of business after the retrocessional coverage has been bound. The Company also offers dual trigger reinsurance contracts which require the Company to pay claims based on claims incurred by insurers and reinsurers in addition to the estimate of insured industry losses as reported by referenced statistical reporting agencies.

Also included in the Property segment is property per risk, property (re)insurance, delegated authority arrangements and regional U.S. multi-line reinsurance. The Company's predominant exposure under such coverage is to property damage. However, other risks, including business interruption and other non-property losses, may also be covered when arising from a covered peril. The Company's coverages are offered on either a worldwide basis or are limited to selected geographic areas. Principally all of the business is reinsurance, although the Company also writes insurance business primarily through delegated authority arrangements. The Company offers these products principally through proportional reinsurance coverage or in the form of delegated authority arrangements. In a proportional reinsurance arrangement (also referred to as quota share reinsurance or pro rata reinsurance), the reinsurer shares a proportional part of the original premiums and losses of the reinsured.

Claims and claim expenses in the Company's Property segment are generally characterized by losses of low frequency and high severity. Initial reporting of paid and incurred claims in general, tends to be relatively prompt, particularly for less complex losses. The Company considers this business “short-tail” as compared to the reporting of claims for “long-tail” products, which tends to be slower. However, the timing of claims payment and reporting also varies depending on various factors, including: whether the claims arise under reinsurance of primary insurance companies or reinsurance of other reinsurance companies; the nature of the events (e.g., hurricanes, earthquakes or terrorism); the geographic area involved; post-event inflation which may cause the cost to repair damaged property to increase significantly from current estimates, or for property claims to remain open for a longer period of time, due to limitations on the supply of building materials, labor and other resources; complex policy coverage and other legal issues; and the quality of each client’s claims management and reserving practices. Management’s judgments regarding these factors are reflected in the Company's reserve for claims and claim expenses.

Reserving for most of the Company's Property segment generally does not involve the use of traditional actuarial techniques. Rather, claims and claim expense reserves are estimated by management by completing an in-depth analysis of the individual contracts which may potentially be impacted by the loss. The in-depth analysis generally involves: 1) estimating the size of insured industry losses; 2) reviewing reinsurance contract portfolios to identify contracts which are exposed; 3) reviewing information reported or otherwise provided by customers and brokers; 4) discussing the loss with customers and brokers; and 5) estimating the ultimate expected cost to settle all claims and administrative costs arising from the loss on a contract-by-contract basis and in aggregate for the event. Once a loss has occurred, during the then current reporting period, the Company records its best estimate of the ultimate expected cost to settle all claims arising from the loss. The Company's estimate of claims and claim expense reserves is then determined by deducting cumulative paid losses from its estimate of the ultimate expected loss. The Company’s estimate of IBNR is determined by deducting cumulative paid losses, case reserves and additional case reserves from its estimate of the ultimate expected loss. Once the Company receives a valid notice of loss or payment request under a catastrophe reinsurance contract, it is generally able to process and pay such claims promptly.

Because losses from which claims arise under policies written within the Property segment are typically prominent, public events such as hurricanes and earthquakes, the Company is often able to use independent reports as part of its loss reserve estimation process. The Company also reviews catastrophe bulletins published by various statistical reporting agencies to assist in determining the size of the industry loss, although these reports may not be available for some time after an event.

For smaller events including localized severe weather events such as windstorms, hail, ice, snow, flooding, freezing and tornadoes, which are not necessarily prominent, public occurrences, the Company initially

places greater reliance on catastrophe bulletins published by statistical reporting agencies to assist in determining what events occurred during the reporting period than the Company does for large events. This includes reviewing catastrophe bulletins published by Property Claim Services for U.S. catastrophes. The Company sets its initial estimates of reserves for claims and claim expenses for these smaller events based on a combination of its historical market share for these types of losses and the estimate of the total insured industry property losses as reported by statistical reporting agencies, although management may make significant adjustments based on the Company's current exposure to the geographic region involved as well as the size of the loss and the peril involved. This approach supplements the Company's approach for estimating losses for larger catastrophes, which as discussed above, includes discussions with brokers and ceding companies and reviewing individual contracts impacted by the event. Approximately one year from the date of loss for these small events, the Company typically estimates IBNR for these events by using the paid Bornhuetter-Ferguson actuarial method. The loss development factors for the paid Bornhuetter-Ferguson actuarial method are selected based on a review of the Company's historical experience. There were no significant changes to the Company's paid loss development factors over the last three years.

In general, reserves for the Company's more recent large losses are subject to greater uncertainty and, therefore, greater potential variability, and are likely to experience material changes from one period to the next. This is due to the uncertainty as to the size of the industry losses, uncertainty as to which contracts have been exposed, uncertainty due to complex legal and coverage issues that can arise out of large or complex, and uncertainty as to the magnitude of claims incurred by the Company's customers. As the Company's claims age, more information becomes available and the Company believes its estimates become more certain.

The following table details the Company’s Property segment incurred claims and claim expenses and cumulative paid claims and claim expenses as of December 31, 2020, net of reinsurance, as well as IBNR plus ACR included within the net incurred claims amounts.



	Incurred Claims and Claim Expenses, Net of Reinsurance
	For the year ended December 31,																				At December 31, 2020
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		IBNR and ACR
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
2011	$	1,628,699	$	1,571,670	$	1,501,089	$	1,470,521	$	1,446,398	$	1,415,459	$	1,412,109	$	1,398,038	$	1,379,645	$	1,380,673	$	23,635
2012	—		562,094		431,482		397,075		376,811		359,890		348,108		340,218		335,699		327,407		3,286
2013	—		—		323,743		300,349		277,641		255,322		243,839		240,007		240,252		246,855		1,177
2014	—		—		—		305,033		281,496		267,795		262,696		261,522		258,791		250,617		1,442
2015	—		—		—		—		375,399		359,662		336,705		325,719		314,389		310,317		5,495
2016	—		—		—		—		—		460,422		473,708		457,052		438,040		419,308		18,718
2017	—		—		—		—		—		—		1,649,071		1,467,835		1,360,897		1,364,285		276,858
2018	—		—		—		—		—		—		—		957,622		1,062,871		1,051,617		183,781
2019	—		—		—		—		—		—		—		—		1,014,100		978,600		427,179
2020	—		—		—		—		—		—		—		—		—		1,552,079		1,246,937
Total																			$	7,881,758	$	2,188,508

	Cumulative Paid Claims and Claim Expenses, Net of Reinsurance
	For the year ended December 31,
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
2011	$	305,318	$	627,932	$	1,025,947	$	1,188,978	$	1,278,942	$	1,303,092	$	1,326,439	$	1,332,319	$	1,339,798	$	1,346,335
2012	—		166,143		206,440		254,924		281,594		293,008		307,845		311,179		316,691		317,291
2013	—		—		81,344		158,689		196,171		212,431		220,333		223,822		227,412		232,882
2014	—		—		—		107,075		185,934		224,960		236,789		243,862		247,578		247,165
2015	—		—		—		—		127,314		228,285		262,702		282,362		293,140		297,004
2016	—		—		—		—		—		120,478		260,902		329,543		354,088		374,565
2017	—		—		—		—		—		—		534,752		665,330		823,683		958,207
2018	—		—		—		—		—		—		—		432,075		454,553		667,336
2019	—		—		—		—		—		—		—		—		160,915		377,564
2020	—		—		—		—		—		—		—		—		—		242,624
Total																			$	5,060,973
Outstanding liabilities from accident year 2010 and prior, net of reinsurance																			113,550
Adjustment for unallocated loss adjustment expenses																			13,717
Unamortized fair value adjustments recorded in connection with acquisitions																			(11,795)

Liability for claims and claim expenses, net of reinsurance																			$	2,936,257

Casualty and Specialty Segment

The Company offers its casualty and specialty reinsurance products principally on a proportional basis, and it also provides excess of loss coverage. The Company offers casualty and specialty reinsurance products to insurance and reinsurance companies and provides coverage for specific geographic regions or on a worldwide basis. Principally all of the business is reinsurance, although the Company also writes insurance business.

As with the Company's Property segment, its Casualty and Specialty segment reinsurance contracts can include coverage for relatively large limits or exposures. As a result, the Company's casualty and specialty reinsurance business can be subject to significant claims volatility. In periods of low claims frequency or severity, the Company's results will generally be favorably impacted while in periods of high claims frequency or severity the Company's results will generally be negatively impacted.

The Company's processes and methodologies in respect of loss estimation for the coverages offered through its Casualty and Specialty segment differ from those used for its Property segment. For example, the Company's casualty and specialty coverages are more likely to be impacted by factors such as long-term inflation and changes in the social and legal environment, which the Company believes gives rise to

greater uncertainty in its reserves for claims and claim expenses. Moreover, in many lines of business the Company does not have the benefit of a significant amount of its own historical experience and may have little or no related corporate reserving history in many of its newer or growing lines of business. The Company believes this makes its Casualty and Specialty segment reserving subject to greater uncertainty than its Property segment.

The Company calculates multiple point estimates for claims and claim expense reserves using a variety of actuarial reserving techniques for many, but not all, of its classes of business for each underwriting year within the Casualty and Specialty segment. The Company does not believe that these multiple point estimates are, or should be considered, a range. Rather, the Company considers each class of business and determines the most appropriate point estimate for each underwriting year based on the characteristics of the particular class including: (1) loss development patterns derived from historical data; (2) the credibility of the selected loss development pattern; (3) the stability of the loss development patterns; (4) how developed the underwriting year is; and (5) the observed loss development of other underwriting years for the same class. The Company also considers other relevant factors, including: (1) historical ultimate loss ratios; (2) the presence of individual large losses; and (3) known occurrences that have not yet resulted in reported losses. The Company makes determinations of the most appropriate point estimate of loss for each class based on an evaluation of relevant information and do not ascribe any particular portion of the estimate to a particular factor or consideration. In addition, the Company believes that a review of individual contract information improves the loss estimates for some classes of business.

When developing claims and claims expense reserves for its Casualty and Specialty segment, the Company considers several actuarial techniques such as the expected loss ratio method, the Bornhuetter-Ferguson actuarial method and the paid and reported chain ladder actuarial method.

For classes of business and underwriting years where the Company has limited historical claims experience, estimates of ultimate losses are generally initially determined based on the loss ratio method applied to each underwriting year and to each class of business. Unless the Company has credible claims experience or unfavorable development, it generally selects an ultimate loss based on its initial view of the loss. The selected ultimate losses are determined by multiplying the initial expected loss ratio by the earned premium. The initial expected loss ratios are key inputs that involve management judgment and are based on a variety of factors, including: (1) contract by contract expected loss ratios developed during the Company’s pricing process; (2) historical loss ratios and combined ratios adjusted for rate change and trend; and (3) industry benchmarks for similar business. These judgments take into account management’s view of past, current and future factors that may influence ultimate losses, including: (1) market conditions; (2) changes in the business underwritten; (3) changes in timing of the emergence of claims; and (4) other factors that may influence ultimate loss ratios and losses.

The determination of when reported losses are sufficient and credible to warrant selection of an ultimate loss ratio different from the initial expected loss ratio also requires judgment. The Company generally makes adjustments for reported loss experience indicating unfavorable variances from initial expected loss ratios sooner than reported loss experience indicating favorable variances. This is because the reporting of losses in excess of expectations tends to have greater credibility than an absence or lower than expected level of reported losses. Over time, as a greater number of claims are reported and the credibility of reported losses improves, actuarial estimates of IBNR are typically based on the Bornhuetter-Ferguson actuarial method or the reported chain ladder actuarial method.

The Bornhuetter-Ferguson method allows for greater weight to be applied to expected results in periods where little or no actual experience is available, and, hence, is less susceptible to the potential pitfall of being excessively swayed by experience of actual paid and/or reported loss data, compared to the chain ladder actuarial method. The Bornhuetter-Ferguson method uses the initial expected loss ratio to estimate IBNR, and it assumes that past experience is not fully representative of the future. As the Company’s reserves for claims and claim expenses age, and actual claims experience becomes available, this method places less weight on expected experience and places more weight on actual experience. This experience, which represents the difference between expected reported claims and actual reported claims, is reflected in the respective reporting period as a change in estimate. The utilization of the Bornhuetter-Ferguson method requires the Company to estimate an expected ultimate claims and claim expense ratio and select an expected loss reporting pattern. The Company selects its estimates of the expected ultimate claims and claim expense ratios as described above and selects its expected loss reporting patterns by utilizing

actuarial analysis, including management’s judgment, and historical patterns of paid losses and reporting of case reserves to the Company, as well as industry loss development patterns. The estimated expected claims and claim expense ratio may be modified to the extent that reported losses at a given point in time differ from what would be expected based on the selected loss reporting pattern.

The reported chain ladder actuarial method utilizes actual reported losses and a loss development pattern to determine an estimate of ultimate losses that is independent of the initial expected ultimate loss ratio and earned premium. The Company believes this technique is most appropriate when there are a large number of reported losses with significant statistical credibility and a relatively stable loss development pattern. Information that may cause future loss development patterns to differ from historical loss development patterns is considered and reflected in the Company’s selected loss development patterns as appropriate. For certain reinsurance contracts, historical loss development patterns may be developed from ceding company data or other sources.

In addition, certain specialty coverages may be impacted by natural and man-made catastrophes. The Company estimates reserves for claim and claim expenses for these losses, following a process that is similar to its Property segment described above.

The following table details the Company’s Casualty and Specialty segment incurred claims and claim expenses and cumulative paid claims and claim expenses as of December 31, 2020, net of reinsurance, as well as IBNR plus ACR included within the net incurred claims amounts.



	Incurred Claims and Claim Expenses, Net of Reinsurance
	For the year ended December 31,																				At December 31, 2020
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		IBNR and ACR
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
2011	$	428,832	$	431,776	$	404,413	$	375,306	$	368,080	$	360,420	$	348,761	$	355,936	$	362,223	$	358,371	$	19,047
2012	—		580,296		595,113		565,322		553,950		542,542		556,300		570,780		580,366		572,594		30,314
2013	—		—		597,712		596,555		567,832		543,326		530,256		515,405		498,721		489,802		21,450
2014	—		—		—		705,223		700,520		704,634		685,528		667,726		668,011		641,980		61,370
2015	—		—		—		—		771,338		791,751		830,864		811,034		817,645		834,879		106,429
2016	—		—		—		—		—		968,634		1,001,832		1,000,773		1,016,177		984,205		118,103
2017	—		—		—		—		—		—		1,317,200		1,294,009		1,330,123		1,320,765		266,399
2018	—		—		—		—		—		—		—		1,268,346		1,318,108		1,343,050		472,726
2019	—		—		—		—		—		—		—		—		1,220,627		1,250,528		740,556
2020	—		—		—		—		—		—		—		—		—		1,428,311		1,215,429
Total																			$	9,224,485	$	3,051,823

	Cumulative Paid Claims and Claim Expenses, Net of Reinsurance
	For the year ended December 31,
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
2011	$	64,765	$	138,726	$	178,865	$	209,875	$	242,724	$	263,682	$	279,652	$	294,549	$	302,892	$	308,178
2012	—		102,809		212,802		270,284		318,102		358,395		418,347		447,086		472,590		481,195
2013	—		—		52,012		187,020		244,095		291,172		342,431		373,128		397,744		412,373
2014	—		—		—		124,591		252,707		336,314		401,100		455,758		499,491		530,075
2015	—		—		—		—		135,732		270,831		401,511		498,625		584,219		651,783
2016	—		—		—		—		—		167,743		368,992		507,479		624,588		715,235
2017	—		—		—		—		—		—		213,962		412,515		554,013		774,021
2018	—		—		—		—		—		—		—		157,282		364,620		590,273
2019	—		—		—		—		—		—		—		—		127,520		324,418
2020	—		—		—		—		—		—		—		—		—		148,101
Total																			$	4,935,652
Outstanding liabilities from accident year 2010 and prior, net of reinsurance																			251,744
Adjustment for unallocated loss adjustment expenses																			43,821
Unamortized fair value adjustments recorded in connection with acquisitions																			(66,035)

Liability for claims and claim expenses, net of reinsurance																			$	4,518,363

Prior Year Development of the Reserve for Net Claims and Claim Expenses

The Company's estimates of claims and claim expense reserves are not precise in that, among other things, they are based on predictions of future developments and estimates of future trends and other variable factors. Some, but not all, of the Company's reserves are further subject to the uncertainty inherent in actuarial methodologies and estimates. Because a reserve estimate is simply an insurer's estimate at a point in time of its ultimate liability, and because there are numerous factors that affect reserves and claims payments that cannot be determined with certainty in advance, the Company's ultimate payments will vary, perhaps materially, from its estimates of reserves. If the Company determines in a subsequent period that adjustments to its previously established reserves are appropriate, such adjustments are recorded in the period in which they are identified. On a net basis, the Company's cumulative favorable or unfavorable development is generally reduced by offsetting changes in its reinsurance recoverable, as well as changes to loss related premiums such as reinstatement premiums and redeemable noncontrolling interest, all of which generally move in the opposite direction to changes in the Company's ultimate claims and claim expenses.

The following table details the Company’s prior year net development by segment of its liability for net unpaid claims and claim expenses:



Year ended December 31,	2020		2019		2018
	(Favorable) adverse development		(Favorable) adverse development		(Favorable) adverse development
Property	$	(157,261)	$	(2,933)	$	(221,290)
Casualty and Specialty	(26,763)		(23,882)		(49,262)
Other	212		(40)		(197)
Total net favorable development of prior accident years net claims and claim expenses	$	(183,812)	$	(26,855)	$	(270,749)

Changes to prior year estimated net claims reserves increased net income by $183.8 million during 2020 (2019 - increased net income by $26.9 million, 2018 - increased net income by $270.7 million), excluding the consideration of changes in reinstatement, adjustment or other premium changes, profit commissions, redeemable noncontrolling interest - DaVinciRe and income tax.

Property Segment

The following tables detail the development of the Company’s liability for net unpaid claims and claim expenses for its Property segment, allocated between large and small catastrophe net claims and claim expenses and attritional net claims and claim expenses, included in the other line item:



Year ended December 31,	2020
	(Favorable) adverse development
Catastrophe net claims and claim expenses
Large catastrophe events
2019 Large Loss Events	$	(44,389)
2018 Large Loss Events	(43,991)
2017 Large Loss Events	(32,649)

Other	124
Total large catastrophe events	(120,905)
Small catastrophe events and attritional loss movements










Other small catastrophe events and attritional loss movements	(41,801)
Total small catastrophe events and attritional loss movements	(41,801)
Total catastrophe and attritional net claims and claim expenses	(162,706)


Actuarial assumption changes	5,445

Total net favorable development of prior accident years net claims and claim expenses	$	(157,261)

The net favorable development of prior accident years net claims and claim expenses within the Company’s Property segment in 2020 of $157.3 million was primarily comprised of net favorable development on prior year accident years net claims and claim expenses associated with the following large catastrophe events:

•$44.4 million associated with Hurricane Dorian and Typhoon Faxai, Typhoon Hagibis and certain losses associated with aggregate loss contracts (collectively, the “2019 Large Loss Events”);

•$44.0 million associated with Typhoons Jebi, Mangkhut and Trami, Hurricane Florence, the wildfires in California during the third and fourth quarters of 2018, Hurricane Michael and certain losses associated with aggregate loss contracts (collectively, the “2018 Large Loss Events”); and

•$32.6 million associated with Hurricanes Harvey, Irma and Maria, the Mexico City Earthquake, the wildfires in California during the fourth quarter of 2017 and certain losses associated with aggregate loss contracts (collectively, the “2017 Large Loss Events”).

The Company’s Property segment also experienced net favorable development of $41.8 million associated with a number of other small catastrophe events as well as attritional loss movements related to lines of business where the Company principally estimates net claims and claim expenses using traditional actuarial methods. Partially offsetting these net favorable developments was net adverse development of $5.4 million related to actuarial assumption changes.



Year ended December 31,	2019
	(Favorable) adverse development
Catastrophe net claims and claim expenses
Large catastrophe events
2017 Large Loss Events	$	(101,572)
New Zealand Earthquake (2011)	(7,497)
Tohoku Earthquake and Tsunami (2011)	(5,198)
New Zealand Earthquake (2010)	47,071
2018 Large Loss Events	81,555
Other	(31,916)
Total large catastrophe events	(17,557)
Small catastrophe events and attritional loss movements
Other small catastrophe events and attritional loss movements	5,379
Total small catastrophe events and attritional loss movements	5,379
Total catastrophe and attritional net claims and claim expenses	(12,178)
Actuarial assumption changes	9,245
Total net favorable development of prior accident years net claims and claim expenses	$	(2,933)

The net favorable development of prior accident years net claims and claim expenses within the Company’s Property segment in 2019 of $2.9 million was comprised of net favorable development of $17.6 million related to large catastrophe events, net adverse development of $5.4 million related to small catastrophe events and attritional loss movements and $9.2 million of net adverse development associated with actuarial assumption changes. Included in net favorable development of prior accident years net claims and claim expenses from large events was $101.6 million of decreases in the net estimated ultimate losses associated with the 2017 Large Loss Events, partially offset by $81.6 million of increases in the net estimated ultimate losses associated with the 2018 Large Loss Events and $47.1 million of net increases in the estimated ultimate losses associated with the 2010 New Zealand Earthquake.



Year ended December 31,	2018
	(Favorable) adverse development
Catastrophe net claims and claim expenses
Large catastrophe events
2017 Large Loss Events	$	(172,512)
Other	(9,517)
Total large catastrophe events	(182,029)
Small catastrophe events and attritional loss movements
Other small catastrophe events and attritional loss movements	(33,579)
Total small catastrophe events and attritional loss movements	(33,579)
Total catastrophe and attritional net claims and claim expenses	(215,608)

Actuarial assumption changes	(5,682)

Total net favorable development of prior accident years net claims and claim expenses	$	(221,290)

The net favorable development of prior accident years net claims and claim expenses within the Company’s Property segment in 2018 of $221.3 million was comprised of net favorable development of $182.0 million related to large catastrophe events, net favorable development of $33.6 million related to small catastrophe events and attritional loss movements and $5.7 million of net favorable development associated with

actuarial assumption changes. Included in net favorable development of prior accident years net claims and claim expenses from large events was $172.5 million of decreases in the net estimated ultimate losses associated with the 2017 Large Loss Events. The Company’s Property segment also experienced net favorable development of $33.6 million associated with a number of other small catastrophe events as well as attritional loss movements related to lines of business where the Company principally estimates net claims and claim expenses using traditional actuarial methods.

Casualty and Specialty Segment

The following table details the development of the Company’s liability for unpaid claims and claim expenses for its Casualty and Specialty segment:



Year ended December 31,	2020		2019		2018
	(Favorable) adverse development		(Favorable) adverse development		(Favorable) adverse development
Actuarial methods - actual reported claims less than expected claims	$	(29,280)	$	(52,796)	$	(41,476)

Actuarial assumption changes	2,517		28,914		(7,786)
Total net favorable development of prior accident years net claims and claim expenses	$	(26,763)	$	(23,882)	$	(49,262)

The net favorable development of prior accident years net claims and claim expenses within the Company’s Casualty and Specialty segment in 2020 of $26.8 million was due to reported losses generally coming in lower than expected on attritional net claims and claim expenses across a number of lines of business, partially offset by net adverse development associated with certain actuarial assumption changes.

The net favorable development of prior accident years net claims and claim expenses within the Company’s Casualty and Specialty segment in 2019 of $23.9 million was driven by reported losses generally coming in lower than expected on attritional net claims and claim expenses, partially offset by adverse development associated with certain assumption changes across a number of lines of business.

The net favorable development of prior accident years net claims and claim expenses within the Company’s Casualty and Specialty segment in 2018 of $49.3 million was driven by reported losses generally coming in lower than expected on attritional net claims and claim expenses and certain assumption changes across a number of lines of business.

Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Reserve for Claims and Claim Expenses

The reconciliation of the net incurred and paid claims development tables to the reserve for claims and claim expenses in the consolidated balance sheet is as follows:



At December 31, 2020
Net Reserve for Claims and Claim Expenses
Property	$	2,936,257
Casualty and Specialty	4,518,363
Other	508
Total net reserve for claims and claim expenses	7,455,128

Reinsurance Recoverable
Property	$	1,435,488
Casualty and Specialty	1,490,322
Other	200
Total reinsurance recoverable	2,926,010
Total reserve for claims and claim expenses	$	10,381,138

Historical Claims Duration

The following is unaudited supplementary information about average historical claims duration by segment:



	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Number of Years)
At December 31, 2020	1		2		3		4		5		6		7		8		9		10
Property	28.9	%	17.9	%	18.6	%	9.2	%	5.0	%	2.0	%	1.4	%	0.9	%	0.5	%	0.5	%
Casualty and Specialty	14.0	%	17.8	%	13.4	%	12.0	%	9.2	%	7.7	%	4.8	%	3.9	%	1.8	%	1.5	%

Claims Frequency

Each of the Company’s reportable segments are broadly considered to be assumed reinsurance, where multiple claims are often aggregated, perhaps multiple times through retrocessional reinsurance, before ultimately being ceded to the Company. In addition, the nature, size, terms and conditions of contracts entered into by the Company changes from one accident year to the next and the quantum of contractual or policy limits, and accordingly the potential amount of claims and claim expenses associated with a reported claim, can range from nominal, to significant. These factors can impact the amount and timing of the claims and claim expenses to be recorded and accordingly, developing claim frequency information is highly subjective and is not prepared or utilized for internal purposes. In addition, the Company does not have direct access to claim frequency information underlying certain of its proportional contracts given the nature of that business. As a result, the Company does not believe providing claim frequency information is practicable as it relates to its proportional contracts.

Notwithstanding the factors noted above, the Company has developed claims frequency information associated with its excess of loss reinsurance contracts. As each accident year develops, the Company would expect the cumulative number of reported claims to increase in certain of its excess of loss reinsurance contracts, most notably in its Casualty and Specialty segment. In determining claims frequency for its excess of loss reinsurance contracts, the Company has made the following assumptions:

•Claims below the insured layer of a contract are excluded;

•If an insured loss event results in claims associated with a number of layers of a contract, the Company would consider this to be a single claim; and

•If an insured loss event results in claims associated with a number of the Company's operating subsidiaries, the Company considers each operating subsidiary to have a reported claim.

The following table details the Company's cumulative number of reported claims for its excess of loss reinsurance contracts allocated by segment:



	At December 31, 2020
	Cumulative Number of Reported Claims
Accident Year	Property	Casualty and Specialty
2011	1,394	2,014
2012	922	2,402
2013	803	2,877
2014	762	3,666
2015	772	4,090
2016	1,178	4,600
2017	2,529	3,934
2018	2,418	2,973
2019	1,493	2,080
2020	1,297	612

Assumed Reinsurance Contracts Classified As Deposit Contracts

Net claims and claim expenses incurred were reduced by $0.4 million during 2020 (2019 – $Nil, 2018 – $0.2 million) related to income earned on assumed reinsurance contracts that were classified as deposit contracts with underwriting risk only. Other income was increased by $1.0 million during 2020 (2019 – $1.3 million, 2018 – $11.2 million) related to premiums and losses incurred on assumed reinsurance contracts that were classified as deposit contracts with timing risk only. Aggregate deposit liabilities of $7.5 million are included in reinsurance balances payable at December 31, 2020 (2019 – $9.0 million) and aggregate deposit assets of $Nil are included in other assets at December 31, 2020 (2019 – $Nil) associated with these contracts.