Reserve for Claims and Claim Expenses

6 Months Ended

Jun. 30, 2022

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 (“additional case reserves”). 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 unaudited 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 June 30, 2022	Case Reserves		Additional Case Reserves		IBNR		Total
Property	$	1,867,749	$	1,863,120	$	2,168,573	$	5,899,442
Casualty and Specialty	1,875,398		147,793		5,520,173		7,543,364

Total	$	3,743,147	$	2,010,913	$	7,688,746	$	13,442,806

At December 31, 2021
Property	$	1,555,210	$	1,996,760	$	2,825,718	$	6,377,688
Casualty and Specialty	1,784,334		128,065		5,004,543		6,916,942

Total	$	3,339,544	$	2,124,825	$	7,830,261	$	13,294,630

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



Six months ended June 30	2022		2021
Reserve for claims and claim expenses, net of reinsurance recoverable, as of beginning of period	$	9,025,961	$	7,455,128
Net incurred related to:
Current year	1,608,762		1,448,133
Prior years	(60,790)		(61,061)
Total net incurred	1,547,972		1,387,072
Net paid related to:
Current year	41,124		65,278
Prior years	1,129,979		995,826
Total net paid	1,171,103		1,061,104
Foreign exchange (1)	(166,483)		(23,992)



Reserve for claims and claim expenses, net of reinsurance recoverable, as of end of period	9,236,347		7,757,104
Reinsurance recoverable as of end of period	4,206,459		3,187,638
Reserve for claims and claim expenses as of end of period	$	13,442,806	$	10,944,742

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

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:



Six months ended June 30	2022		2021
	(Favorable) adverse development		(Favorable) adverse development
Property	$	(51,810)	$	(56,145)
Casualty and Specialty	(8,980)		(4,916)

Total net (favorable) adverse development of prior accident years net claims and claim expenses	$	(60,790)	$	(61,061)

Changes to prior year estimated net claims reserves decreased net loss by $60.8 million during the six months ended June 30, 2022 (2021 - increased net income by $61.1 million), excluding the consideration of changes in reinstatement, adjustment or other premium changes, profit commissions, redeemable noncontrolling interests - DaVinciRe and Vermeer, 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:



Six months ended June 30	2022
	(Favorable) adverse development
Catastrophe net claims and claim expenses
Large catastrophe events
2021 Weather-Related Large Loss Events	$	4,385
2020 Weather-Related Large Loss Events	(10,887)
2019 Large Loss Events	(25,821)
2018 Large Loss Events	(10,300)
2017 Large Loss Events	(22,143)




Other	(2,578)
Total large catastrophe events	(67,344)
Small catastrophe events and attritional loss movements


Other small catastrophe events and attritional loss movements	15,534
Total small catastrophe events and attritional loss movements	15,534
Total catastrophe and attritional net claims and claim expenses	(51,810)

Total net (favorable) adverse development of prior accident years net claims and claim expenses	$	(51,810)

The net favorable development of prior accident years net claims and claim expenses within the Company’s Property segment for the six months ended June 30, 2022 of $51.8 million included net favorable development on prior accident years net claims and claim expenses associated with the following large catastrophe events:

•$4.4 million of net adverse development associated with Winter Storm Uri, the European Floods, Hurricane Ida, the hail storm in Europe in late June 2021, the wildfires in California during the third quarter of 2021, the tornadoes in the Central and Midwest U.S. in December 2021, the Midwest Derecho in December 2021, and losses associated with aggregate loss contracts (collectively, the “2021 Weather-Related Large Loss Events”);

•$10.9 million of net favorable development associated with Hurricanes Laura, Sally, Isaias, Delta, Zeta and Eta, the California, Oregon and Washington wildfires, Typhoon Maysak, the August 2020 Derecho, and losses associated with aggregate loss contracts (collectively, the “2020 Weather-Related Large Loss Events”);

•$25.8 million of net favorable development associated with Hurricane Dorian and Typhoons Faxai and Hagibis and certain losses associated with aggregate loss contracts (collectively, the “2019 Large Loss Events”);

•$10.3 million of net favorable development 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

•$22.1 million of net favorable development 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 adverse development of $15.5 million in the six months ended June 30, 2022 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.



Six months ended June 30	2021
	(Favorable) adverse development
Catastrophe net claims and claim expenses
Large catastrophe events
2020 Weather-Related Large Loss Events	$	16,932
2019 Large Loss Events	(1,424)
2018 Large Loss Events	(37,910)
2017 Large Loss Events	(5,708)
Other	(2,993)
Total large catastrophe events	(31,103)
Small catastrophe events and attritional loss movements
Other small catastrophe events and attritional loss movements	(25,042)
Total small catastrophe events and attritional loss movements	(25,042)
Total catastrophe and attritional net claims and claim expenses	(56,145)

Total net (favorable) adverse development of prior accident years net claims and claim expenses	$	(56,145)

The net favorable development of prior accident years net claims and claim expenses within the Company’s Property segment in the six months ended June 30, 2021 of $56.1 million was primarily comprised of net favorable development on prior accident years net claims and claim expenses associated with the following large catastrophe events:

•$37.9 million associated with the 2018 Large Loss Events;

•$5.7 million associated with the 2017 Large Loss Events; and partially offset by

•$16.9 million of net adverse development associated with the 2020 Large Loss Events.

The Company’s Property segment also experienced net favorable development of $25.0 million in the six months ended June 30, 2021 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:



Six months ended June 30	2022		2021
	(Favorable) adverse development		(Favorable) adverse development
Actuarial methods - actual reported claims less than expected claims	$	(27,315)	$	(4,916)
Actuarial assumption changes	18,335		—
Total net (favorable) adverse development of prior accident years net claims and claim expenses	$	(8,980)	$	(4,916)

The net favorable development of prior accident years net claims and claim expenses within the Company’s Casualty and Specialty segment of $9.0 million in the six months ended June 30, 2022 was due to reported

losses generally coming in lower than expected on attritional net claims and claim expenses, principally within our specialty lines of business.

The net favorable development of prior accident years net claims and claim expenses within the Company’s Casualty and Specialty segment of $4.9 million in the six months ended June 30, 2021 was also due to reported losses generally coming in lower than expected on attritional net claims and claim expenses, principally within our specialty lines of business.