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Reserves for Losses and Loss Settlement Expenses | 6 Months Ended
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Jun. 30, 2024
Insurance Loss Reserves [Abstract] |
RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES | RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property or the loss of its income-producing abilities. Casualty insurance is primarily concerned with losses caused by injuries to persons and legal liability imposed on the insured for such injury or for damage to property of others. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation, arising out of events covered by the policy. Liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what we expect to pay for claims that have been reported and those that have been incurred but not reported ("IBNR"), based on known facts, circumstances, and historical trends. Because property and casualty insurance reserves are estimates of the unpaid portions of incurred losses that have been reported to us, as well as losses that have been incurred but not reported, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process. The ultimate cost of losses and related loss settlement expenses may vary materially from recorded amounts. We regularly update our reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported as a component of losses and loss settlement expenses incurred in the period such changes are determined. The determination of reserves (particularly those relating to liability lines of insurance that have relatively longer lag in claim reporting) requires significant work to reasonably project expected future claim reporting and payment patterns. If, during the course of our regular monitoring of reserves, we determine that coverages previously written are incurring higher than expected losses, we will evaluate an appropriate response that may include, among other things, increasing the related reserves. Any adjustments we make to reserves are reflected in operating results in the year in which we make those adjustments. We engage an independent actuary, Regnier Consulting Group, Inc. ("Regnier"), to render an opinion as to the reasonableness of our statutory reserves annually. The actuarial opinion is filed in those states where we are licensed. On a quarterly basis, our actuarial reserving department performs a detailed review of IBNR reserves. This review includes a comparison of results from the most recent analysis of reserves completed by both our internal and external actuaries. Senior management meets with our actuarial team to review, on a regular and quarterly basis, the adequacy of carried reserves based on results from this actuarial analysis. There are two fundamental types or sources of IBNR reserves. We record IBNR reserves for "normal" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate establishing specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate. Our IBNR methodologies and assumptions are reviewed periodically for reasonability. We do not discount loss reserves based on the time value of money. The following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves at June 30, 2024 and December 31, 2023 (net of reinsurance amounts):
| June 30, 2024 |  | December 31, 2023
Gross liability for losses and loss settlement expenses at beginning of year | $ | 1,638,755 |  |  | $ | 1,497,274 |
Ceded losses and loss settlement expenses | (191,640) |  |  | (146,875) |
Net liability for losses and loss settlement expenses at beginning of year | $ | 1,447,115 |  |  | $ | 1,350,399 |
Losses and loss settlement expenses incurred for claims occurring during |  |  |
Current year | $ | 378,121 |  |  | $ | 701,664 |
Prior years | 2,850 |  |  | 67,750 |
Total incurred | $ | 380,971 |  |  | $ | 769,414 |
Losses and loss settlement expense payments for claims occurring during |  |  |
Current year | $ | 61,548 |  |  | $ | 191,899 |
Prior years | 216,453 |  |  | 480,800 |
Total paid | $ | 278,001 |  |  | $ | 672,699 |
Net liability for losses and loss settlement expenses at end of period | $ | 1,550,085 |  |  | $ | 1,447,115 |
Ceded losses and loss settlement expenses | 205,654 |  |  | 191,640 |
Gross liability for losses and loss settlement expenses at end of period | $ | 1,755,739 |  |  | $ | 1,638,755 |
There are a multitude of factors that can impact loss reserve development. Those factors include, but are not limited to: historical data, the potential impact of various loss reserve development factors and trends including historical loss experience, legislative enactments, judicial decisions, legal developments in imposition of damages, experience with alternative dispute resolution, results of our medical bill review process, the potential impact of salvage and subrogation and changes and trends in general economic conditions, including the effects of inflation. All of these factors influence our estimates of required reserves and for long tail lines these factors can change over the course of the settlement of the claim. However, there is no precise method for evaluating the specific monetary impact of any individual factor on the development of reserves. Generally, we base reserves for each claim on the estimated ultimate exposure for that claim. We believe that it is appropriate and reasonable to establish a best estimate for reserves within a range of reasonable estimates, especially when we are reserving for claims for bodily injury, disabilities and similar claims, for which settlements and verdicts can vary widely. We believe our approach produces recorded reserves that are reasonably consistent as to their relative position within a range of reasonable reserves from year-to-year. However, conditions and trends that have affected the reserve development for a given year do change. Because of the type of property coverage we write, we have potential exposure to environmental pollution, mold and asbestos claims. Our underwriters are aware of these exposures and use riders or endorsements to limit exposure. We are not aware of any significant contingent liabilities related to environmental issues. Reserve Development Reserve development in the six-month period ended June 30, 2024 was adverse $2.9 million driven primarily by catastrophe loss development within the Assumed book. In addition, there was proactive strengthening in other liability lines of business due to continued uncertainty in future loss cost trends related to economic and social inflation, offset by favorable development in commercial auto, workers compensation and fire and allied lines. During the first six months of 2023, the Company made additional refinements to its reserve review processes and analyses, including increased segmentation on unique exposures, which resulted in deeper insights and understanding of loss experience and significant movements in reserve development across a range of commercial liability lines of business. The significant driver of the reserve strengthening was an increase in long-tailed other liability reserves primarily due to increased loss cost trends related to economic and social inflation. The commercial automobile line of business also experienced reserve strengthening in reaction to continuing loss trends in post-2020 accident years. These increases were partially offset by favorable development in workers' compensation and fire and allied lines.

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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/disclosureRef -Topic 944 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480081/944-40-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 40 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/944-40/tableOfContent + Details
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