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Reserves For Claims
 12 Months Ended
Dec. 31, 2012
Reserves For Claims [Abstract]  
Reserves For Claims

6. Reserves for Claims

Changes in the reserves for claims for the years ended December 31 are summarized as follows based on the year in which the policies were written:

    2012     2011  
Balance, beginning of year $ 37,996,000   $ 38,198,700  
Provisions related to:            
Current year   7,650,959     6,845,338  
Prior years   (1,578,844 )   (3,502,911 )
Total provision charged to operations   6,072,115     3,342,427  
Claims paid, net of recoveries, related to:            
Current year   (76,288 )   (305,079 )
Prior years   (4,913,827 )   (3,240,048 )
Total claims paid, net of recoveries   (4,990,115 )   (3,545,127 )
Balance, end of year $ 39,078,000   $ 37,996,000  

 

     The Company continually refines its reserve estimates as current loss experience develops and credible data emerges. Movements in the reserves related to prior periods were primarily the result of changes to estimates to better reflect the latest reported loss data. The 2012 calendar year change in the provision relating to prior years resulted mostly from favorable development in 2012 versus prior year related primarily to policy years 2010 and 2011. Due to variances between actual and expected loss payments, loss development is subject to significant variability.

 

     The Company does not recognize claim recoveries until an actual payment has been received by the Company. During 2012, the Company realized claim recoveries of approximately $1,324,000. During 2011, the Company realized claim recoveries of approximately $1,488,000.

The provision for claims as a percentage of net premiums written was 5.9% and 4.1% in 2012 and 2011, respectively.

     A large claim is defined as a claim with incurred losses exceeding $250,000. Due to the small volume of large claims, the long-tail nature of title insurance claims and the inherent uncertainty in loss emergence patterns, large claim activity can vary significantly between policy years. The estimated development of large claims by policy year is therefore subject to significant changes as experience develops.

A summary of the Company's loss reserves, broken down into its components of known title claims and IBNR claims follows:

    2012 %     2011 %  
Known title claims $ 5,166,370 13.2 % $ 6,233,501 16.4 %
IBNR   33,911,630 86.8 %   31,762,499 83.6 %
Total loss reserves $ 39,078,000 100.0 % $ 37,996,000 100.0 %

 

In management's opinion, the reserves are adequate to cover claim losses which might result from pending and future claims.