Liability for Unpaid Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 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 June 30,					Six Months Ended June 30,
(Dollars in thousands)	2023		2022			2023		2022
Balance at beginning of period	$	857,520	$	770,332		$	832,404	$	759,904
Less: Ceded reinsurance receivables		73,665		93,194			73,021		94,443
Net balance at beginning of period		783,855		677,138			759,383		665,461
Incurred losses and loss adjustment expenses related to:
Current year		78,031		96,189			166,032		183,947
Prior years		51		(3,571	)		51		(6,634	)
Total incurred losses and loss adjustment expenses		78,082		92,618			166,083		177,313
Paid losses and loss adjustment expenses related to:
Current year		24,565		29,079			34,184		42,394
Prior years		44,354		30,201			98,264		89,904
Total paid losses and loss adjustment expenses		68,919		59,280			132,448		132,298
Net balance at end of period		793,018		710,476			793,018		710,476
Plus: Ceded reinsurance receivables		73,933		94,185			73,933		94,185
Balance at end of period	$	866,951	$	804,661		$	866,951	$	804,661

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 second quarter of 2023, the Company's increased its prior accident year loss reserves by $0.1 million, which consisted of a $5.0 million increase related to Commercial Specialty, a $1.0 million increase related to Reinsurance Operations, and a $5.9 million decrease related to Exited Lines.

The $5.0 million increase in prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:

•

Property: A $1.0 million decrease primarily recognizes lower than expected claims severity in the 2020 and 2022 accident years, partially offset by increases in the 2015 accident year.

•

General Liability: A $6.1 million increase primarily recognizes higher than expected claims severity in the 2017 through 2022 accident years partially offset by decreases in accident years prior to 2006 primarily related to construction defect.

The $1.0 million increase of prior accident year loss reserves related to Reinsurance Operations primarily consisted of the following:

•

Professional: A $1.1 million increase in the 2022 accident year recognizes higher prior accident year case incurred emergence than expected.

•

General Liability: A $0.1 million decrease based on information received from the cedants.

The $5.9 million decrease in prior accident year loss reserves related to Exited Lines primarily consisted of the following:

•

Property: A $1.1 million increase primarily in Property Brokerage. The increase reflects higher than expected claims severity in the 2014, 2021 and 2022 accident years partially offset by lower than expected severity in the 2017 and 2020 accident years.

•

Reinsurance: A $6.2 million decrease in the 2012 and 2015 through 2021 accident years based on information received from cedants, primarily in the property treaties.

•

General Liability: A $0.9 million decrease primarily recognizes lower than expected severity in the 2014 through 2017 accident years, partially offset by an increase in the 2019 accident year.

During the second quarter of 2022, the Company decreased its prior accident year loss reserves by $3.6 million, which consisted of a $2.3 million decrease related to Commercial Specialty, a $1.2 million decrease related to Reinsurance Operations, and a $0.1 million decrease related to Exited Lines.

The $2.3 million decrease of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:

•

Property: A $3.4 million decrease primarily recognizes lower than expected claims severity in the 2015 and 2018 through 2021 accident years.

•

General Liability: A $1.2 million increase reflects higher than expected claims severity in accident years prior to 2005, 2016, 2017, 2019 and 2020 accident years, partially offset by decreases in the 2010 through 2015, 2018 and 2021 accident years.

The $1.2 million reduction of prior accident year loss reserves related to Reinsurance Operations primarily consisted of the following:

•

Professional: A $1.2 million decrease was recognized in the 2016 accident year reflecting a reduction in the ultimate for the claims-made segment; the inception-to-date case incurred remains zero in this year.

The $0.1 million reduction of prior accident year loss reserves related to Exited Lines consisted of the following:

•

Property: A $2.0 million increase reflects higher than expected claims severity in the 2015 through 2018 accident years, partially offset by a decrease in the 2011 and 2021 accident years.

•

Reinsurance: A $2.1 million decrease primarily in the 2017 through the 2021 accident years based on the reported information from cedants.

During the first six months of 2023, the Company increased its prior accident year loss reserves by $0.1 million, which consisted of a $6.5 million increase related to Commercial Specialty, a $1.0 million increase related to Reinsurance Operations, and a $7.4 million decrease related to Exited Lines.

The $6.5 million increase of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:

•

Property: A $0.8 million decrease recognizes lower than expected claims severity in the 2021 accident year, partially offset by increases in the 2015, 2019, 2020, and 2022 accident years.

•

General Liability: A $7.3 million increase recognizes higher than expected claims severity in the 2013, 2015, 2017, and 2019 through 2022 accident years, partially offset by decreases in accident years prior to 2006 related to construction defect and the 2011 accident year.

The $1.0 million increase of prior accident year loss reserves related to Reinsurance Operations primarily consisted of the following:

•

Professional: A $1.1 million increase in the 2022 accident year recognizes higher prior accident year case incurred emergence than expected.

•

General Liability: A $0.1 million decrease based on information received from the cedants.

The $7.4 million reduction of prior accident year loss reserves related to Exited Lines primarily consisted of the following:

•

Property: A $1.3 million increase reflects higher than expected claims severity in the 2014, 2021 and 2022 accident years in Property Brokerage, partially offset by lower than expected severity in the 2016, 2017 and 2020 accident years.

•

Reinsurance: A $7.3 million decrease in the 2012 and 2015 through 2021 accident years based on information received from cedants, primarily in the property treaties.

•

General Liability: A $1.4 million decrease primarily recognizes lower than expected severity in the 2014 through 2017 accident years, partially offset by an increase in the 2022 accident year.

During the first six months of 2022, the Company decreased its prior accident year loss reserves by $6.6 million, which consisted of a $0.4 million decrease related to Commercial Specialty, a $1.2 million decrease related to Reinsurance Operations, and a $5.0 million decrease related to Exited Lines.

The $0.4 million decrease of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:

•

Property: A $1.5 million decrease primarily recognizes lower than expected claims severity in the 2019 and 2021 accident years, partially offset by increases in the 2015 and 2018 accident years.

•

General Liability: A $1.2 million increase reflects higher than expected claims severity in accident years prior to 2005, 2010, 2016, 2017, 2019 and 2020 accident years, partially offset by decreases in the 2006, 2007, 2011 through 2015, 2018 and 2021 accident years.

The $1.2 million reduction of prior accident year loss reserves related to Reinsurance Operations primarily consisted of the following:

•

The $5.0 million reduction of prior accident year loss reserves related to Exited Lines primarily consisted of the following:

•

Property: A $0.2 million decrease primarily in the 2011, 2018 and 2021 accident years, partially offset by increases in the 2015 through 2017 and 2020 accident years.

•

Reinsurance: A $4.3 million decrease primarily in the 2017 through the 2021 accident years based on reported information from the cedants.

•

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