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Note 4 - Reserve for Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2023

Reserve for Losses and Loss Adjustment Expenses [Text Block]

4. Reserve for Losses and Loss Adjustment Expenses

The following table represents a reconciliation of changes in the ending reserve balances for losses and loss adjustment expenses (“LAE”):

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2023*			*2022*			*2023*		*2022*
	(in thousands)						(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period	$	81,300		$	55,769		$	77,520	$	45,419
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year		15,116			30,904			50,954		58,703
Prior years		1,023			(4	)		3,742		1,548
Total incurred		16,139			30,900			54,696		60,251
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year		6,646			7,873			14,215		13,762
Prior years		(1,385	)		4,548			25,823		17,660
Total payments		5,261			12,421			40,038		31,422
Reserve for losses and LAE net of reinsurance recoverables at end of period		92,178			74,248			92,178		74,248
Add: Reinsurance recoverables on unpaid losses and LAE at end of period		232,170			131,575			232,170		131,575
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period	$	324,348		$	205,823		$	324,348	$	205,823

Considerable variability is inherent in the estimate of the reserve for losses and LAE. Although management believes the liability recorded for losses and LAE is adequate, the variability inherent in this estimate could result in changes to the ultimate liability, which may be material to stockholders’ equity.

The Company experienced adverse prior year development of $1.0 million and insignificant prior year development during the three months ended September 30, 2023 and 2022, respectively.

The Company experienced adverse prior year development of $3.7 million and adverse prior year development of $1.5 million during the nine months ended September 30, 2023 and 2022, respectively.

Adverse prior year development during the three months ended September 30, 2023 was primarily due to higher than anticipated severity of attritional losses, offset by lower than anticipated severity of catastrophe losses.

Adverse prior year development during the nine months ended September 30, 2023 was primarily due to higher than anticipated severity of attritional losses, offset by lower than anticipated severity of catastrophe losses. Adverse prior year development during the nine months ended September 30, 2022 was primarily due to higher than anticipated severity of attritional and catastrophe losses.