Liability for Unpaid Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2023

Liability for Unpaid Losses and Loss Adjustment Expenses

Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:


	Quarters Ended March 31,
(Dollars in thousands)	2023		2022
Balance at beginning of period	$	832,404	$	759,904
Less: Ceded reinsurance receivables		73,021		94,443
Net balance at beginning of period		759,383		665,461
Incurred losses and loss adjustment expenses related to:
Current year		88,001		87,758
Prior years		—		(3,063	)
Total incurred losses and loss adjustment expenses		88,001		84,695
Paid losses and loss adjustment expenses related to:
Current year		9,617		13,315
Prior years		53,912		59,703
Total paid losses and loss adjustment expenses		63,529		73,018
Net balance at end of period		783,855		677,138
Plus: Ceded reinsurance receivables		73,665		93,194
Balance at end of period	$	857,520	$	770,332

When analyzing loss reserves and prior year development, the Company considers many factors, including the frequency and severity of claims, loss trends, case reserve settlements that may have resulted in significant development, and any other additional or pertinent factors that may impact reserve estimates.

During the first quarter of 2023, the Company's adjustments to prior accident year loss reserves netted to zero. This consisted of a $1.5 million increase related to Commercial Specialty and a $1.5 million decrease related to Exited Lines.

The $1.5 million increase in prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:

•

Property: A $0.2 million increase primarily recognizes higher than expected claims severity in the 2018 through 2020 and 2022 accident years, mostly offset by a decrease in the 2021 accident year reflecting lower than expected claims severity in that year.

•

General Liability: A $1.3 million increase primarily in accident years prior to 2005 and the 2013, 2015, 2016, 2019, 2020, and 2022 accident years mainly reflects higher than expected claims severity, partially offset by decreases in the 2011 and 2018 accident years.

The $1.5 million decrease in prior accident year loss reserves related to Exited Lines consisted of the following:

•

Property: A $1.0 million decrease in total, mainly in one reinsurance treaty in the 2017 and 2020 accident years based on the reported information from the cedant and decreases in the 2016 and 2018 accident years in property brokerage, partially offset by increases in the 2021 and 2022 accident years in property brokerage, specialty property and farm, ranch & stable lines of business.

•

General Liability: A $0.5 million decrease in total primarily in the 2014 through 2017, 2019 and 2020 accident years, partially offset by increases in the 2018, 2021, and 2022 accident years. These prior year reserve loss adjustments were mainly in the specialty property and farm, ranch & stable lines of business.

During the first quarter of 2022, the Company decreased its prior accident year loss reserves by $3.1 million, which consisted of a $1.9 million increase related to Commercial Specialty and a $4.9 million decrease related to Exited Lines.

The $1.9 million increase of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:

•

Property: A $1.9 million increase primarily recognizes higher than expected claims severity in the 2015, 2018, and 2020 accident years, partially offset by a decrease in the 2019 and 2021 accident years.

The $4.9 million reduction of prior accident year loss reserves related to Exited Lines primarily consisted of the following:

•

Property: A $2.1 million decrease primarily in the 2015, 2018 and 2021 accident years, partially offset by increases in the 2017 and 2020 accident years.

•

General Liability: A $0.6 million decrease primarily in the 2017, 2019, and 2021 accident years partially offset by an increase in the 2018 accident year.

•

Reinsurance: A $2.2 million decrease was primarily from one treaty and in the 2017 through 2021 accident years based on the reported information from the cedant.