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Reserves for Unpaid Losses and Loss Adjustment Expenses | 12 Months Ended
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Dec. 31, 2014
Insurance Loss Reserves [Abstract] |
Reserves for Unpaid Losses and Loss Adjustment Expenses | Reserves for Unpaid Losses and Loss Adjustment Expenses Insurance Operations White Mountains establishes loss and LAE reserves that are estimates of amounts needed to pay claims and related expenses in the future for insured events that have already occurred. The process of estimating reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain. Loss and LAE reserves are typically comprised of (1) case reserves for claims reported and (2) reserves for losses that have occurred but for which claims have not yet been reported, referred to as incurred but not reported (“IBNR”) reserves, which include a provision for expected future development on case reserves. Case reserves are estimated based on the experience and knowledge of claims staff regarding the nature and potential cost of each claim and are adjusted as additional information becomes known or payments are made. IBNR reserves are typically derived by subtracting paid loss and LAE and case reserves from estimates of ultimate loss and LAE. Actuaries estimate ultimate loss and LAE using various generally accepted actuarial methods applied to known losses and other relevant information. Like case reserves, IBNR reserves are adjusted as additional information becomes known or payments are made. Ultimate loss and LAE are generally determined by extrapolation of claim emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future. In forecasting ultimate loss and LAE with respect to any line of business, past experience with respect to that line of business is the primary resource, but cannot be relied upon in isolation. White Mountains’s own experience, particularly claims development experience, such as trends in case reserves, payments on and closings of claims, as well as changes in business mix and coverage limits, is the most important information for estimating its reserves. External data, available from organizations such as statistical bureaus, consulting firms and reinsurance companies, is sometimes used to supplement or corroborate White Mountains’s own experience. External data can be especially useful for estimating costs on new lines of business. Ultimate loss and LAE for major losses and catastrophes are estimated based on the known and expected exposures to the loss event, rather than simply relying on the extrapolation of reported and settled claims. For some lines of business, such as “long-tail” coverages discussed below, claims data reported in the most recent accident or report year is often too limited to provide a meaningful basis for analysis due to the typical delay in reporting and settling of claims. For this type of business, White Mountains uses an expected loss ratio method for the initial accident year or years. This is a standard and accepted actuarial reserve estimation method in these circumstances in which the loss ratio is selected based upon information used in pricing policies for that line of business, as well as any publicly available industry data, such as industry pricing, experience and trends, for that line of business. Uncertainties in estimating ultimate loss and LAE are magnified by the time lag between when a claim actually occurs and when it is reported and eventually settled. This time lag is sometimes referred to as the “claim-tail”. The claim-tail for most property coverages is typically short (usually a few days up to a few months). The claim-tail for liability/casualty coverages, such as automobile liability, general liability, products liability, multiple peril coverage, and workers compensation, can be especially long as claims are often reported and ultimately paid or settled years, even decades, after the related loss events occur. During the long claims reporting and settlement period, additional facts regarding coverages written in prior accident years, as well as about actual claims and trends may become known and, as a result, White Mountains may adjust its reserves. If management determines that an adjustment is appropriate, the adjustment is booked in the accounting period in which such determination is made in accordance with GAAP. Accordingly, should reserves need to be increased or decreased in the future from amounts currently established, future results of operations would be negatively or positively impacted, respectively. In determining ultimate loss and LAE, the cost to indemnify claimants, provide needed legal defense and other services for insureds and administer the investigation and adjustment of claims are considered. These claim costs are influenced by many factors that change over time, such as expanded coverage definitions as a result of new court decisions, inflation in costs to repair or replace damaged property, inflation in the cost of medical services and legislated changes in statutory benefits, as well as by the particular, unique facts that pertain to each claim. As a result, the rate at which claims arose in the past and the costs to settle them may not always be representative of what will occur in the future. The factors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurred losses from historical trends are frequently subject to multiple and conflicting interpretations. Changes in coverage terms or claims handling practices may also cause future experience and/or development patterns to vary from the past. A key objective of actuaries in developing estimates of ultimate loss and LAE, and resulting IBNR reserves, is to identify aberrations and systemic changes occurring within historical experience and accurately adjust for them so that the future can be projected reliably. Because of the factors previously discussed, this process requires the use of informed judgment and is inherently uncertain. White Mountains’s actuaries use several generally accepted actuarial methods to evaluate its loss reserves, each of which has its own strengths and weaknesses. Management places more or less reliance on a particular method based on the facts and circumstances at the time the reserve estimates are made. These methods generally fall into one of the following categories or are hybrids of one or more of the following categories:
• | Historical paid loss development methods: These methods use historical loss payments over discrete periods of time to estimate future losses. Historical paid loss development methods assume that the ratio of losses paid in one period to losses paid in an earlier period will remain constant. These methods necessarily assume that factors that have affected paid losses in the past, such as inflation or the effects of litigation, will remain constant in the future. Because historical paid loss development methods do not use case reserves to estimate ultimate losses, they can be more reliable than the other methods discussed below that look to case reserves (such as actuarial methods that use incurred losses) in situations where there are significant changes in how case reserves are established by a company’s claims adjusters. However, historical paid loss development methods are more leveraged, meaning that small changes in payments have a larger impact on estimates of ultimate losses, than actuarial methods that use incurred losses because cumulative loss payments take much longer to equal the expected ultimate losses than cumulative incurred amounts. In addition, and for similar reasons, historical paid loss development methods are often slow to react to situations when new or different factors arise than those that have affected paid losses in the past.
• | Historical incurred loss development methods: These methods, like historical paid loss development methods, assume that the ratio of losses in one period to losses in an earlier period will remain constant in the future. However, instead of using paid losses, these methods use incurred losses (i.e., the sum of cumulative historical loss payments plus outstanding case reserves) over discrete periods of time to estimate future losses. Historical incurred loss development methods can be preferable to historical paid loss development methods because they explicitly take into account open cases and the claims adjusters’ evaluations of the cost to settle all known claims. However, historical incurred loss development methods necessarily assume that case reserving practices are consistently applied over time. Therefore, when there have been significant changes in how case reserves are established, using incurred loss data to project ultimate losses can be less reliable than other methods.
• | Expected loss ratio methods: These methods are based on the assumption that ultimate losses vary proportionately with premiums. Expected loss ratios are typically developed based upon the information used in pricing, and are multiplied by the total amount of premiums earned to calculate ultimate losses. Expected loss ratio methods are useful for estimating ultimate losses in the early years of long-tailed lines of business, when little or no paid or incurred loss information is available.
• | Adjusted historical paid and incurred loss development methods: These methods take traditional historical paid and incurred loss development methods and adjust them for the estimated impact of changes from the past in factors such as inflation, the speed of claim payments or the adequacy of case reserves. Adjusted historical paid and incurred loss development methods are often more reliable methods of predicting ultimate losses in periods of significant change, provided the actuaries can develop methods to reasonably quantify the impact of changes.
White Mountains performs an actuarial review of its recorded reserves each quarter. White Mountains’s actuaries compare the previous quarter’s estimates of paid loss and LAE, case reserves and IBNR to amounts indicated by actual experience. Differences between previous estimates and actual experience are evaluated to determine whether a given actuarial method for estimating loss and LAE should be relied upon to a greater or lesser extent than it had been in the past. While some variance is expected each quarter due to the inherent uncertainty in loss and LAE, persistent or large variances would indicate that prior assumptions and/or reliance on certain reserving methods may need to be revised going forward. Upon completion of each quarterly review, White Mountains’s actuaries select indicated reserve levels based on the results of the actuarial methods described previously, which are the primary consideration in determining management's best estimate of required reserves. However, in making its best estimate, management also considers other qualitative factors that may lead to a difference between held reserves and actuarially indicated reserves levels in the future. Typically, these factors exist when management and our actuaries conclude that there is insufficient historical incurred and paid loss information or that trends included in the historical incurred and paid loss information are unlikely to repeat in the future. Such factors include, among others, recent entry into new markets or new products, improvements in the claims department that are expected to lessen future ultimate loss costs, legal and regulatory developments, or other volatilities that may arise. Reinsurance Operations Sirius Group establishes loss and LAE reserves that are estimates of future amounts needed to pay claims and related expenses for events that have already occurred. Sirius Group also obtains reinsurance whereby another reinsurer contractually agrees to indemnify White Mountains for all or a portion of the reinsurance risks underwritten by White Mountains. Such arrangements, where one reinsurer provides reinsurance to another reinsurer, are usually referred to as “retrocessional reinsurance” arrangements. White Mountains establishes estimates of amounts recoverable from retrocessional reinsurance in a manner consistent with the loss and LAE liability associated with reinsurance contracts offered to its customers (the “ceding companies”), net of an allowance for uncollectible amounts. Net reinsurance loss reserves represent loss and LAE reserves reduced by retrocessional reinsurance recoverable on unpaid losses. The estimation of net reinsurance loss and LAE reserves is subject to the same risk as the estimation of insurance loss and LAE reserves. In addition to those risk factors which give rise to inherent uncertainties in establishing insurance loss and LAE reserves, the inherent uncertainties of estimating such reserves are even greater for the reinsurer, due primarily to: (1) the claim-tail for reinsurers and insurers working through MGUs being further extended because claims are first reported to either the original primary insurance company or the MGU and then through one or more intermediaries or reinsurers, (2) the diversity of loss development patterns among different types of reinsurance treaties, facultative contracts or direct insurance contracts, (3) the necessary reliance on the ceding companies, intermediaries and MGUs for information regarding reported claims and (4) the differing reserving practices among ceding companies and MGUs. As with insurance reserves, the process of estimating reinsurance reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain. Based on the above, such uncertainty may be larger relative to the reserves for a company that principally writes reinsurance compared to an insurance company, and certainty may take a longer time to emerge. Upon notification of a loss from an insured (typically a ceding company), Sirius Group establishes case reserves, including LAE reserves, based upon Sirius Group’s share of the amount of reserves established by the insured and Sirius Group’s independent evaluation of the loss. In cases where available information indicates that reserves established by a ceding company are inadequate, Sirius Group establishes case reserves or IBNR in excess of its share of the reserves established by the ceding company. Also, in certain instances, Sirius Group may decide not to establish case reserves or IBNR, when the information available indicates that reserves established by ceding companies are not adequately supported. In addition, specific claim information reported by insureds or obtained through claim audits can alert management to emerging trends such as changing legal interpretations of coverage and liability, claims from unexpected sources or classes of business, and significant changes in the frequency or severity of individual claims where customary. Generally, ceding company audits are not customary outside the United States. This information is often used to supplement estimates of IBNR. Although loss and LAE reserves are initially determined based on underwriting and pricing analyses, Sirius Group regularly reviews the adequacy of its recorded reserves by using a variety of generally accepted actuarial methods, including historical incurred and paid loss development methods. If actual loss activity differs substantially from expectations, an adjustment to recorded reserves may be warranted. As time passes, loss reserve estimates for a given year will rely more on actual loss activity and historical patterns than on initial assumptions based on pricing indications. The actuarial methods described above are used to calculate a point estimate of loss and LAE reserves for each company within Sirius Group. These point estimates are then aggregated to produce an actuarial point estimate for the entire segment. Once a point estimate is established, Sirius Group’s actuaries estimate loss reserve ranges to measure the sensitivity of the actuarial assumptions used to set the point estimates. These ranges are calculated from historical variations in loss ratios, payment and reporting patterns by class and type of business. Loss and Loss Adjustment Expense Reserve Summary The following table summarizes the loss and LAE reserve activities of White Mountains’s insurance and reinsurance subsidiaries for the years ended December 31, 2014, 2013 and 2012:
|  | Year Ended December 31,
Millions |  | 2014 |  | 2013 |  | 2012
Gross beginning balance |  | $ | 3,079.3 |  |  | $ | 3,168.9 |  |  | $ | 5,702.3 |
Less beginning reinsurance recoverable on unpaid losses |  | (428.1 | ) |  | (429.1 | ) |  | (2,507.3 | )
Net loss and LAE reserves |  | 2,651.2 |  |  | 2,739.8 |  |  | 3,195.0 |
Less: Beginning net loss and LAE reserves for AutoOne and the Runoff Transaction(1) |  | — |  |  | — |  |  | (383.3 | )
Loss and LAE reserves acquired(2) |  | 45.4 |  |  | 37.7 |  |  | 17.0 |
Loss and LAE reserves consolidated — SSIE |  | 13.6 |  |  | — |  |  | — |
Losses and LAE incurred relating to: |  |  |  |  |  |
Current year losses |  | 1,175.3 |  |  | 1,088.9 |  |  | 1,235.8 |
Prior year losses |  | (6.0 | ) |  | (48.4 | ) |  | (41.9 | )
Total incurred losses and LAE |  | 1,169.3 |  |  | 1,040.5 |  |  | 1,193.9 |
Accretion of fair value adjustment to net loss and LAE reserves |  | 0.7 |  |  | 1.7 |  |  | 10.6 |
Foreign currency translation adjustment to net loss and LAE reserves |  | (36.0 | ) |  | .3 |  |  | 12.9 |
Loss and LAE paid relating to: |  |  |  |  |  |  |  |  |
Current year losses |  | (345.3 | ) |  | (336.2 | ) |  | (404.7 | )
Prior year losses |  | (823.0 | ) |  | (832.6 | ) |  | (901.6 | )
Total loss and LAE payments |  | (1,168.3 | ) |  | (1,168.8 | ) |  | (1,306.3 | )
Net ending balance |  | 2,675.9 |  |  | 2,651.2 |  |  | 2,739.8 |
Plus ending reinsurance recoverable on unpaid losses |  | 483.9 |  |  | 428.1 |  |  | 429.1 |
Gross ending balance |  | $ | 3,159.8 |  |  | $ | 3,079.3 |  |  | $ | 3,168.9 |
(1) | Loss and LAE reserve balances from OneBeacon’s Runoff Business prior to December 31, 2012 were not classified as held for sale. Adjustment is to present loss and LAE reserve activities for continuing operations.
(2) | Loss and LAE reserves acquired in 2014 relate to Sirius Group’s purchase of Olympus Re and loss portfolio transfer from Transamerica. Loss and LAE reserves acquired in 2013 relate to WM Solutions’s purchases of Empire and Ashmere. Loss and LAE reserves acquired in 2012 relate to WM Solutions’s purchases of PICO, Citation, Woodridge and Oakwood.
Loss and LAE development —2014 During the year ended December 31, 2014, White Mountains experienced $6.0 million of net favorable loss reserve development, which consisted of $98.0 million of net favorable loss reserve development at Sirius Group, $89.8 million of net unfavorable loss reserve development at OneBeacon and $2.2 million of net unfavorable loss reserve development at SSIE. Sirius Group’s net favorable loss reserve development primarily related to property ($54.0 million), aviation and space ($13.0 million), accident and health ($13.0 million) lines and casualty ($13.0 million). The casualty reduction is net of a $10.0 million increase in asbestos and environmental loss reserves. For the property loss estimates decrease, $24.0 million represented reduction of loss reserves previously held above the actuarial central estimate. This amount represented an IBNR provision established between 2010-2012 in response to the large catastrophe events, including the 2010 earthquake in Chile, the 2010/2011 earthquakes in New Zealand, the 2011 earthquake in Japan, and hurricane Sandy in 2012, and the inherent uncertainty associated with deriving initial loss estimates. When examined in 2014, the loss estimates for these events had stabilized and had proven to be redundant in aggregate; as a result, the additional amount above the actuarial central estimate was reversed. OneBeacon 2014 Fourth Quarter Loss and LAE Reserve Increase Through the first nine months of 2014, OneBeacon recorded $14.3 million of unfavorable loss and LAE reserve development, driven by greater-than-expected large losses in several underwriting units, primarily in the professional and management liability lines within Professional Insurance. This large loss activity, which occurred mostly during the second and third quarters of 2014, also impacted the current accident year loss and LAE estimates. Additionally, OneBeacon incurred higher-than-usual claim coverage determination costs, a component of LAE expenses, during the first nine months of 2014. Other underwriting units also reported increased claim activity, including the Entertainment, Government Risks, and Accident underwriting units. Since the increased level of loss and LAE activity continued into the early part of the fourth quarter, the high level of activity in the second and third quarters no longer seemed to be isolated occurrences. As such, during the fourth quarter of 2014, OneBeacon enhanced its actuarial and claims review in several areas. OneBeacon isolated the recent large loss activity in each of its underwriting units and examined the emergence of large losses relative to the timing and amounts of expected large losses. OneBeacon also conducted additional analyses in the lawyers’ professional liability line within the Professional Insurance underwriting unit. These new analyses included a claim level review and the application of additional actuarial methods and loss development assumptions. The results of these analyses indicated that the assumed tail risk included in the loss development patterns used to record IBNR reserves for this line were insufficient and needed to be increased for remaining long-tail exposures. OneBeacon’s claims and actuarial staff also conducted an in-depth review of coverage determination, litigation and other claim-specific adjusting expenses as a result of an emerging trend of increased expenses in these areas over recent quarters, particularly coverage determination expenses. This review concluded that the ultimate costs of these loss adjustment expenses were larger than previously estimated, causing management to record an increase in estimated LAE expenses, primarily in Professional Insurance. Finally, OneBeacon also recorded unfavorable prior year development in other underwriting units, including Entertainment and Government Risks. The unfavorable loss development in Entertainment and Government Risks resulted from heavier than expected claim activity during the fourth quarter, predominantly in the general liability and commercial auto liability lines. In order to fully reflect these recent trends, OneBeacon recorded a $109.2 million increase in loss and LAE reserves, which included a $75.5 million increase in prior accident year loss and LAE reserves and a $33.7 million increase in the current accident year loss and LAE reserves recorded at September 30, 2014. The components of the 2014 fourth quarter loss and LAE reserve increase and the net loss and LAE development for the full year are provided below:
Millions |  | 2014 Fourth Quarter Reserve Increases |  | Full Year 2014
Underwriting Unit |  | Current Accident Year |  | Prior Accident Year |  | Total |  | Net Prior Year Development
Professional Insurance |  | $ | 22.9 |  |  | $ | 46.4 |  |  | $ | 69.3 |  |  | $ | 59.1 |
Specialty Property |  | (1.1 | ) |  | 5.7 |  |  | 4.6 |  |  | 1.1 |
Crop |  | 3.8 |  |  | — |  |  | 3.8 |  |  | — |
Other |  | 2.8 |  |  | (.4 | ) |  | 2.4 |  |  | 1.6 |
Specialty Products |  | 28.4 |  |  | 51.7 |  |  | 80.1 |  |  | 61.8 |
Entertainment |  | 1.5 |  |  | 11.6 |  |  | 13.1 |  |  | 13.5 |
Accident |  | — |  |  | 3.5 |  |  | 3.5 |  |  | 6.0 |
Government Risks |  | 1.2 |  |  | 7.1 |  |  | 8.3 |  |  | 8.5 |
Other |  | 2.6 |  |  | 1.6 |  |  | 4.2 |  |  | — |
Specialty Industries |  | 5.3 |  |  | 23.8 |  |  | 29.1 |  |  | 28.0 |
Total |  | $ | 33.7 |  |  | $ | 75.5 |  |  | $ | 109.2 |  |  | $ | 89.8 |
As noted above, OneBeacon increased its provision for current accident year losses and LAE by $33.7 million in the fourth quarter of 2014. In making its loss and LAE reserve picks for the 2014 accident year, OneBeacon considered the results of the enhanced actuarial and claim review and the fact that reported large claims were approaching estimated ultimate held reserves for large losses sooner than originally expected. $3.8 million of the increase is related to higher-than-expected reports of crop losses that emerged in the fourth quarter. The remaining $29.9 million of the increase reflects an increase in management’s best estimate of current losses and LAE as of December 31, 2014 from those recorded in the first nine months of 2014. This increase primarily affected the Professional Insurance underwriting unit, which represented $22.9 million of the total provision. Loss and LAE development —2013 During the year ended December 31, 2013, White Mountains experienced $48.4 million of net favorable loss reserve development, which related entirely to Sirius Group. Sirius Group’s net favorable loss reserve development included $23.9 million of favorable loss reserve development on prior years’ catastrophe losses. Other major reductions in loss reserve estimates recognized included property ($16.6 million), aviation/space ($10.1 million), and accident and health ($9.2 million) lines, partially offset by an $11.8 million increase in asbestos loss reserves. During 2013, OneBeacon experienced no net loss and LAE reserve development on prior accident year reserves. OneBeacon experienced unfavorable development primarily related to property, general liability and accident and health lines, which was offset by favorable development in its other liability and ocean marine lines. Loss and LAE development —2012 During the year ended December 31, 2012, White Mountains experienced $41.9 million of net favorable loss reserve development, which consisted of $7.4 million of net favorable loss reserve development at OneBeacon and $34.5 million of net favorable loss reserve development at Sirius Group. During 2012, OneBeacon experienced $7.4 million of net favorable loss and LAE reserve development on prior accident year reserves. The favorable reserve development at OneBeacon was primarily from workers' compensation, multiple peril liability and general liability lines. This favorable development was offset somewhat by adverse development on excess property claims. In 2012, Sirius Group had net favorable loss reserve development of $34.5 million. The major reductions in loss reserve estimates at Sirius Group were recognized in casualty runoff ($31.5 million), property ($28.4 million), marine/energy ($11.6 million), trade credit ($6.8 million) and aviation/space ($5.3 million) lines, partially offset by a $46.4 million increase in asbestos loss reserves and a $4.3 million increase in accident and health. Fair value adjustment to loss and LAE reserves In connection with purchase accounting for acquisitions, White Mountains is required to adjust loss and LAE reserves and the related reinsurance recoverables to fair value on their respective acquired balance sheets. The net reduction to loss and LAE reserves is being recognized through an income statement charge ratably with and over the period the claims are settled. White Mountains recognized $0.7 million, $1.7 million and $10.6 million of such charges during 2014, 2013 and 2012. As of December 31, 2014, the pre-tax un-accreted adjustment was $4.0 million. Asbestos and Environmental Loss and Loss Adjustment Expense Reserve Activity White Mountains’s reserves include provisions made for claims that assert damages from asbestos and environmental related exposures. Asbestos claims relate primarily to injuries asserted by those who came in contact with asbestos or products containing asbestos. Environmental claims relate primarily to pollution and related clean-up cost obligations, particularly as mandated by U.S. federal and state environmental protection agencies. In addition to the factors described above regarding the reserving process, White Mountains estimates its A&E reserves based upon, among other factors, facts surrounding reported cases and exposures to claims, such as policy limits and deductibles, current law, past and projected claim activity and past settlement values for similar claims, as well as analysis of industry studies and events, such as recent settlements and asbestos-related bankruptcies. The cost of administering A&E claims, which is an important factor in estimating loss reserves, tends to be higher than in the case of non-A&E claims due to the higher legal costs typically associated with A&E claims. Substantially all of OneBeacon's reserves for unpaid loss and LAE for asbestos and environmental exposures were transferred to Armour at the closing of the Runoff Transaction (see Note 22). As of December 31, 2014, the remaining unpaid loss and LAE loss reserves for asbestos and environmental exposures related to continuing operations is less than $1.0 million on both a gross and net basis. Sirius Group's A&E exposure is primarily from reinsurance contracts written between 1974 through 1985 by acquired companies, mainly MONY Reinsurance Company and Christiania General Insurance Company. The exposures are mostly higher layer excess of loss treaty and facultative coverages with relatively low limits exposed for each claim. In 2013 and 2012, Sirius Group increased its net A&E exposure through incoming runoff portfolios acquired by White Mountains Solutions. These acquisitions added $22.9 million in net asbestos reserves and $2.1 million in net environmental reserves in 2014, $13.0 million in net asbestos reserves and $1.0 million in net environmental reserves in 2013, and $11.0 million in net asbestos reserves and $0.7 million in net environmental reserves in 2012. The acquisition of companies having modest portfolios of A&E exposure has been typical of several prior White Mountains Solutions transactions and is likely to be an element of at least some future acquisitions. However, the acquisition of new A&E liabilities is undertaken only after careful due diligence and utilizing conservative reserving assumptions in relation to industry benchmarks. In the case of the portfolios acquired during 2013 and 2012, the exposures arise almost entirely from old assumed reinsurance contracts having small limits of liability. Sirius Group recorded $8.0 million, $11.8 million and $46.4 million of asbestos-related incurred losses and LAE on its already existing asbestos reserves in 2014, 2013 and 2012. The 2013 incurred losses were primarily the result of management’s monitoring of a variety of metrics including actual paid and reported claims activity as compared to the most recent in-depth analysis performed in 2012, net paid and reported survival ratios, peer comparisons, and industry benchmarks. In 2012, the increase in net asbestos losses included $14.0 million in response to Sirius Group’s quarterly monitoring of newly reported claims and $33.0 million as a result of an in-depth analysis of all treaty and facultative contracts likely to have asbestos exposure which examined total expected asbestos losses and LAE from a variety of information sources, including previous asbestos studies, reported client data and external benchmarking scenarios. Sirius Group recorded an increase of $1.6 million and $0.8 million of environmental losses in 2014 and 2013, and a decrease of $0.5 million of environmental losses in 2012 on its already existing reserves. Sirius Group’s net reserves for A&E losses were $210.2 million and $193.9 million as of December 31, 2014 and 2013, respectively. Sirius Group’s A&E three-year net paid survival ratio was approximately 9.0 years and 8.0 years as of December 31, 2014 and 2013. White Mountains’s reserves for A&E losses as of December 31, 2014 represent management’s best estimate of its ultimate liability based on information currently available. However, as case law expands, and medical and clean-up costs increase and industry settlement practices change, White Mountains may be subject to asbestos and environmental losses beyond currently estimated amounts. White Mountains cannot reasonably estimate at the present time loss reserve additions arising from any such future adverse developments and cannot be sure that allocated loss reserves, plus the remaining capacity under the NICO Cover and other reinsurance contracts, will be sufficient to cover additional liability arising from any such adverse developments. Sirius Group
Net A&E Loss Reserve Activity |  | Year Ended December 31,
|  | 2014 |  | 2013 |  | 2012
Millions |  | Gross |  | Net |  | Gross |  | Net |  | Gross |  | Net
Asbestos: |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 207.4 |  |  | $ | 178.7 |  |  | $ | 208.2 |  |  | $ | 174.2 |  |  | $ | 185.1 |  |  | $ | 146.2 |
Losses and LAE acquired |  | 22.9 |  |  | 22.9 |  |  | 13.0 |  |  | 13.0 |  |  | 11.0 |  |  | 11.0 |
Incurred losses and LAE |  | 7.4 |  |  | 8.0 |  |  | 12.1 |  |  | 11.8 |  |  | 46.8 |  |  | 46.4 |
Paid losses and LAE |  | (21.9 | ) |  | (16.8 | ) |  | (25.9 | ) |  | (20.3 | ) |  | (34.7 | ) |  | (29.4 | )
Ending balance |  | 215.8 |  |  | 192.8 |  |  | 207.4 |  |  | 178.7 |  |  | 208.2 |  |  | 174.2 |
Environmental: |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | 20.4 |  |  | 15.2 |  |  | 20.4 |  |  | 15.2 |  |  | 22.1 |  |  | 16.5 |
Losses and LAE acquired |  | 2.1 |  |  | 2.1 |  |  | 1.0 |  |  | 1.0 |  |  | 0.7 |  |  | 0.7 |
Incurred losses and LAE |  | 1.6 |  |  | 1.6 |  |  | .8 |  |  | .8 |  |  | (0.1 | ) |  | (0.5 | )
Paid losses and LAE |  | (1.4 | ) |  | (1.5 | ) |  | (1.8 | ) |  | (1.8 | ) |  | (2.3 | ) |  | (1.5 | )
Ending balance |  | 22.7 |  |  | 17.4 |  |  | 20.4 |  |  | 15.2 |  |  | 20.4 |  |  | 15.2 |
Total asbestos and environmental: |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | 227.8 |  |  | 193.9 |  |  | 228.6 |  |  | 189.4 |  |  | 207.2 |  |  | 162.7 |
Losses and LAE acquired |  | 25.0 |  |  | 25.0 |  |  | 14.0 |  |  | 14.0 |  |  | 11.7 |  |  | 11.7 |
Incurred losses and LAE |  | 9.0 |  |  | 9.6 |  |  | 12.9 |  |  | 12.6 |  |  | 46.7 |  |  | 45.9 |
Paid losses and LAE |  | (23.3 | ) |  | (18.3 | ) |  | (27.7 | ) |  | (22.1 | ) |  | (37.0 | ) |  | (30.9 | )
Ending balance |  | $ | 238.5 |  |  | $ | 210.2 |  |  | $ | 227.8 |  |  | $ | 193.9 |  |  | $ | 228.6 |  |  | $ | 189.4 |

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- Definition The entire disclosure for liabilities related to future policy benefits and unpaid claims and claim adjustments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 13 -Article 7 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 40 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6482485&loc=d3e14764-158437 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 40 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6482852&loc=d3e14931-158439 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6482485&loc=d3e14754-158437 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03.13(a)(1),(b)) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 + Details
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