Liability for Unpaid Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2022

Liability for unpaid losses and loss adjustment expenses

LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE (LAE)

We determine the reserve for unpaid losses on an individual case basis for all incidents reported. The liability also includes amounts for incurred but not reported (IBNR) claims as of the balance sheet date.

The table below shows the analysis of our reserve for unpaid losses for the three months ended March 31, 2022 and 2021 on a GAAP basis:


	March 31,
	2022		2021
Balance at January 1	$	1,084,450	$	1,089,966
Less: reinsurance recoverable on unpaid losses	749,600		674,746
Net balance at January 1	$	334,850	$	415,220

Incurred related to:
Current year	89,935		86,012
Prior years	1,433		29,769
Total incurred	$	91,368	$	115,781
Paid related to:
Current year	19,141		30,597
Prior years	102,582		103,977
Total paid	$	121,723	$	134,574

Net balance at March 31	$	304,495	$	396,427
Plus: reinsurance recoverable on unpaid losses	662,719		821,364
Balance at March 31	$	967,214	$	1,217,791

Composition of reserve for unpaid losses and LAE:
Case reserves	$	396,020	$	432,537
IBNR reserves	571,194		785,254
Balance at March 31	$	967,214	$	1,217,791

Based upon our internal analysis and our review of the annual statement of actuarial opinion provided by our actuarial consultants at December 31, 2021, we believe that the reserve for unpaid losses reasonably represents the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

As reflected in the table above, we had adverse development in 2022 related to prior year losses. This adverse development came as a result of the strengthening of our catastrophe reserves in 2022 based on historical loss trends. The loss payments made by the Company during the three months ended March 31, 2022, were lower than the loss payments made during the three months ended March 31, 2021, due to the settling of claims related to the unprecedented catastrophe activity that took place in 2020. Case and IBNR reserves decreased when compared to the prior period as a result of Winter Storm Uri, which occurred in the first quarter of 2021. Reinsurance recoverable on unpaid losses decreased as a result of the higher frequency of 2020 catastrophe activity coupled with increases in our ceded losses related to Hurricane Irma and Winter Storm Uri in the first quarter of 2021.