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Loss and Loss Adjustment Expense Reserves | 9 Months Ended
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Sep. 30, 2022
Insurance Loss Reserves [Abstract] |
Loss and Loss Adjustment Expense Reserves | Loss and Loss Adjustment Expense Reserves The following table summarizes the loss and LAE reserve activity of Ark’s insurance and reinsurance subsidiaries for the three and nine months ended September 30, 2022 and 2021:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Millions |  | 2022 |  | 2021 |  | 2022 |  | 2021
Gross beginning balance |  | $ | 1,022.1 |  |  | $ | 760.0 |  |  | $ | 894.7 |  |  | $ | 696.0 |
Less: beginning reinsurance recoverable on unpaid losses (1) |  | (375.5) |  |  | (425.3) |  |  | (428.9) |  |  | (433.4) |
Net loss and LAE reserves |  | 646.6 |  |  | 334.7 |  |  | 465.8 |  |  | 262.6 |
Loss and LAE incurred relating to: |  |  |  |  |  |  |  |
Current year losses |  | 222.9 |  |  | 141.9 |  |  | 491.8 |  |  | 269.0 |
Prior year losses |  | (9.2) |  |  | (12.7) |  |  | (35.6) |  |  | (21.2) |
Net incurred losses and LAE |  | 213.7 |  |  | 129.2 |  |  | 456.2 |  |  | 247.8 |
Loss and LAE paid relating to: |  |  |  |  |  |  |  |
Current year losses |  | (6.1) |  |  | (9.0) |  |  | (20.8) |  |  | (11.5) |
Prior year losses |  | (37.0) |  |  | (20.3) |  |  | (130.8) |  |  | (62.1) |
Net paid loss and LAE |  | (43.1) |  |  | (29.3) |  |  | (151.6) |  |  | (73.6) |
Change in TPC Providers’ participation (2) |  | — |  |  | — |  |  | 57.5 |  |  | (2.2) |
Foreign currency translation and other adjustments to loss and LAE reserves |  | (9.2) |  |  | (1.2) |  |  | (19.9) |  |  | (1.2) |
Net ending balance |  | 808.0 |  |  | 433.4 |  |  | 808.0 |  |  | 433.4 |
Plus: ending reinsurance recoverable on unpaid losses (3) |  | 521.4 |  |  | 457.5 |  |  | 521.4 |  |  | 457.5 |
Gross ending balance |  | $ | 1,329.4 |  |  | $ | 890.9 |  |  | $ | 1,329.4 |  |  | $ | 890.9 |
(1) The beginning reinsurance recoverable on unpaid losses includes amounts attributable to TPC Providers of $182.4 and $314.6 for the three months ended September 30, 2022 and 2021 and $276.8 and $319.2 for the nine months ended September 30, 2022 and 2021. (2) Amount represents the impact to net loss and LAE reserves due to a change in the TPC Providers’ participation related to the annual reinsurance to close (“RITC”) process. (3) The ending reinsurance recoverable on unpaid losses includes amounts attributable to TPC Providers of $168.0 and $299.9 as of September 30, 2022 and 2021. For the three and nine months ended September 30, 2022, Ark recognized $9.2 million and $35.6 million of net favorable prior year loss reserve development. Ark’s net favorable prior year loss reserve development in 2022 was driven primarily by good claims experience across most classes including the property and accident & health and specialty reserving lines of business, predominantly from business underwritten in London. For the three and nine months ended September 30, 2021, Ark recognized $12.7 million and $21.2 million of net favorable prior year loss reserve development. Ark’s net favorable prior year loss reserve development in 2021 was driven primarily by the property and accident & health reserving line of business. TPC Providers’ Participation For the years of account prior to the Ark Transaction, a significant proportion of the Syndicates’ underwriting capital was provided by TPC Providers using whole account reinsurance contracts with Ark’s corporate member. The TPC Providers’ participation in the Syndicates for the 2020 open year of account is 42.8% of the total net result of the Syndicates. For the years of account subsequent to the Ark Transaction, Ark is no longer using TPC Providers to provide underwriting capital for the Syndicates. An RITC agreement is generally put in place after the third year of operations for a year of account such that the outstanding loss and LAE reserves, including future development thereon, are reinsured into the next year of account. As a result, and in combination with the changing participation provided by TPC Providers, Ark’s participation on outstanding loss and LAE reserves reinsured into the next year of account may change, perhaps significantly. During the first quarter of 2022, an RITC was executed such that the outstanding loss and LAE reserves for claims arising out of the 2019 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 58.3%, were reinsured into the 2020 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates is 42.8%. During the first quarter of 2021, an RITC was executed such that the outstanding loss and LAE reserves for claims arising out of the 2018 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 57.6%, were reinsured into the 2019 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 58.3%. Municipal Bond Guarantee Insurance HG Re and BAM do not have any outstanding loss and LAE reserves related to BAM’s municipal bond guarantee insurance business.

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