Liability for Unpaid Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2022

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,
	2022		2021		2022		2021
Balance at beginning of period	$	244,482	$	315,780	$	346,216	$	322,465
Less: Reinsurance recoverable	(65,403)		(118,671)		(115,860)		(119,522)
Net balance at beginning of period	179,079		197,109		230,356		202,943
Incurred related to:
Current year	196,594		159,490		381,045		304,690
Prior years	3,710		7,731		4,365		6,494
Total incurred	200,304		167,221		385,410		311,184
Paid related to:
Current year	164,888		151,348		236,615		205,829
Prior years	47,118		47,481		211,774		142,797
Total paid	212,006		198,829		448,389		348,626
Net balance at end of period	167,377		165,501		167,377		165,501
Plus: Reinsurance recoverable	18,972		113,157		18,972		113,157
Balance at end of period	$	186,349	$	278,658	$	186,349	$	278,658

During the three months ended June 30, 2022, there was adverse prior years’ reserve development of $63.6 million gross, less $59.9 million ceded, resulting in $3.7 million net unfavorable development. The direct and net prior years’ reserve development for the quarter ended June 30, 2022 was principally due to gross reserve development on Hurricane Irma of $39.3 million, of which $35.6 million was ceded, resulting in net development on Hurricane Irma of $3.7 million in the quarter. In addition to Hurricane Irma development, the Company concluded a favorable commutation during the quarter, favorably increasing ceded prior year loss payments which was offset by a provisory increase in direct prior incurred but not reported (“IBNR”) amount, resulting in no net effect.

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 loss 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 six months ended June 30, 2022, there was adverse prior years’ reserve development of $74.3 million gross, less $69.9 million ceded, resulting in $4.4 million net development. The direct and net prior years’ reserve development for the six months ended June 30, 2022 was principally due to a gross reserve development on Hurricane Irma of $49.8 million, of which $45.6 million was ceded, resulting in net development on Hurricane Irma of $4.2 million in the period. Additionally, the Company concluded a favorable commutation during the quarter, favorably increasing ceded prior year loss payments which was offset by a provisory direct prior year IBNR amount, resulting in no net effect. Hurricane Matthew direct and net losses increased $0.1 million.

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.