Unpaid Losses and Loss Adjustment Expenses

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Unpaid Losses and Loss Adjustment Expenses

NOTE 7 – UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

The Company’s loss and loss adjustment expense reserves are as follows:

	Year ended December 31
	2011	2010
Direct reserves
Case reserves	$12,771,203	$16,041,554
IBNR reserves	41,715,640	45,518,141
Total direct reserves	$54,486,843	$61,559,695
Reserves net of reinsurance
Case reserves	$11,815,692	$13,729,606
IBNR reserves	34,696,487	36,013,775
Total net reserves	$46,512,179	$49,743,381

Reserves for losses and loss adjustment expenses before reinsurance for each of Crusader’s lines of business were as follows:

	Year ended December 31
	2011		2010
Line of Business
CMP	$52,198,037	95.8%	$58,665,420	95.3%
Other liability	2,246,166	4.1%	2,845,407	4.6%
Other	42,640	0.1%	48,868	0.1%
Total	$54,486,843	100.0%	$61,559,695	100.0%

The Company‘s consolidated financial statements include estimated reserves for unpaid losses and related loss adjustment expenses of the insurance company operation. The Company sets loss and loss adjustment expense reserves at each balance sheet date based upon management’s best estimate of the ultimate payments that it anticipates will be made to settle all losses incurred and all related loss adjustment expenses incurred as of that date for both reported and unreported claims.

The following table provides an analysis of the roll forward of Crusader’s losses and loss adjustment expenses, including a reconciliation of the ending balance sheet liability for the periods indicated:

	Year ended December 31
	2011	2010	2009
Reserve for unpaid losses and loss adjustment expenses at beginning of year – net of reinsurance	$49,743,381	$55,409,545	$58,839,017
Incurred losses and loss adjustment expenses
Provision for insured events of current year	19,229,785	23,038,294	23,501,314
Decrease in provision for events of prior years	(4,842,458)	(4,568,179)	(3,955,553)
Total losses and loss adjustment expenses	14,387,327	18,470,115	19,545,761
Payments
Losses and loss adjustment expenses attributable to     insured events of the current year	5,187,128	8,327,215	5,852,107
Losses and loss adjustment expenses attributable to     insured events of prior years	12,431,401	15,809,064	17,123,126
Total payments	17,618,529	24,136,279	22,975,233
Reserve for unpaid losses and loss adjustment expenses at end of year – net of reinsurance	46,512,179	49,743,381	55,409,545
Reinsurance recoverable on unpaid losses and loss adjustment expenses at end of year	7,974,664	11,816,314	16,175,863
Reserve for unpaid losses and loss adjustment expenses at end of year per balance sheet, gross of reinsurance	$54,486,843	$61,559,695	$71,585,408

 At each quarterly review, actual claims costs that emerge are compared with the claims costs that were expected to emerge during that development period. Sometimes the previous claims costs estimates prove to have been too high; sometimes they prove to have been too low. In the case of the Company, the estimates proved to be too high in each of the years reflected in the table. The favorable development in 2009 through 2011 underscores the inherent uncertainty in insurance claims costs, especially for a very small insurer.