We generally use the term loss(es) to collectively refer to both loss and LAE. We establish reserves for both reported and unreported unpaid losses that have occurred at or before the balance sheet date for amounts we estimate we will be required to pay in the future. Our policy is to establish these loss reserves after considering all information known to us at each reporting period. At any given point in time, our loss reserve represents our best estimate of the ultimate settlement and administration cost of our insured claims incurred and unpaid. Since the process of estimating loss reserves requires significant judgment due to a number of variables, such as fluctuations in inflation, judicial decisions, legislative changes and changes in claims handling procedures, our ultimate liability will likely differ from these estimates. We revise our reserve for unpaid losses as additional information becomes available, and reflect adjustments, if any, in our earnings in the periods in which we determine the adjustments are necessary.

•Case reserves - When a claim is reported, we establish an automatic minimum case reserve for that claim type that represents our initial estimate of the losses that will ultimately be paid on the reported claim. Our initial estimate for each claim is based upon averages of loss payments for our prior closed claims made for that claim type. Then, our claims personnel perform an evaluation of the type of claim involved, the circumstances surrounding each claim and the policy provisions relating to the loss and adjust the reserve as necessary. As claims mature, we increase or decrease the reserve estimates as deemed necessary by our claims department based upon additional information we receive regarding the loss, the results of on-site reviews and any other information we gather while reviewing the claims.

•Reserves for losses incurred but not reported (IBNR reserves) - Our IBNR reserves include true IBNR reserves plus “bulk” reserves. Bulk reserves represent additional amounts that cannot be allocated to particular claims, but which are necessary to estimate ultimate losses on reported and unreported claims. We estimate our IBNR reserves by projecting the ultimate losses using the methods discussed below and then deducting actual loss payments and case reserves from the projected ultimate losses. We review and adjust our IBNR reserves on a quarterly basis based on information available to us at the balance sheet date.

When we establish our reserves, we analyze various factors such as our historical loss experience and that of the insurance industry, claims frequency and severity, our business mix, our claims processing procedures, legislative enactments, judicial decisions and legal developments in imposition of damages, and general economic conditions, including inflation. A change in any of these factors from the assumptions implicit in our estimates will cause our ultimate loss experience to be better or worse than indicated by our reserves, and the difference could be material. Due to the interaction of the aforementioned factors, there

is no precise method for evaluating the impact of any one specific factor in isolation, and an element of judgment is ultimately required. Due to the uncertain nature of any projection of the future, the ultimate amount we will pay for losses will be different from the reserves we record. However, in our judgment, we employ techniques and assumptions that are appropriate, and the resulting reserve estimates are reasonable, given the information available at the balance sheet date.

To determine our ultimate losses, we first use multiple actuarial techniques to establish a range of reasonable estimates. These techniques are in line with actuarial standards of practice and actuarial literature. A brief overview of each of these techniques is provided below. We then make additional qualitative considerations for many of the previously mentioned factors and select a point within this range. These ultimate loss estimates include reserves for both reported and unreported claims.

We calculate our estimate of ultimate losses with the following actuarial methods. The methods are applied to paid and incurred loss data. Incurred losses are defined as paid losses plus case reserves. For our loss reserving process, the word “segment” refers to a subgrouping of our claims data, such as by geographic area and/or by particular line of business; it does not refer to operating segments.

•Development Method - The development method is based upon the assumption that the relative change in a given year’s loss estimates from one evaluation point to the next is similar to the relative change in prior years’ reported loss estimates at similar evaluation points. In utilizing this method, actual annual historical loss data is evaluated. Loss development factors (LDFs) are calculated to measure the change in cumulative losses from one evaluation point to the next. These historical LDFs and comparable industry benchmark factors form the basis for selecting the LDFs used in projecting the current valuation of losses to an ultimate basis. When applied to incurred loss data, the implicit assumption is that the relative adequacy of case reserves has been consistent over time, and that there have been no material changes in the rate at which claims have been reported. Applying this method to paid losses avoids potential distortions in the data due to changes in case reserving methodology, but also loses any potentially useful information contained in the current case reserves. The paid development method’s implicit assumption is that the rate of payment of claims has been relatively consistent over time.

•Expected Loss Method - Ultimate loss projections are based upon a prior measure of the anticipated losses, usually relative to a measure of exposure (such as earned house years). An expected loss cost is applied to each year’s measure of exposure to determine estimated ultimate losses for that year. Actual losses are not considered in this calculation. Because the ultimate loss estimates do not change unless the exposures or loss costs change, this method has the advantage of being stable over time. However, the advantage of this stability is offset by a lack of responsiveness since this method does not consider actual loss experience as it emerges. This method assumes that the loss cost per unit of exposure is a good indication of ultimate losses. It can be entirely dependent on pricing assumptions (e.g., historical experience adjusted for loss trend).

•Bornhuetter-Ferguson Method - The Bornhuetter-Ferguson (B-F) method is a credibility weighting procedure that blends the responsiveness of the Development Method with the stability of the Expected Loss Method by setting ultimate losses equal to actual losses plus the expected unreported losses which are based on the Expected Loss Method. As an experience year matures, actual losses gradually move closer to their ultimate levels so reliance on the Expected Loss Method can be reduced.

•Paid-to-Paid Development Method - In addition to the aforementioned methods, we also rely upon the Paid-to-Paid Development Method to project ultimate unallocated loss adjustment expense (ULAE). Ratios of paid ULAE to paid loss and allocated loss adjustment expense are compiled by calendar year and a paid-to-paid ratio selection is made. The selected ratio is applied to the estimated IBNR amounts and one half of this ratio is applied to case reserves. This method is derived from rule of thumb that half of ULAE is incurred when a claim is opened and the other half is incurred over the remaining life of the claim.

Each of these methods has its own strengths and weaknesses that depend upon the circumstances of the segment and the age of the claims experience we analyze. The nature of our book of business allows us to place substantial, but not exclusive, reliance on the loss development methods, and the selected LDFs, represent the most critical aspect of our loss reserving process. We use the same set of LDFs in the methods during our loss reserving process that we also use to calculate the premium necessary to pay expected ultimate losses.

As previously noted, we evaluate several factors when exercising our judgment in the selection of the LDFs that ultimately drive the determination of our loss reserves. The process of establishing our reserves is complex and necessarily imprecise, as it involves using judgment that is affected by many variables. We believe a reasonably-likely change in almost any of these aforementioned factors could have an impact on our reported results, financial condition and liquidity. However, we do not believe any reasonably likely changes in the frequency or severity of claims would have a material impact on us.

On an annual basis, our consulting actuary issues a statement of actuarial opinion that documents the actuary’s evaluation of the adequacy of our unpaid loss obligations under the terms of our policies. We review the analysis underlying the consulting actuary’s opinion and compare the projected ultimate losses to our own estimates to ensure that the reserve for unpaid losses recorded at each annual balance sheet date is based upon all internal and external factors related to known and unknown claims against us and to ensure our reserve is within guidelines promulgated by the National Association of Insurance Commissioners (NAIC).

Our commercial lines claims are handled by Sedgwick Delegated Authority (“SDA”) pursuant to a servicing agreement with AmRisc, as AmCoastal’s exclusive managing general underwriter. We maintain a claims management team that focuses on statutory claim compliance and overall customer satisfaction on these claims. When AmRisc receives a claim, it sends notification to SDA and our claims team. SDA triages all incoming claims to determine whether they can be desk-adjusted or whether SDA will assign the fieldwork to third-party claims adjusting companies. The third-party claims adjusting companies conduct inspections of the damaged property and prepare initial estimates. SDA reviews the reports to determine whether there is a covered loss to be paid to the policyholder in accordance with the terms and conditions of the policy in effect. We have established an authority level with SDA to settle claims on our behalf. If a loss amount exceeds this authority, the approval elevates to AmRisc for review and ultimately to our team for final review if the loss exceeds AmRisc’s established authority level. Our claims team monitors all claims throughout the claims-handling process, regardless of the loss amount.

We maintain an internal and external claims staff that monitors and directs all aspects of our personal lines claims process. We assign the fieldwork to third-party claims adjusting companies, none of whom have the authority to settle or pay any claims on our behalf. The third-party claims adjusting companies conduct inspection of the damaged property and prepare initial estimates. We review the inspection reports and initial estimates to determine the amounts to be paid to the policyholder in accordance with the terms and conditions of the policy in effect at the time that the policyholder incurs the loss.

We maintain strategic relationships with multiple claims adjusting companies that we can engage should we need additional non-catastrophe claims servicing capacity. We believe the combination of our internal resources and relationships with external claims servicing companies provide an adequate level of claims servicing in the event catastrophes affect our policyholders.

The following is information about incurred claims development and paid claims development as of December 31, 2023, net of reinsurance, as well as cumulative claim frequency and the total of IBNR liability plus expected development on reported claims included within the net incurred claims amounts. Please note that a portion of our Commercial Lines Operating Segment is subject to a loss cap which may have been allocated to the incurred table below in a different period than the payment is reflected in the paid table. This may result in a decrease in incurred claims year-over-year. The incurred claims development and paid claims development data reflect the acquisitions of IIC, and AmCo in April 2016, and April 2017, respectively, on a retrospective basis (includes IIC and AmCo data for years prior to our acquisition of the insurance affiliates). The information about incurred claims development and paid claims development for the years ended December 31, 2014 to 2022 is presented as supplementary information.


	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				As of December 31, 2023
																					Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
	For the Years Ended December 31,
																			Audited
Accident Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
2014	$	48,290	$	47,315	$	47,721	$	47,661	$	47,797	$	47,905	$	48,249	$	48,141	$	48,389	$	48,329	$	—	1,881
2015	—		27,812		26,948		25,772		26,272		26,325		26,428		26,693		26,714		26,920		—		2,316
2016	—		—		33,863		33,987		33,471		33,412		33,337		33,320		33,302		33,302		29		785
2017	—		—		—		20,741		21,325		13,864		14,398		14,203		14,183		14,063		28		1,104
2018	—		—		—		—		20,421		18,838		19,138		19,669		20,056		20,307		279		1,373
2019	—		—		—		—		—		14,511		10,084		9,704		9,812		9,562		218		721
2020	—		—		—		—		—		—		24,796		22,184		22,080		22,163		523		791
2021	—		—		—		—		—		—		—		34,129		30,946		30,438		1,757		613
2022	—		—		—		—		—		—		—		—		48,641		49,444		4,653		614
2023	—		—		—		—		—		—		—		—		—		15,474		3,332		639
																	Total		$	270,002


Accident Year	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
																			Audited
	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
2014	$	39,871	$	44,482	$	46,573	$	47,296	$	47,482	$	47,703	$	47,776	$	48,089	$	48,320	$	48,329
2015	—		17,151		24,964		24,863		25,374		26,019		26,125		26,137		26,600		26,920
2016	—		—		26,529		32,715		32,961		33,119		33,252		33,246		33,251		33,273
2017	—		—		—		13,359		19,445		13,374		13,758		13,970		13,835		14,028
2018	—		—		—		—		15,758		17,305		17,780		18,563		19,262		19,325
2019	—		—		—		—		—		6,459		8,481		8,894		9,057		9,195
2020	—		—		—		—		—		—		15,909		19,976		20,592		21,037
2021	—		—		—		—		—		—		—		22,143		26,795		27,207
2022	—		—		—		—		—		—		—		—		32,008		39,759
2023	—		—		—		—		—		—		—		—		—		9,716
																	Total		$	248,789
All outstanding liabilities before 2014, net of reinsurance																			409
	Liabilities for claims and claim adjustment expenses, net of reinsurance																		$	21,622


	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				As of December 31, 2023
																					Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
	For the Years Ended December 31,
																			Audited
Accident Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
2014	$	15,845	$	15,752	$	16,311	$	16,816	$	16,070	$	15,602	$	15,604	$	15,618	$	15,611	$	15,611	$	—	680
2015	—		16,504		20,379		24,563		26,614		26,332		26,910		28,350		28,680		28,678		279		821
2016	—		—		37,837		25,043		22,578		23,816		23,397		23,945		38,526		23,935		351		1,143
2017	—		—		—		70,650		72,135		78,970		83,286		87,833		91,545		80,536		16,647		4,242
2018	—		—		—		—		61,778		64,964		69,203		68,384		84,727		67,238		(429)		3,674
2019	—		—		—		—		—		76,515		70,515		68,900		41,424		70,611		1,899		5,006
2020	—		—		—		—		—		—		67,573		68,165		66,177		75,369		3,408		4,664
2021	—		—		—		—		—		—		—		53,338		38,304		29,991		(4,413)		1,802
2022	—		—		—		—		—		—		—		—		65,255		68,194		18,688		1,515
2023	—		—		—		—		—		—		—		—		—		25,430		15,144		314
																	Total		$	485,593


Accident Year	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
																			Audited
	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
2014	$	6,379	$	9,452	$	13,212	$	14,420	$	15,336	$	15,460	$	15,475	$	15,606	$	15,611	$	15,611
2015	—		10,188		17,134		20,640		22,978		23,605		25,269		27,303		28,024		28,057
2016	—		—		10,638		16,217		19,114		21,410		22,266		23,506		38,063		23,583
2017	—		—		—		40,467		62,353		64,329		73,683		80,460		84,933		54,143
2018	—		—		—		—		27,852		54,551		61,885		66,848		82,443		67,193
2019	—		—		—		—		—		38,428		57,041		62,133		34,768		64,274
2020	—		—		—		—		—		—		25,068		46,535		69,903		74,858
2021	—		—		—		—		—		—		—		19,754		28,506		32,033
2022	—		—		—		—		—		—		—		—		7,742		42,845
2023	—		—		—		—		—		—		—		—		—		8,993
																	Total		$	411,590
All outstanding liabilities before 2014, net of reinsurance																			—
	Liabilities for claims and claim adjustment expenses, net of reinsurance																		$	74,003


	December 31,
	2023		2022
Net outstanding liabilities
Personal Lines Operating Segment	$	21,622	$	24,940
Commercial Lines Operating Segment	74,003		80,256
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	95,625		105,196

Reinsurance recoverable on unpaid claims
Personal Lines Operating Segment	226		674
Commercial Lines Operating Segment	271,722		731,667
Total reinsurance recoverable on unpaid claims	271,948		732,341

Unallocated claims adjustment expenses	2,648		5,421

Total gross liability for unpaid claims and claims adjustment expense	$	370,221	$	842,958


	2023		2022		2021
Balance at January 1	$	842,958	$	250,642	$	363,434
Less: reinsurance recoverable on unpaid losses	732,341		176,183		265,723
Net balance at January 1	$	110,617	$	74,459	$	97,711

Incurred related to:
Current year	75,155		145,675		95,183
Prior years	(12,294)		(10,869)		(6,132)
Total incurred	$	62,861	$	134,806	$	89,051
Paid related to:
Current year	51,133		66,070		64,444
Prior years	24,072		32,577		47,859
Total paid	$	75,205	$	98,647	$	112,303

Net balance at December 31	$	98,273	$	110,617	$	74,459
Plus: reinsurance recoverable on unpaid losses	271,948		732,341		176,183
Balance at December 31	$	370,221	$	842,958	$	250,642

Composition of reserve for unpaid losses and LAE:
Case reserves	$	120,103	$	300,864	$	114,652
IBNR reserves	250,118		542,094		135,990
Balance at December 31	$	370,221	$	842,958	$	250,642

Based upon our internal analysis and our review of the statement of actuarial opinion provided by our actuarial consultants, 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 all three years related to prior year losses. This favorable development came as a result of re-estimating ultimate losses in each year based on historical loss trends. The loss payments made by the Company during the year ended December 31, 2023, were lower than the loss payments made during the year ended December 31, 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.