Liability for Unpaid Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 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 six months ended June 30, 2022 and 2021 on a GAAP basis:


	June 30,
	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	172,243		204,448
Prior years	9,199		29,397
Total incurred	$	181,442	$	233,845
Paid related to:
Current year	70,971		83,188
Prior years	156,918		180,594
Total paid	$	227,889	$	263,782

Net balance at June 30	$	288,403	$	385,283
Plus: reinsurance recoverable on unpaid losses	561,591		751,092
Balance at June 30	$	849,994	$	1,136,375

Composition of reserve for unpaid losses and LAE:
Case reserves	$	357,647	$	417,163
IBNR reserves	492,347		719,212
Balance at June 30	$	849,994	$	1,136,375

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 six months ended June 30, 2022, were lower than the loss payments made during the six months ended June 30, 2021, due to the settling of claims related to the unprecedented number of catastrophic events that took place in 2020. Case and IBNR reserves decreased when compared to the prior period as a result of decreased catastrophe losses and our reduced exposure base in 2022. 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 half of 2021.