Liability for Unpaid Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2023

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, 2023 and 2022 on a GAAP basis:


	September 30,
	2023		2022
Balance at January 1	$	842,958	$	250,642
Less: reinsurance recoverable on unpaid losses	732,254		176,096
Net balance at January 1	$	110,704	$	74,546

Incurred related to:
Current year	62,756		101,899
Prior years	(11,665)		(8,787)
Total incurred	$	51,091	$	93,112
Paid related to:
Current year	40,768		40,633
Prior years	15,000		29,877
Total paid	$	55,768	$	70,510

Net balance at September 30	$	106,027	$	97,148
Plus: reinsurance recoverable on unpaid losses	337,379		443,034
Balance at September 30	$	443,406	$	540,182

Composition of reserve for unpaid losses and LAE:
Case reserves	$	138,666	$	106,207
IBNR reserves	304,740		433,975
Balance at September 30	$	443,406	$	540,182

Based upon our internal analysis and our review of the annual statement of actuarial opinion provided by our actuarial consultants at December 31, 2022, 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 favorable development in both 2023 and 2022 related to prior year losses. This favorable development came as a result of re-estimating ultimate losses in 2023 based on historical loss trends. The loss payments made by the Company during the nine months ended September 30, 2023, were lower than the loss payments made during the nine months ended September 30, 2022, due to the settling of prior year catastrophe claims, with no similar catastrophe activity occurring in 2023. IBNR reserves and reinsurance recoverable on unpaid losses also decreased when compared to the prior period as a result of Hurricane Ian.