XML 158 R19.htm IDEA: XBRL DOCUMENT v3.20.1
Subsequent Events
 3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events Subsequent Events
In connection with its preparation of the Condensed Consolidated Financial Statements, ProAssurance evaluated events that occurred subsequent to March 31, 2020 for recognition or disclosure in its financial statements and notes to financial statements.
Large National Healthcare Account
During the fourth quarter of 2019, the Company increased reserve estimates for a large national healthcare account in its Specialty P&C segment that exceeded the assumptions the Company made when originally underwriting the account. The policy term for this account expires towards the end of the second quarter of 2020. Based on underwriting negotiations with the insured to-date, the Company believes it is more likely than not that the account will not renew on terms offered by ProAssurance and the insured will exercise its option to purchase the extended reporting endorsement or "tail" coverage. Based on preliminary projected exposure data provided to the Company, if the account exercises its option to purchase tail coverage, a net loss of up to approximately $50 million could be recognized in the second quarter of 2020; if the insured chooses to exercise this tail policy all premium and corresponding losses will be fully recognized in the same period the tail policy is written.
COVID-19
The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and geographies, including how it will impact its insureds, the loss environment, the healthcare industry, the labor market and Lloyd's. While the Company did not incur significant operational or financial disruptions during the three months ended March 31, 2020 from the COVID-19 pandemic, it is unable to predict the impact that the COVID-19 pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties.
Subsequent to March 31, 2020, the Company has started granting certain premium relief requests as a result of COVID-19, most often in the form of premium credits or deferrals. These premium relief efforts are intended for insureds adversely impacted by the COVID-19 pandemic, and to adjust for changes in exposures given payroll reductions, suspension of elective medical procedures and general reduction in non-COVID-19 healthcare consumption. The Company is evaluating each request on an individual basis, considering a number of factors; however, it is unable to predict the impact that premium relief efforts will have on its financial condition, results of operations and cash flows.
In response to COVID-19, the federal government and a number of states have started enacting legislative changes. The PREP Act was amended on March 27, 2020 to extend liability immunity for activities related to medical countermeasures against COVID-19, except for claims involving "willful misconduct" as defined in the PREP Act. Certain states have started enacting legislative changes designed to effectively expand workers’ compensation coverage by potentially incorporating a presumption of compensability for certain types of workers. Other states are considering similar measures. Depending on the number of states that institute such changes and the terms of the changes, as well as the impact of the amendment to the PREP Act and any related legal challenges, the Company may experience increases in claims frequency and severity for its healthcare professional liability and workers’ compensation books of business, which could have an effect on its financial condition, results of operations and cash flows.
Furthermore, the Company is closely monitoring the impact of potential legislation or court decisions that could retroactively require insurers to extend certain insurance to cover COVID-19 claims, even if the original contract excluded the cover of communicable diseases as is typical in certain policies. These actions could result in a significant increase in claim frequency and severity due to an unintended increase in exposure for Syndicate 1729 and 6131 which could have an effect on the Company's financial condition, results of operations and cash flows given its participation in those Syndicates.
Capital Management
Given the Company’s current earnings profile, the effects that underlying conditions in the broader insurance marketplace continue to have on the Company’s results, and the uncertainties introduced by the COVID-19 pandemic, as described above, the Board has made the decision to reduce the quarterly cash dividend from $0.31 per share to $0.05 per share, beginning with the dividend declared for the second quarter of 2020 on May 7, 2020. Any decision to pay future cash dividends is subject to the Board’s final determination after a comprehensive review of financial performance, future expectations and other factors deemed relevant by the Board.