Reserve for Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2024

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Reserve for Losses and Loss Adjustment Expenses

The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses (“LAE”) for the three months ended March 31:


(In thousands)	2024		2023
Reserve for losses and LAE at beginning of period	$	260,095	$	216,464
Less: Reinsurance recoverables	24,104		14,618
Net reserve for losses and LAE at beginning of period	235,991		201,846

Add provision for losses and LAE, net of reinsurance, occurring in:
Current period	39,396		32,694
Prior years	(29,483)		(32,874)
Net incurred losses and LAE during the current period	9,913		(180)
Deduct payments for losses and LAE, net of reinsurance, occurring in:
Current period	404		—
Prior years	4,846		2,001
Net loss and LAE payments during the current period	5,250		2,001
Net reserve for losses and LAE at end of period	240,654		199,665
Plus: Reinsurance recoverables	26,670		16,357
Reserve for losses and LAE at end of period	$	267,324	$	216,022

For the three months ended March 31, 2024, $4.8 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been a $29.5 million favorable prior year development during the three months ended March 31, 2024. Reserves remaining as of March 31, 2024 for prior years are $201.7 million as a result of re-estimation of unpaid losses and loss adjustment expenses. For the three months ended March 31, 2023, $2.0 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There was a $32.9 million favorable prior year development during the three months ended March 31, 2023. Reserves remaining as of March 31, 2023 for prior years were $167.0 million as a result of re-estimation of unpaid losses and loss adjustment expenses. In both periods, the favorable prior years' loss development was the result of a re-estimation of amounts ultimately to be paid on prior year defaults in the default inventory, including the impact of previously identified defaults that cured. Original estimates are increased or decreased as additional information becomes known regarding individual claims.

The Federal Reserve increased the target federal funds rate several times during 2022 and 2023 in an effort to reduce consumer price inflation. These rate increases have resulted in higher mortgage interest rates which may lower home sale activity and affect the options available to delinquent borrowers. It is reasonably possible that our estimate of losses could change in the near term as a result of changes in the economic environment, the impact of elevated mortgage interest rates on home sale activity, housing inventory and home prices.