Reserve for Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2023

Reserve for Losses and Loss Adjustment Expenses

The following table presents a reconciliation of unpaid losses and loss adjustment expenses ("LAE") for the nine months ended September 30, 2023 and 2022:


(Expressed in thousands of U.S. Dollars)	2023		2022
Gross unpaid losses and loss expenses, beginning of period	$	2,856,275	$	2,415,491
Reinsurance recoverable on unpaid losses	1,177,863		1,112,543
Net unpaid losses and loss expenses, beginning of period	1,678,412		1,302,948

Net losses and loss expenses incurred in respect of losses occurring in:
Current year	528,457		600,536
Prior years	(8,903)		(3,522)
Total incurred	519,554		597,014

Net losses and loss expenses paid in respect of losses occurring in:
Current year	28,521		18,901
Prior years	397,407		236,661
Total paid	425,928		255,562





Foreign currency revaluation and other	19,661		(39,331)
Net unpaid losses and loss expenses, end of period	1,791,699		1,605,069
Reinsurance recoverable on unpaid losses	1,157,123		1,151,128
Gross unpaid losses and loss expenses, end of period	$	2,948,822	$	2,756,197

Net favorable prior year development of $8.9 million for the nine months ended September 30, 2023 was comprised of $4.9 million and $4.0 million of favorable prior year development on catastrophe and attritional losses, respectively. See below for further details:

•Net favorable development of $20.3 million on specialty contracts, driven by lower than expected claims development across various classes; offset by

•Net unfavorable development of $8.8 million on casualty contracts, primarily related to higher than expected claims development across various classes; and

•Net unfavorable development of $6.6 million on property contracts, primarily driven by higher than expected claims related to Winterstorm Elliott and development on certain attritional claims, including claims arising from exited classes of business.

In addition, casualty business protected by the LPT discussed in Note 7, Reinsurance, recorded favorable gross development, which, in addition to amortization of the associated deferred gain, resulted in a net positive earnings impact of $4.0 million.

Net favorable prior year development of $3.5 million for the nine months ended September 30, 2022 was comprised of $15.0 million of favorable prior year development on catastrophe losses offset by $11.5 million of unfavorable prior year development on attritional losses. See below for further details:

•Net favorable development of $23.6 million on specialty contracts, driven by reductions in loss estimates; and

•Net favorable development of $1.6 million on property contracts, driven by reductions in loss estimates; offset by

•Net unfavorable development of $27.7 million on casualty contracts, including claims arising from exited classes of business.

In addition, casualty business protected by the LPT discussed in Note 7, Reinsurance, recorded favorable gross development which was partially offset by amortization of the associated deferred gain, resulting in a net positive earnings impact of $6.0 million.

Reinsurance recoverable on unpaid losses related to the LPT discussed in Note 7, Reinsurance was recognized for each of the nine months ended September 30, 2023 and 2022 in the reconciliation of beginning and ending gross and net loss and LAE reserves presented above.

The Company amortized acquisition costs of $78.5 million and $65.7 million for the three months ended September 30, 2023 and 2022, respectively, and $220.5 million and $194.8 million for the nine months ended September 30, 2023 and 2022, respectively.

Ukraine Conflict

The estimate of net reserves for losses and loss adjustment expenses related to the ongoing Ukraine conflict is subject to significant uncertainty. As at September 30, 2023 and December 31, 2022, our recorded reserves relating to the Ukraine conflict totaled $66.2 million and $79.3 million, respectively.

Covid-19

Our Covid-19 losses also remain subject to significant uncertainty. Actual ultimate losses for these events may differ materially from the Company's current estimates. As at September 30, 2023 and December 31, 2022, our recorded reserves relating to Covid-19 totaled $13.9 million and $39.0 million, respectively.

While the Company believes, based on current facts and circumstances, that its estimates of net reserves for losses and loss adjustment expenses are adequate for losses and loss adjustment expenses that have been incurred at September 30, 2023, the Company will continue to monitor its assumptions as new information becomes available and will adjust its estimate of net reserves for losses and loss adjustment expenses as appropriate. Actual ultimate losses for these events may differ materially from the Company's current estimates.