Unpaid Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Unpaid Losses and Loss Adjustment Expenses

NOTE 11 – UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

The following table provides an analysis of Crusader’s loss and loss adjustment expense reserves, including a reconciliation of the beginning and ending balance sheet liability for the periods indicated:  

	Three Months Ended March 31
	2017		2016
Reserve for unpaid losses and loss adjustment expenses at January 1 – gross of reinsurance	$	47,055,787	$	49,093,571
Less reinsurance recoverable on unpaid losses and loss adjustment expenses		9,520,970		9,636,961
Reserve for unpaid losses and loss adjustment expenses at January 1 – net of reinsurance		37,534,817		39,456,610
Incurred losses and loss adjustment expenses:
Provision for insured events of current year		6,497,566		4,723,668
Development of insured events of prior years		2,027,615		361,826
Total incurred losses and loss adjustment expenses		8,525,181		5,085,494
Loss and loss adjustment expense payments:
Attributable to insured events of the current year		1,035,179		465,024
Attributable to insured events of prior years		5,020,402		4,705,011
Total payments		6,055,581		5,170,035
Reserve for unpaid losses and loss adjustment expenses at March 31 – net of reinsurance		40,004,417		39,372,069
Reinsurance recoverable on unpaid losses and loss adjustment expenses		9,885,632		10,639,215
Reserve for unpaid losses and loss adjustment expenses at March 31 – gross of reinsurance	$	49,890,049	$	50,011,284

Some lines of insurance are commonly referred to as "long-tail" lines because of the extended time required before claims are ultimately settled. Lines of insurance in which claims are settled relatively quickly are called "short-tail" lines. It is generally more difficult to estimate loss reserves for long-tail lines because of the long period of time that elapses between the occurrence of a claim and its final disposition and the difficulty of estimating the settlement value of the claim. Crusader’s short-tail lines consist of its property coverages, and its long-tail lines consist of its liability coverages. However, Crusader’s long-tail liability claims tend to be settled relatively quicker than other long-tail lines not underwritten by Crusader, such as workers’ compensation, professional liability, umbrella liability, and medical malpractice. Since trends develop over longer periods of time on long-tail lines of business, the Company generally gives credibility to those trends more slowly than for short-tail or less volatile lines of business.

The $1,773,898 increase in the provision for insured events of current year for the three months ended March 31, 2017, compared to the provision for insured events of current year for the three months ended March 31, 2016, was due primarily to an aberrational increase in the frequency and severity of accident year 2017 short-tail property claims.

The $1,665,789 increase in the development of insured events of prior years for the three months ended March 31, 2017, compared to the three months ended March 31, 2016, was primarily due to higher than expected long-tail liability claims in accident years 2013, 2014, and 2016.