Liability for Unpaid Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 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 September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Balance at beginning of period	$	278,658	$	147,659	$	322,465	$	267,760
Less: Reinsurance recoverable	(113,157)		(26,107)		(119,522)		(123,221)
Net balance at beginning of period	165,501		121,552		202,943		144,539
Incurred related to:
Current year	176,092		208,392		480,782		489,966
Prior years	11,489		30,085		17,983		34,904
Total incurred	187,581		238,477		498,765		524,870
Paid related to:
Current year	180,473		172,977		386,302		355,479
Prior years	42,841		43,661		185,638		170,539
Total paid	223,314		216,638		571,940		526,018
Net balance at end of period	129,768		143,391		129,768		143,391
Plus: Reinsurance recoverable	82,720		59,329		82,720		59,329
Balance at end of period	$	212,488	$	202,720	$	212,488	$	202,720

During the three months ended September 30, 2021, there was adverse prior years’ reserve development of $87.9 million gross, less $76.4 million ceded, resulting in $11.5 million net development. The direct and net prior years’ reserve development for the quarter ended September 30, 2021 was principally due to a direct increase in the ultimate losses for hurricanes of $81.7 million offset by ceded hurricane losses of $76.4 million resulting in net unfavorable development of $5.3 million. Direct losses increased for Hurricanes Irma and Sally. Excluding hurricanes, there was $6.2 million of direct and net prior years’ reserve development for the quarter ended September 30, 2021. This development, primarily from the 2019 and prior accident years, resulted from settlements on litigated claims exceeding prior estimated amounts.

During the three months ended September 30, 2020, there was adverse prior years’ reserve development of $136.7 million gross, less $106.7 million ceded, resulting in $30.1 million net development. The net prior years’ 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 years’ companion claims in the run-up to the expiration of the statutory limitations period for filing Hurricane Irma claims.

During the nine months ended September 30, 2021, there was adverse prior years’ reserve development of $296.9 million gross, less $278.9 million ceded, resulting in $18.0 million net development. The direct and net prior year reserve development for the nine months ended September 30, 2021 was principally due to a direct increase in the ultimate losses for several hurricanes of $282.9 million, offset by ceded hurricane losses of $278.9 million, resulting in net unfavorable reserve development of $4.0 million. Direct losses increased for Hurricanes Irma, Sally, Michael and Matthew. Excluding hurricanes, there was $14.0 million of direct and net prior years’ reserve development for the nine months ended September 30, 2021. This development, primarily from the 2019 and prior accident years, resulted from settlements on litigated claims exceeding prior estimated amounts.

During the nine months ended September 30, 2020, there was adverse prior years’ reserve development of $190.8 million gross, less $155.9 million ceded, resulting in $34.9 million net unfavorable development. The direct and net prior years’ 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 years’ companion claims in the run-up to the expiration of the statutory limitations period for Hurricane Irma.

With respect to hurricanes occurring prior to July 1, 2020, Florida law barred new, supplemental or reopened claims for losses caused by the perils of windstorms or hurricanes unless notice was 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. Effective July 1, 2021, the Florida legislature amended the law to require a new or reopened claim, whether or not attributable to a hurricane, to be filed within two years of the date of loss.