Reserve for Loss and Loss Expense

6 Months Ended

Jun. 30, 2020

The table below provides a rollforward of reserve for loss and loss expense balances:



	Six Months ended June 30,
($ in thousands)	2020			2019
Gross reserve for loss and loss expense, at beginning of year	$	4,067,163		3,893,868
Less: reinsurance recoverable on unpaid loss and loss expense, at beginning of year¹	547,066			537,388
Net reserve for loss and loss expense, at beginning of year	3,520,097			3,356,480
Incurred loss and loss expense for claims occurring in the:
Current year	825,201			783,938
Prior years	(20,928		)	(16,375	)
Total incurred loss and loss expense	804,273			767,563
Paid loss and loss expense for claims occurring in the:
Current year	221,422			210,374
Prior years	479,736			442,820
Total paid loss and loss expense	701,158			653,194
Net reserve for loss and loss expense, at end of period	3,623,212			3,470,849
Add: Reinsurance recoverable on unpaid loss and loss expense, at end of period	553,694			556,203
Gross reserve for loss and loss expense at end of period	$	4,176,906		4,027,052

¹Includes an adjustment of $2.9 million related to our adoption of ASU 2016-13. Refer to Note 2. "Adoption of Accounting Pronouncements" for additional information.

Our current year incurred losses of $825.2 million were impacted by catastrophe losses that were $116.4 million in Six Months 2020, compared to $50.3 million in Six Months 2019. In addition, the current year incurred losses include an estimate of $10.0 million for COVID-19-related losses related to a small portion of our policies that include a $25,000 sub-limited coverage for specified extra expenses to clean or disinfect a property when ordered by a Board of Health. As of June 30, 2020, the $10.0 million remained as an IBNR reserve estimate. In most instances, COVID-19 does not cause a direct physical loss to property, and when combined with other policy wording requirements, we do not expect material business interruption losses from COVID-19. It also is our practice to include in, or attach to, all standard lines commercial property and businessowners policies an exclusion that states that all loss or property damage caused by or resulting from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness, or disease is not a covered cause of loss. We also attach a regulatory approved virus exclusion to all standard commercial lines property policies. This exclusion is also included within all of our standard businessowners policies.

Prior year reserve development in Six Months 2020 was favorable by $20.9 million, which included $25.0 million of casualty reserve development, partially offset by $4.1 million of unfavorable property reserve development. The favorable casualty reserve development included $25.0 million of development in our workers compensation lines of business and $10.0 million in our general liability line of business, partially offset by $10.0 million of unfavorable reserve development in our commercial automobile line of business.

Prior year reserve development in Six Months 2019 was favorable by $16.4 million, which was driven by casualty reserve development of $20.0 million in our workers compensation line of business and $7.0 million in our general liability line of business. This was partially offset by $10.6 million of unfavorable property reserve development.