Reserve for Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2024

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, 2024 and 2023:


	Nine Months Ended
	September 30,
($ in thousands)	2024		2023
Gross unpaid losses and loss adjustment expenses, beginning of period	$	3,030,037	$	2,856,275
Reinsurance recoverable on unpaid losses	1,161,077		1,177,863
Net unpaid losses and loss adjustment expenses, beginning of period	1,868,960		1,678,412

Net losses and loss adjustment expenses incurred in respect of losses occurring in:
Current year	726,602		528,457
Prior years	(6,124)		(8,903)
Total incurred	720,478		519,554

Net losses and loss adjustment expenses paid in respect of losses occurring in:
Current year	24,850		28,521
Prior years	344,992		397,407
Total paid	369,842		425,928





Foreign currency revaluation and other	24,739		19,661
Net unpaid losses and loss adjustment expenses, end of period	2,244,335		1,791,699
Reinsurance recoverable on unpaid losses	1,190,465		1,157,123
Gross unpaid losses and loss adjustment expenses, end of period	$	3,434,800	$	2,948,822

Net favorable prior year development of $6.1 million for the nine months ended September 30, 2024 was primarily driven by $13.2 million of favorable prior year development on catastrophe losses, partially offset by $7.1 million of unfavorable development on attritional losses. See below for further details:

•Net favorable development of $26.1 million on property contracts, primarily driven by favorable prior year development on catastrophe losses and overall lower than expected claims development across various classes; partially offset by

•Net unfavorable development of $13.2 million on casualty contracts, primarily driven by higher than expected claims development across certain classes and unfavorable development of one specific large loss; and

•Net unfavorable development of $9.5 million on specialty contracts, primarily driven by two specific large losses; and

•In addition, casualty business protected by the LPT discussed in Note 7, Reinsurance, benefited from favorable development in the underlying reserves of $1.4 million and $1.3 million in amortization of the associated deferred gain, for a total net positive earnings impact of $2.7 million.

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 Elliot and development on certain attritional claims, including claims arising from exited classes of business; and

•In addition, casualty business protected by the LPT discussed in Note 7, Reinsurance, benefited from $2.5 million in amortization of the associated deferred gain, which, in addition to favorable development in the underlying reserves of $1.5 million, had a total net positive earnings impact of $4.0 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, 2024 and 2023 in the reconciliation of beginning and ending gross and net loss and LAE reserves presented above.

Acquisition Costs

The Company amortized acquisition costs of $102.2 million and $78.5 million for the three months ended September 30, 2024 and 2023, respectively, and $283.1 million and $220.5 million for the nine months ended September 30, 2024 and 2023, respectively.

Hurricane Helene

On September 26, 2024, Hurricane Helene made landfall near the Big Bend region of Florida before traveling inland across the southeastern U.S. and dissipating over Tennessee on September 29, 2024. The level of uncertainty within the Company’s loss estimates for Hurricane Helene is increased by the fact that this event occurred in the final days of the fiscal quarter. As at September 30, 2024 and December 31, 2023, our net recorded reserves relating to Hurricane Helene totaled $33.9 million and $Nil, respectively.

Baltimore Bridge

Our net reserves for losses and loss adjustment expenses related to the Francis Scott Key Baltimore Bridge collapse on March 26, 2024 are also subject to significant uncertainty. As at September 30, 2024 and December 31, 2023, our recorded reserves totaled $37.9 million and $Nil, respectively.

Ukraine Conflict

Our net reserves for losses and loss adjustment expenses related to the ongoing Ukraine conflict are also subject to significant uncertainty. As at September 30, 2024 and December 31, 2023, our recorded reserves totaled $63.7 million and $64.9 million, respectively.

Covid-19

Our Covid-19 losses are also subject to significant uncertainty. As at September 30, 2024 and December 31, 2023, our net recorded reserves relating to Covid-19 totaled $15.6 million and $14.1 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, 2024, 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.