Liability for Unpaid Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2021

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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Balance at beginning of period	$	315,780	$	195,978	$	322,465	$	267,760
Less: Reinsurance recoverable	(118,671)		(66,158)		(119,522)		(123,221)
Net balance at beginning of period	197,109		129,820		202,943		144,539
Incurred related to:
Current year	159,490		150,867		304,690		281,574
Prior years	7,731		478		6,494		4,819
Total incurred	167,221		151,345		311,184		286,393
Paid related to:
Current year	151,348		120,724		205,829		182,502
Prior years	47,481		38,889		142,797		126,878
Total paid	198,829		159,613		348,626		309,380
Net balance at end of period	165,501		121,552		165,501		121,552
Plus: Reinsurance recoverable	113,157		26,107		113,157		26,107
Balance at end of period	$	278,658	$	147,659	$	278,658	$	147,659

For the three months ended June 30, 2021, there was adverse prior years’ reserve development of $116.9 million gross, less $109.2 million ceded, resulting in $7.7 million net development. The direct and net prior years’ reserve development for the quarter ended June 30, 2021 was principally due to a direct increase in the ultimate losses for hurricanes of $109.1 million offset by ceded hurricane losses of $109.2 million resulting in net favorable development of $0.1 million. Direct losses increased for Hurricanes Irma, Sally, Michael and Matthew. Ceded losses benefited from changes to estimated non-Florida reinsurance coverage which has a lower attachment point. As a result of ceded losses exceeding direct losses, net losses development on prior hurricanes was favorable during second quarter of 2021. Excluding hurricanes, there was $7.8 million of direct and net prior years’ reserve development for the quarter ended June 30, 2021. This development, from the 2019 and prior accident years, resulted from the settlement on litigated claims exceeding prior estimated amounts.

During the three months ended June 30, 2020, there was adverse prior years’ reserve development of $11.6 million gross, less $11.1 million ceded, resulting in $0.5 million net development. The direct and net prior years’ reserve development for the quarter ended June 30, 2020 was principally due to an increase in ultimate losses and LAE for Hurricane Matthew.

For the six months ended June 30, 2021, there was adverse prior years’ reserve development of $209.0 million gross, less $202.5 million ceded, resulting in $6.5 million net. The direct and net prior year reserve development for the six months ended June 30, 2021 was principally due to a direct increase in the ultimate losses for several hurricanes of $201.2 million offset by ceded hurricane losses of $202.5 million resulting in net favorable development of $1.3 million. Direct losses increased for Hurricanes Irma, Sally, Michael and Matthew. Ceded losses benefited from changes to estimated non-Florida reinsurance coverage which has a lower attachment point. This benefit was offset by increases in previously estimated losses and LAE on Hurricane Irma for claims which are not recoverable from the Florida Hurricane Catastrophe Fund (“FHCF”). Excluding major hurricanes, there was $7.8 million of direct and net prior years’ reserve development for the six months ended June 30, 2021. This development, from the 2019 and prior accident years, resulted from the settlement on litigated claims exceeding prior estimated amounts.

For the six months ended June 30, 2020, there was adverse prior year reserve development of $54.1 million gross, less $49.3 million ceded, resulting in $4.8 million net. The direct and net prior year reserve development for the six months ended June 30, 2020 was principally due to increased ultimate losses and LAE for Hurricane Irma.