Liability for Unpaid Losses and Loss Adjustment Expenses

12 Months Ended

Dec. 31, 2025

Liability for Unpaid Losses and Loss Adjustment Expenses

The liability for unpaid losses and LAE includes an amount determined from loss reports and individual cases and an

amount, based on past experience, for losses IBNR. The liability for unpaid losses and LAE is reported net of receivables

for salvage and subrogation of approximately $1,209 and $3,650 at December 31, 2025 and December 31, 2024.

The following table provides a reconciliation of changes in the liability for unpaid losses and LAE:


	December 31,
	2025	2024
Unpaid Loss and LAE beginning of period	$475,708	$279,392
Less: Reinsurance recoverables on unpaid losses and LAE	415,086	214,718
Net unpaid loss and LAE at beginning of period	60,622	64,674
Add: Losses and LAE, net of reinsurance, incurred related to:
Current period	99,848	94,019
Prior period	(1,814)	(3,187)
Total net losses and LAE incurred	98,034	90,832
Less: Losses and LAE paid, net of reinsurance, related to:
Current period	45,574	56,038
Prior period	38,827	38,846
Total net paid losses and LAE	84,401	94,884
Unpaid loss and LAE, net of reinsurance at end of period	74,255	60,622
Add: Reinsurance recoverables on unpaid losses and LAE	192,336	415,086
Unpaid loss and LAE at end of period	$266,591	$475,708

During 2025, the liability for unpaid losses and LAE, net of reinsurance, increased by $13,633 from $60,622 as of

December 31, 2024 to $74,255 as of December 31, 2025. The increase was primarily as a result of an increase in reserves

for Citizens, a Florida state-supported insurer, assumed business of $15,560, partially offset by a decrease in reserves

related to non-catastrophe storms.

Prior period development includes changes in estimated losses and LAE for all events occurring in prior periods including

hurricanes and other weather events. In 2025, the Company’s net loss and LAE incurred for the year ended December 31,

2025 reflected a favorable development of $1,814, which was a result of re-estimation of unpaid losses and LAE. These

adjustments are generally the result of ongoing analysis of recent loss development trends. Original estimates are decreased

or increased as additional information becomes known regarding individual claims.

The following is information about incurred and paid loss development as of December 31, 2025, net of reinsurance, as

well as cumulative claim frequency and the total of IBNR liabilities plus expected development on reported claims

included within the net incurred loss amounts. All information is reported in thousands, except for cumulative number of

reported claims, which are shown at the actual counts.

In determining the cumulative number of reported claims, the Company measures claim frequency per policy, per claim

event for all coverages. Reported claims that are closed without an indemnity payment are not included in cumulative

number of reported claims.

The Company compiles and aggregates its claims data by grouping the claims according to the year in which the claim

occurred (“accident year”) when analyzing claim payment and emergence patterns and trends over time. The Company

analyzed the usefulness of disaggregation of its results and determined the characteristics associated with the policies and

the related unpaid loss reserves, incurred losses, and payment patterns are similar in nature. As such, the information about

incurred and paid loss development for the years ended December 31, 2015 to 2024, is presented as supplementary

information.


Incurred Losses and Allocated LAE, Net of Reinsurance
For the years ended December 31,
Accident Year	2015*	2016*	2017*	2018*	2019*	2020*	2021*	2022*	2023*	2024*	2025	Total of IBNR Liabilities Plus Expected Development on Reported Claims	Cumulative Number of Reported Claims
2015	$42,003	$39,623	$46,877	$47,555	$48,545	$48,672	$48,426	$48,853	$49,012	$48,895	$49,086	$19	55,583
2016	—	53,192	51,879	54,306	56,499	57,282	60,983	61,206	61,568	60,855	60,791	66	83,177
2017	—	—	57,286	48,820	26,956	24,139	22,535	18,846	19,453	19,172	19,363	25	266,335
2018	—	—	—	89,565	78,270	82,013	86,354	83,734	84,985	83,191	83,072	72	105,848
2019	—	—	—	—	104,651	107,979	118,580	118,187	121,378	119,509	118,987	553	81,599
2020	—	—	—	—	—	93,727	133,001	134,531	140,552	139,361	139,337	1,344	95,164
2021	—	—	—	—	—	—	78,605	110,218	114,801	116,366	116,347	2,008	47,158
2022	—	—	—	—	—	—	—	91,299	72,343	71,726	76,236	5,388	134,076
2023	—	—	—	—	—	—	—	—	88,840	90,307	94,161	5,337	23,363
2024	—	—	—	—	—	—	—	—	—	94,189	84,378	11,054	29,632
2025	—	—	—	—	—	—	—	—	—	—	99,847	50,565	5,965
										Total	$941,605


Cumulative Paid Losses and Allocated LAE, Net of Reinsurance

For the years ended December 31,
Accident Year	2015*	2016*	2017*	2018*	2019*	2020*	2021*	2022*	2023*	2024*	2025
2015	$20,564	$32,681	$40,904	$45,050	$47,492	$48,396	$48,316	$48,796	$48,905	$48,878	$48,967
2016	—	31,282	42,759	49,237	54,877	56,557	60,486	61,012	61,187	60,759	60,727
2017	—	—	25,224	40,067	24,925	22,207	21,343	18,371	19,012	19,091	19,346
2018	—	—	—	45,454	72,404	77,680	83,699	82,836	83,761	83,091	83,011
2019	—	—	—	—	58,982	95,405	112,510	116,637	117,975	118,521	118,533
2020	—	—	—	—	—	58,376	120,360	130,048	136,788	137,474	138,159
2021	—	—	—	—	—	—	48,184	99,498	108,814	113,529	114,606
2022	—	—	—	—	—	—	—	49,437	56,876	65,080	71,376
2023	—	—	—	—	—	—	—	—	55,107	80,487	89,552
2024	—	—	—	—	—	—	—	—	—	56,037	77,499
2025	—	—	—	—	—	—	—	—	—	—	45,574
										Total	$867,350

* Presented as unaudited required supplementary information.

Reconciliation of the Disclosure of Incurred and Paid Loss Development to the Liability for Unpaid Losses and LAE

The reconciliation of the net incurred and paid loss development tables to the liability for unpaid losses and LAE in the

consolidated balance sheets is as follows:


	December 31, 2025	December 31, 2024
Homeowners’ Insurance Liabilities for unpaid losses and allocated LAE, net of reinsurance	$74,255	$60,622
Reinsurance recoverable on unpaid losses and LAE	192,336	415,086
Total gross liability for unpaid losses and LAE	$266,591	$475,708

The following is supplementary information about average historical claims duration as of December 31, 2025, and is

presented as required supplementary information, which is unaudited.


Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years	1	2	3	4	5	6	7	8	9	10
Homeowners’ Insurance	55%	31%	3%	4%	1%	—%	—%	—%	—%	—%

Basis For Estimating Liabilities For Unpaid Losses And Loss Adjustment Expenses

The Company establishes a liability to provide for the estimated unpaid portion of the costs of paying losses and LAE

under insurance policies issued. Predominately all of the Company’s claims relate to the Company’s core product,

homeowners insurance and the various policy forms in which it is available. The liability for unpaid losses and LAE

consists of the following three main components:

•Case reserves: When claims are reported, the Company establishes individual estimates of the ultimate cost of each

claim (case reserves). These case reserves are continually monitored and revised in response to new information and

for amounts paid.

•Incurred but not reported: In addition to case reserves, the Company establishes a provision for IBNR. IBNR is an

actuarial estimate composed of the following: (i) future payments on claims that are incurred but have not yet been

reported to the Company; (ii) a reserve for the additional development on claims that have been reported to the

Company; and (iii) a provision for additional payments on closed claims that might reopen. IBNR reserves apply to the

entire body of claims arising from a specific period, rather than a specific claim. Most of the Company’s IBNR

reserves relate to estimated future claim payments on recorded open claims.

•LAE reserves: Company’s estimate of the future expense to manage, investigate, administer, and settle claims that

have occurred, and include legal expenses. LAE reserves are established in the aggregate, rather than on a claim-by-

claim basis. LAE reserves are categorized between Allocated LAE, and Unallocated LAE.

A portion of the Company’s obligations for losses and LAE are ceded to unaffiliated reinsurers. The amount of reinsurance

that will be recoverable on losses and LAE reserves includes the reinsurance recoverable from quota share, catastrophe

excess of loss, reinstatement premium protection, per risk excess of loss, and facultative reinsurance contracts.

Characteristics of Reserves and the Actuarial Methods used to Develop Reserve Estimates

The liability for unpaid losses and LAE, also known as reserves, is established based on estimates of the ultimate future

amounts needed to settle claims, either known or unknown, less losses and LAE that have been paid to date. Historically,

claims are typically reported promptly with relatively little reporting lag between the date of occurrence and the date the

loss is reported. Certain number of claims are not known immediately after a loss and insureds are delayed at reporting

those losses to the Company. In the current Florida market, an increased number of claims are reported well after the

purported dates of loss. Reporting delays at times are material. In addition, claims that were settled often are reopened

based on newly reported claim demands from our insureds as a result of third-party representation. The Company is seeing

increased litigation and changes to consumer behavior over the reporting and settlement process especially with Florida-

based claims. The Company’s claim settlement data suggests that the Company’s typical insurance claims have an average

settlement time of less than one year from the reported date unless delayed by some form of litigation or dispute.

Judgment is required in the actuarial estimation of loss reserves, including the selection of various actuarial methodologies

to project the ultimate cost of claims. Specifically, judgment is required in the following areas: the selection of parameters

utilized in the various methodologies; the use of industry data and other benchmarks; and the weighting of differing reserve

indications resulting from alternative methods and assumptions.

The Company’s actuary prepares reserve estimates for all accident years using the Company’s own historical claims data,

industry data and many of the generally accepted actuarial methodologies for estimating loss reserves, such as loss

development, frequency/severity, Bornhuetter-Ferguson expected loss projection, IBNR-to-case outstanding, incremental

cost per closed claim methods, and DCC development methods. Reportable catastrophe and non-catastrophe storms losses

are analyzed and reserved for separately using a frequency and severity approach. These methods vary in their

responsiveness to different information, characteristics, and dynamics in the data, and the results assist the actuary in

considering these characteristics and dynamics in the historical data. The methods employed for each segment of claims

data, and the relative weight accorded to each method, vary depending on the nature of the claims segment and on the age

of the claims.

Each actuarial methodology requires the selection and application of various parameters and assumptions. The key

parameters and assumptions include:

1)Loss development factors (“LDFs”) – These factors are key assumptions in the loss development methods which

assume recent accident years will follow the development patterns of prior accident years.

2)Initial expected loss ratio selections – The initial expected loss ratio selection is the key assumption in the

Bornhuetter-Ferguson methods. The selection was made based on average of development methods loss ratios and

selected loss ratio trend.

3)Claim count decay ratios – The decay ratio is the key assumption in the projection of ultimate claim counts for

catastrophe and non-catastrophe storms.

4)Short-term and long-term projected severity trends – These severity trends are the key assumption in projecting

severities for accident years in their future development periods.

Estimation methods described above each produce estimates of ultimate losses and LAE. Based on the results of these

methods, a single estimate (commonly referred to as an actuarial point/central estimate) of the ultimate loss and LAE is

selected accordingly for each accident-year claim grouping. Estimated IBNR reserves are determined by subtracting

reported losses from the selected ultimate loss, and the paid LAE from the ultimate LAE. The estimated loss IBNR reserves

are added to case reserves to determine total estimated unpaid losses. The estimated IBNR reserves can be negative for an

individual accident-year claim grouping if the selected ultimate loss includes a provision for anticipated subrogation, or if

there is a possibility that case reserves are overstated. The reserving methods are carried out on both a net and direct basis

in order to estimate liabilities accordingly. When selecting a single actuarial point/central estimate on a net basis, careful

consideration is given for the reinsurance arrangements that were in place during each accident year, exposure period and

type of loss being reviewed.

Underwriting results are significantly influenced by the Company’s practices in establishing its estimated liability for

unpaid losses and LAE. The liability is an estimate of amounts necessary to ultimately settle all current and future claims

and LAE on losses occurring during the policy coverage period each year as of the financial statement date.

How Reserve Estimates are Established and Updated

Reserve estimates are developed for both open claims and unreported claims. The actuarial methods described above are

used to derive claim settlement patterns by determining development factors to be applied to specific data elements.

Development factors are calculated for data elements such as claim counts reported and settled, paid losses and paid losses

combined with case reserves, loss expense payments, and subrogation recoveries. Historical development patterns for these

data elements are used as the assumptions to calculate reserve estimates.

Often, different estimates are prepared for each detailed component, incorporating alternative analyses of changing claim

settlement patterns and other influences on losses, from which a best estimate is selected for each component, occasionally

incorporating additional analyses and actuarial judgment as described above. These estimates are not based on a single set

of assumptions. Based on a review of these estimates, the best estimate of required reserves is recorded for each accident

year and the required reserves are summed to create the reserve balance carried in the consolidated balance sheets.

Reserves are re-estimated periodically by combining historical payment and reserving patterns with current actual results.

When actual development of claims reported, paid losses or case reserve changes are different than the historical

development pattern used in a prior period reserve estimate, and as actuarial studies validate new trends based on

indications of updated development factor calculations, new ultimate loss and LAE predictions are determined. This

process incorporates the historic and latest trends, and other underlying changes in the data elements used to calculate

reserve estimates. The difference between indicated reserves based on new reserve estimates and the previously recorded

estimate of reserves is the amount of reserve re-estimates. The resulting increase or decrease in the reserve re-estimates is

recorded and included in “Losses and loss adjustment expenses” in the consolidated statements of operations and

comprehensive income.

Claim frequency

The methodology used to determine claim counts is based first around the event and then based on coverage. One event

could have one or more claims based on the policy coverage, for example an event could have a claim for the first party

coverage and a claim for third-party liability regardless of the number of third-party claimants. If multiple third-party

liability claims are reported together, they would be counted as one claim.