Reserves for Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2021

Reserves for Losses and Loss Adjustment Expenses

The following table provides a reconciliation of reserves for losses and loss adjustment expenses (“LAE”):


	For the Nine Months Ended September 30,
(in millions)	2021		2020
Net reserves beginning of the year	$	2,906.1	$	2,722.7
Net AIL reserves acquired	—		27.9

Add:
Losses and LAE incurred during current calendar year, net of reinsurance:
Current accident year	884.9		876.9
Prior accident years	6.0		6.1
Losses and LAE incurred during calendar year, net of reinsurance	890.9		883.0
Deduct:
Net reserve ceded - reinsurance to close transaction for years of account 2017 and prior (1)	219.7		—
Losses and LAE payments made during current calendar year, net of reinsurance:
Current accident year	100.5		188.2
Prior accident years	552.8		632.7
Losses and LAE payments made during current calendar year, net of reinsurance:	653.3		820.9
Change in participation interest (2)	12.5		33.0
Foreign exchange adjustments	(7.3)		23.0
Net reserves - end of period	2,929.2		2,868.7
Add:
Reinsurance recoverables on unpaid losses and LAE, end of period	2,510.3		2,521.3
Gross reserves - end of period	$	5,439.5	$	5,390.0

(1)Amount represents reserves ceded under the reinsurance to close transaction with RiverStone for Lloyd’s years of account 2017 and prior, effective January 1, 2020.

(2)Amount represents the change in reserves due to changing our participation in Syndicates 1200 and 1910.

Reserves for losses and LAE represent the estimated indemnity cost and related adjustment expenses necessary to investigate and settle claims. Such estimates are based upon individual case estimates for reported claims, estimates from ceding companies for reinsurance assumed and actuarial estimates for losses that have been incurred but not yet reported to the insurer. Any change in probable ultimate liabilities is reflected in current operating results.

The impact from the (favorable) unfavorable development of prior accident years’ loss and LAE reserves on each reporting segment is presented below:


	For the Nine Months Ended September 30,
(in millions)	2021		2020
U.S. Operations	$	(0.7)	$	(0.5)
International Operations	0.1		(4.5)
Run-off Lines	6.6		11.1
Total (favorable) unfavorable prior-year development	$	6.0	$	6.1

The following describes the primary factors behind each segment’s prior accident year reserve development for the nine months ended September 30, 2021 and 2020:

Nine months ended September 30, 2021:

•U.S. Operations: Favorable development primarily in specialty lines, partially offset by unfavorable development in liability and professional lines.

•International Operations: Unfavorable development primarily related to a one-time accounting adjustment and large claim movements in Argo Insurance Bermuda, partially offset by favorable development in property lines, including losses associated with prior year catastrophe losses.

•Run-off Lines: Unfavorable loss reserve development on prior accident years in risk management workers compensation, other run-off lines and an individual environmental loss.

Nine months ended September 30, 2020:

•U.S. Operations: Favorable development in surety and commercial multi-peril, partially offset by unfavorable development in general liability, special property and commercial auto liability.

•International Operations: Favorable development in property, specialty and reinsurance, partially offset by unfavorable development in general liability and surety lines.

•Run-off Lines: Unfavorable loss reserve development on prior accident years in asbestos and environmental, driven by asbestos claims remaining open longer than expected, higher defense costs and movement on individual environmental claims as well as unfavorable development in other run-off lines, partially offset by favorable development in risk management workers compensation.

In the opinion of management, our reserves represent the best estimate of our ultimate liabilities, based on currently known facts, current law, current technology and reasonable assumptions where facts are not known. Due to the significant uncertainties and related management judgments, there can be no assurance that future favorable or unfavorable loss development, which may be material, will not occur.