Liability for Unpaid Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2020

Liability for Unpaid Losses and Loss Adjustment Expenses

Set forth in the following table is the change in liability for unpaid losses and LAE for the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Balance at beginning of period	$	147,659	$	288,296	$	267,760	$	472,829
Less: Reinsurance recoverable	(26,107)		(197,117)		(123,221)		(393,365)
Net balance at beginning of period	121,552		91,179		144,539		79,464
Incurred related to:
Current year	208,392		129,353		489,966		355,258
Prior years	30,085		3,218		34,904		3,703
Total incurred	238,477		132,571		524,870		358,961
Paid related to:
Current year	172,977		137,313		355,479		260,955
Prior years	43,661		30,408		170,539		121,441
Total paid	216,638		167,721		526,018		382,396
Net balance at end of period	143,391		56,029		143,391		56,029
Plus: Reinsurance recoverable	59,329		110,313		59,329		110,313
Balance at end of period	$	202,720	$	166,342	$	202,720	$	166,342

For the three months ended September 30, 2020, there was adverse prior year’s reserve development of $136.7 million gross, less $106.7 million ceded, resulting in $30.1 million net. The net prior year’s reserve development for the quarter ended September 30, 2020 was principally due to increased ultimate losses and LAE for Hurricane Irma not recoverable from the Florida Hurricane Catastrophe Fund (”FHCF”) and increased prior year’s companion claims in the run up to the expiration of the statute of limitations for Hurricane Irma.

For the nine months ended September 30, 2020, there was adverse prior year’s reserve development of $190.8 million gross, less $155.9 million ceded, resulting in $34.9 million net. The direct and net prior year’s reserve development for the nine months ended September 30, 2020 was principally due to increased ultimate losses and LAE for Hurricane Irma not recoverable from the FHCF and increased prior year’s companion claims in the run up to the expiration of the statute of limitations for Hurricane Irma.

Florida law bars new, supplemental or reopened claim for loss caused by the peril of windstorm or hurricane unless notice is provided within three years of the event. In September 2020, the three-year period following Hurricane Irma expired. The Company continues to adjust and settle Hurricane Irma claims that were reported prior to the expiration of the three-year period.

During the nine months ended September 30, 2019, there was adverse prior year’s reserve development of $305.3 million gross, less $301.6 million ceded, resulting in $3.7 million net. Gross prior year’s reserve development was principally the result of an increase in estimated losses and LAE for Hurricane Irma claims, which were fully ceded. Net prior year’s reserve development of $3.7 million principally resulted from a change in the allocation of estimated Hurricane Michael losses and LAE recoveries from the Non-Florida reinsurance coverage to the All States reinsurance coverage. There was no change to gross Hurricane Michael losses. The Non-Florida reinsurance coverage has a lower retention and the change in the allocation of reinsurance recoveries to the All States reinsurance coverage resulted in higher retained losses.