Liability for Unpaid Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 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 nine months ended September 30, 2022 and 2021 on a GAAP basis:


	September 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	244,910		305,270
Prior years	53,760		31,344
Total incurred	$	298,670	$	336,614
Paid related to:
Current year	106,865		152,415
Prior years	222,005		243,741
Total paid	$	328,870	$	396,156

Net balance at September 30	$	304,650	$	355,678
Plus: reinsurance recoverable on unpaid losses	1,374,917		1,153,799
Balance at September 30	$	1,679,567	$	1,509,477

Composition of reserve for unpaid losses and LAE:
Case reserves	$	331,825	$	499,311
IBNR reserves	1,347,742		1,010,166
Balance at September 30	$	1,679,567	$	1,509,477

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 nine months ended September 30, 2022, were lower than the loss payments made during the nine months ended September 30, 2021, due to the settling of claims during 2021 related to the unprecedented number of catastrophic events that took place in 2020. Case and IBNR reserves and reinsurance recoverable on unpaid losses increased when compared to the prior period as a result of Hurricane Ian, which made landfall during the third quarter of 2022.