Reserve for Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2025

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)	2025		2024
Reserve for losses and LAE at beginning of period	$	328,866	$	260,095
Less: Reinsurance recoverables	36,754		24,104
Net reserve for losses and LAE at beginning of period	292,112		235,991

Add provision for losses and LAE, net of reinsurance, occurring in:
Current period	49,497		39,396
Prior years	(18,210)		(29,483)
Net incurred losses and LAE during the current period	31,287		9,913
Deduct payments for losses and LAE, net of reinsurance, occurring in:
Current period	51		404
Prior years	7,145		4,846
Net loss and LAE payments during the current period	7,196		5,250
Net reserve for losses and LAE at end of period	316,203		240,654
Plus: Reinsurance recoverables	40,450		26,670
Reserve for losses and LAE at end of period	$	356,653	$	267,324

For the three months ended March 31, 2025, $7.1 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been $18.2 million of favorable prior year development during the three months ended March 31, 2025. Reserves remaining as of March 31, 2025 for prior years are $266.8 million as a result of re-estimation of unpaid losses and loss adjustment expenses. 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 was $29.5 million of favorable prior year development during the three months ended March 31, 2024. Reserves remaining as of March 31, 2024 for prior years were $201.7 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.

On September 26, 2024, Hurricane Helene made landfall and caused property damage in certain counties in Florida, Georgia, South Carolina, North Carolina, Tennessee and Virginia. On October 9, 2024, Hurricane Milton made landfall, causing damage in certain counties in Florida. Loans in default at December 31, 2024 included 2,119 defaults that we identified as hurricane-related defaults. Based on prior industry experience, we expect the ultimate number of hurricane-related defaults that result in claims will be less than the default-to-claim experience of non-hurricane-related defaults. In addition, under our master policy, our exposure may be limited on hurricane-related claims. For example, we are permitted to exclude a claim entirely where damage to the property underlying a mortgage was the proximate cause of the default and adjust a claim where the property underlying a mortgage in default is subject to unrestored physical damage. Accordingly, when establishing our loss reserves as of December 31, 2024, we applied a lower estimated claim rate to new default notices received in the fourth quarter of 2024 from the affected areas than the claim rate we apply to other notices in our default inventory. The impact on our reserves in future periods will be dependent upon the performance of the hurricane-related defaults and our expectations for the amount of ultimate losses on these delinquencies. As of March 31, 2025, the reserves established for the Hurricane Milton and Helene defaults are materially unchanged from December 31, 2024.

In January 2025, several wildfires caused property damage in Southern California. As of January 31, 2025, our insurance in force in areas with Federal Emergency Management Agency ("FEMA") disaster declarations due to these wildfires was less than 0.1% of our total insurance in force. These wildfires have not materially affected our reserves as of March 31, 2025.

The Federal Reserve has increased the target federal funds rate several times during 2022 and 2023 in an effort to reduce consumer price inflation. As a result of progress on inflation, the Federal Reserve reduced the target federal funds rate by 100 basis points since September 2024. Mortgage interest rates remain elevated which has reduced home sale activity and may 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.