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Reserve for Losses and Loss Adjustment Expenses
 12 Months Ended
Dec. 31, 2024
Insurance [Abstract]  
Reserve for Losses and Loss Adjustment Expenses Reserve for Losses and Loss Adjustment Expenses
The reserve for losses is established based on estimates of individual claims and actuarially determined estimates of future losses based on ProAssurance’s past loss experience, available industry data and projections as to future claims frequency, severity, inflationary trends and settlement patterns. Estimating the reserve, particularly the reserve appropriate for liability exposures, is a complex process. For a high proportion of the risks insured or reinsured by ProAssurance, claims may be resolved over an extended period of time, often five years or more, and may be subject to litigation. Estimating losses requires
ProAssurance to make and revise judgments and assessments regarding multiple uncertainties over an extended period of time. As a result, the reserve estimate may vary considerably from the eventual outcome. The assumptions used in establishing ProAssurance’s reserve are regularly reviewed and updated by management as new data becomes available. Changes to estimates of previously established reserves are included in earnings in the period in which the estimate is changed.
ProAssurance believes that the methods it uses to establish reserves are reasonable and appropriate. Each year, ProAssurance uses internal actuaries to review the reserve for losses of each insurance subsidiary. ProAssurance also engages consulting actuaries to review ProAssurance claims data and provide observations regarding cost trends, rate adequacy and ultimate loss costs. The statutory filings of each insurance company with the insurance regulators must be accompanied by a consulting actuary's certification as to their respective reserves. ProAssurance considers the views of the actuaries as well as other factors, such as premium rates, historical paid and incurred loss development trends and an evaluation of the current loss environment including frequency, severity, expected effect of inflation (monetary, social and medical), general economic and social trends, and the legal and political environment in establishing the amount of its reserve for losses. ProAssurance's booked reserves as of December 31, 2024 include consideration of these factors, but the duration and degree to which these issues persist, along with potential legislative, regulatory or judicial actions, could result in significant changes to the Company's reserve estimates in future periods.
ProAssurance partitions its reserve by accident year, which is the year in which the claim becomes its liability. For claims-made policies, the insured event generally becomes a liability when the event is first reported to the Company and the policy that is in effect at that time covers the claim. For occurrence policies, the insured event becomes a liability when the event takes place even though the claim may be reported to the Company at a later date. For retroactive coverages, the insured event becomes a liability at inception of the underlying contract. As claims are incurred (reported) and claim payments are made, they are aggregated by accident year for analysis purposes. ProAssurance also partitions its reserve by reserve type: case reserves and IBNR reserves. Case reserves are established by the claims department based upon the particular circumstances of each reported claim and represent ProAssurance’s estimate of the future loss costs (often referred to as expected losses) that will be paid on reported claims. Case reserves are decremented as claim payments are made and are periodically adjusted upward or downward as estimates regarding the amount of future losses are revised; a reported loss for an individual claim equates to the case reserve at any point in time plus the claim payments that have been made to date. IBNR reserves represent an estimate, in the aggregate, of future development on losses that have been reported to ProAssurance plus an estimate of losses that have been incurred but not reported.
Acquired Reserve
The 2021 acquisition of NORCAL increased ProAssurance's net reserves by $1.1 billion which represented the fair value of NORCAL's reserve, net of the fair value of related reinsurance recoverables, at the time of acquisition including a fair value adjustment on the reserve as well as negative VOBA recorded on NORCAL's unearned premium and DDR reserve. The reserve fair value adjustment will be amortized utilizing loss payment patterns and the negative VOBAs will be amortized over a period in proportion to the earn-out of the premium or in-line with the approximate consumption of losses. Such amortization is recorded as a reduction to net losses and loss adjustment expenses.
Development of Prior Accident Years
In addition to setting the initial reserve for the current accident year, each period ProAssurance reassesses the amount of reserve required for prior accident years.
The foundation of ProAssurance’s reserve re-estimation process is an actuarial analysis that is performed by both the internal and consulting actuaries. This detailed analysis projects ultimate losses based on partitions which include line of business, geography, coverage layer and accident year. The procedure uses the most representative data for each partition, capturing its unique patterns of development and trends. ProAssurance believes that the use of consulting actuaries provides an independent view of the loss data as well as a broader perspective on industry loss trends.
Reserving Methodologies
The analyses performed by ProAssurance's internal actuarial team and its consulting actuaries analyzes each partition of the business in a variety of ways and uses multiple actuarial methodologies in performing these analyses, including: Bornhuetter-Ferguson (Paid and Reported) Method, Paid Development Method, Reported (Incurred) Development Method, Average Paid Value Method and Average Reported Value Method.
ProAssurance uses various actuarial methods in the process of setting each reserve. Each actuarial method generally returns a different value, and for the more recent accident years, the variations among the different methodologies can be significant. Generally, methods such as the Bornhuetter-Ferguson Method are used on more recent accident years where there is less data available on which to base the analysis. As time progresses and an increased amount of data is available for a given
accident year, management gives more confidence to the development and average methods, as these methods typically rely more heavily on ProAssurance's own historical data. These methods emphasize different aspects of loss reserve estimation and provide a variety of perspectives for ProAssurance's decisions.
Certain of the methodologies utilized to estimate the ultimate losses for each partition of the reserve consider the actual amounts paid. Paid data is particularly influential when a large portion of known claims have been closed, as is the case for older accident years. In selecting a point estimate for each partition, management considers the extent to which trends are emerging consistently for all partitions and known industry trends. Thus, actual, rather than estimated severity trends are given more consideration. If actual severity trends are lower than those estimated at the time that reserves were previously established, the recognition of favorable development is indicated. This is particularly true for older accident years where actuarial methodologies give more weight to actual loss costs (severity).
The various actuarial methods discussed above are applied in a consistent manner from period to period. For each partition of the reserve, ProAssurance evaluates the results of the various methods, along with the supplementary statistical data regarding such factors as closed with and without indemnity ratios, claim severity trends, the expected duration of such trends, changes in the legal and legislative environment and the current economic environment to develop a point estimate based upon management's judgement and past experience. The series of selected point estimates is the combined to produce an overall point estimate for ultimate losses.
Selected point estimates of ultimate losses are utilized to develop estimates of ultimate losses recoverable from reinsurers, based on the terms and conditions of ProAssurance’s reinsurance agreements. An overall estimate of the amount receivable from reinsurers is determined by combining the individual estimates. ProAssurance’s net reserve estimate is the gross reserve point estimate less the estimated reinsurance recovery.
For the Workers’ Compensation line of business in both the Workers' Compensation Insurance and Segregated Portfolio Cell Reinsurance segments, ProAssurance utilizes the Reported (Incurred) Development Method, Paid Loss Development Method and Bornhuetter-Ferguson Method, to develop the reserve for each accident year. The actuarial review includes the stratification of claims data (lost time claims and medical only claims) using different variations that allow for identification of trends that may not be readily identifiable if the data was evaluated only in the aggregate. Reported and paid loss development factors are key assumptions in the reserve estimation process and are based on ProAssurance’s historical reported and paid loss development patterns. As accident years mature, the various actuarial methodologies produce more consistent loss estimates.
Activity in the reserve for losses and loss adjustment expenses is summarized as follows:
(In thousands)202420232022
Balance, beginning of year$3,401,281 $3,471,147 $3,579,940 
Less reinsurance recoverables on unpaid losses and loss adjustment expenses445,573 431,889 451,741 
Net balance, beginning of year2,955,708 3,039,258 3,128,199 
Net losses:
Current year(1)
779,650 794,848 813,515 
(Favorable) unfavorable development of reserves established in prior years, net(2)
(40,215)5,646 (36,753)
Total739,435 800,494 776,762 
Paid related to:
Current year
(113,268)(101,996)(108,139)
Prior years
(733,248)(782,048)(757,564)
Total paid(846,516)(884,044)(865,703)
Net balance, end of year2,848,627 2,955,708 3,039,258 
Plus reinsurance recoverables on unpaid losses and loss adjustment expenses409,069 445,573 431,889 
Balance, end of year$3,257,696 $3,401,281 $3,471,147 
(1) Current year net losses for the year ended December 31, 2022 included $4.9 million of purchase accounting amortization of the negative VOBA associated with NORCAL's assumed unearned premium, which was amortized over a period in proportion to the earn-out of the associated premium as a reduction to current accident year net losses. As of June 30, 2022, the negative VOBA was fully amortized.
(2) Net prior accident year reserve development recognized for the years ended December 31, 2024, 2023 and 2022 included $5.3 million, $8.3 million and $10.8 million, respectively, of amortization of the purchase accounting fair value adjustment on NORCAL's assumed net reserve and amortization of the negative VOBA associated with NORCAL's DDR reserve which is recorded as a reduction to prior accident year net losses and loss adjustment expenses.
As discussed in Note 1, estimating liability reserves is complex and requires the use of many assumptions. As time passes and ultimate losses for prior years are either known or become subject to a more precise estimation, ProAssurance increases or decreases the reserve estimates established in prior periods.
The consolidated net favorable prior year reserve development recognized for the year ended December 31, 2024 primarily reflected:
•The loss environment in the MPL line of business within the Specialty P&C segment continues to be challenging in many jurisdictions, as claim costs are pressured by social inflation and higher than anticipated loss severity trends that started to reemerge in the fourth quarter of 2022. The Company continues to monitor the impact that these trends have on its open case reserves and prior accident year development. While higher loss severity trends remained challenging in 2024, the Company recognized net favorable prior year reserve development of $33.9 million in the Company's MPL line of business, principally related to accident years 2019 through 2021. Further, net favorable reserve development reflected $4.5 million of favorable development related to the Company's Medical Technology Liability line of business, partially offset by unfavorable reserve development of $6.8 million attributable to the Company's discontinued participation in Lloyd’s Syndicates operations, primarily aviation related losses.
•Consolidated net favorable loss development recognized during the year ended December 31, 2024 also included net favorable development of $2.8 million in the Segregated Portfolio Cell Reinsurance segment related to workers' compensation business of $3.1 million, principally related to accident years 2018 through 2023, partially offset by unfavorable development of $0.3 million related to medical professional liability business driven by higher than expected claim frequency in one program in which the Company does not participate in the underwriting results.
•Consolidated net favorable loss development recognized during the year ended December 31, 2024 also included net favorable development of $0.5 million in the Workers' Compensation Insurance segment reflecting overall favorable trends in claim closing patterns in accident years 2017 through 2019 and 2023.
The consolidated net unfavorable prior year reserve development recognized for the year ended December 31, 2023 primarily reflected:
•Higher than expected loss trends observed in the average cost per claim in the Workers' Compensation Insurance segment primarily attributable to the 2022 accident year. The consolidated net unfavorable loss development also reflected unfavorable development recognized during the first quarter of 2023 primarily attributable to one large claim from the 1997 accident year.
•During the first quarter of 2023, the Company strengthened case reserves related to four large MPL claims resulting in net unfavorable prior year reserve development of $10.1 million recognized during 2023. The net unfavorable prior year reserve development also reflected higher than expected loss development on certain large claims, primarily catastrophe related losses, associated with Lloyd’s Syndicates operations, partially offset by favorable prior year reserve development due to lower than anticipated loss emergence, predominately in the Medical Technology Liability line of business.
•Consolidated net unfavorable loss development recognized for the year ended December 31, 2023 was partially offset by favorable reserve development recognized in the Segregated Portfolio Cell Reinsurance segment driven by overall favorable trends in claim closing patterns primarily in accident years 2016 through 2021.
The consolidated net favorable prior year reserve development recognized for the year ended December 31, 2022 primarily reflected:
•Favorable prior year reserve development due to lower than anticipated loss emergence in the Specialty P&C segment related to the 2017, 2020 and 2021 accident years, primarily attributable to NORCAL's 2021 accident year, and, to a lesser extent, the Medical Technology Liability and MPL lines of business. The net favorable development recognized also included a $9.0 million reduction in the Company's previous IBNR reserve for COVID-19. Further, the net favorable development recognized was partially offset by higher than anticipated loss severity trends in select jurisdictions in the MPL line of business, which emerged primarily in the fourth quarter of 2022 and unfavorable development associated with Lloyd’s Syndicates operations.
•The net favorable development also reflected overall favorable trends in claim closing patterns in the Workers' Compensation Insurance and Segregated Portfolio Cell Reinsurance segments. The net favorable loss development
recognized in the Workers' Compensation Insurance segment is primarily related to the 2017 through 2020 accident years. The net favorable loss development recognized in the Segregated Portfolio Cell Reinsurance segment is primarily related to the 2016 through 2021 accident years.
Claims Development
ProAssurance establishes its reserve and manages claims activity by coverage, product or line of business and various categories of reserves have similar characteristics. Therefore, ProAssurance has aggregated these reserve categories into several reserve groups in the following disclosures and tables that provide a more meaningful view of the amount, timing and uncertainty of cash flows arising from the liability. At the same time, these reserve groups present a disaggregated view of the major elements of the overall loss reserve liability. The reserve groups include MPL claims-made reserve, MPL occurrence reserve, Medical Technology Liability claims-made reserve, Workers’ Compensation Insurance reserve and Segregated Portfolio Cell Reinsurance - workers' compensation reserve. All other loss reserve categories are deemed to be less homogeneous or relatively small on a standalone basis and are included in other short-duration lines in the claims development reconciliation.
The composition of the reserve groups is based on similar characteristics with respect to the risks being insured and the reporting and payout pattern of the underlying claims. In most instances the groups follow the coverage categorizations used in statutory financial reporting for U.S.-domiciled property-casualty insurance companies.
MPL claims are disaggregated into those claims covered by claims-made policies and those claims covered by occurrence policies. Claims-made coverage has a short reporting pattern, with virtually all claims known shortly after the end of the policy period. Occurrence coverage claims can have an extended reporting pattern, with the time from the loss event until the filing of the claim often measured in years, at which point the claims resolution process begins. Although the resolution process and time frame is similar once a claim is reported, combining claims from claims-made and occurrence coverage types would result in distortion due to the difference in reporting lag. Medical Technology Liability reserves are grouped separately due to the nature of the risk, including the potential for mass torts and multiple claims arising out of the same product or service. The small amount of Medical Technology Liability occurrence reserves are included in other short-duration lines.
Workers' compensation reserves in the Workers' Compensation Insurance and the Segregated Portfolio Cell Reinsurance segments are each grouped separately due to the difference in the type of coverage provided and the differences in the claims resolution process as compared to other liability insurance. The small amount of MPL reserves in the Segregated Portfolio Cell Reinsurance segment are included in other short-duration lines.
ProAssurance has elected to present reserve history for acquired entities in all periods shown in the tables below, including periods prior to acquisition. With the exception of the Workers' Compensation Insurance and Segregated Portfolio Cell Reinsurance - workers' compensation lines of business, virtually all other acquired entities are captured within the MPL line of business.
All information prior to 2024 disclosed in the Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance, Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance and Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance tables that follow is presented as supplementary information. The “Cumulative Number of Reported Claims” in the tables that follow includes the combined number of claims for an accident year and excludes projected unreported IBNR claims. A claim is considered reported when ProAssurance becomes aware of and accepts it for coverage under the terms of the Company's insurance contracts.
Medical Professional Liability Reserve
MPL loss costs are impacted by many factors, including but not limited to the nature of the claim, including whether or not the claim is an individual or a mass tort claim, the personal situation of the claimant or the claimant's family, the outcome of jury trials including the impacts of social inflation, the legislative and judicial climate where any potential litigation may occur, general economic and social conditions and, for claims involving bodily injury, the trend of healthcare costs. ProAssurance sets an initial reserve based upon the evaluation of the current loss environment including frequency, severity, the expected effect of inflation, general economic and social trends, and the legal and political environment. The initial loss ratio for MPL business has ranged from 83% to 104% in the past five years.
ProAssurance has elected to present reserve history for NORCAL in all periods shown in the Medical Professional Liability tables below, including periods prior to acquisition.
Medical Professional Liability Claims-Made
Incurred Claims and Allocated Claim Adjustment Expenses, Net of ReinsuranceDecember 31, 2024
($ in thousands)Year Ended December 31IBNR*Cumulative Number of Reported Claims
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$503,412 $486,760 $492,824 $491,180 $500,336 $500,550 $503,600 $503,628 $504,585 $498,249 $1,001 7,421 
2016— $484,153 $488,349 $507,586 $555,416 $554,395 $560,840 $557,097 $556,531 550,544 $5,116 7,927 
2017— — $508,072 $506,207 $577,401 $569,737 $573,570 $557,620 $554,336 558,362 $5,469 8,081 
2018— — — $544,617 $643,864 $630,169 $636,023 $642,948 $644,705 648,246 $(21,346)8,517 
2019— — — — $670,958 $664,934 $642,370 $646,676 $656,790 653,012 $1,645 8,476 
2020— — — — — $593,994 $574,274 $557,651 $601,642 600,104 $(8,655)6,758 
2021— — — — — — $527,718 $524,468 $508,391 500,764 $(12,560)5,400 
2022— — — — — — — $464,069 $475,752 476,551 $17,785 4,907 
2023— — — — — — — — $465,702 477,274 $50,765 4,487 
2024— — — — — — — — — 460,088 $249,409 3,719 
Total$5,423,194 
* Includes expected development on reported claims
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
(In thousands)Year Ended December 31
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$26,664 $125,234 $256,791 $351,703 $410,506 $446,069 $463,224 $476,664 $482,757 $486,605 
2016— $27,442 $137,338 $276,548 $378,828 $440,163 $472,441 $499,431 $524,901 525,150 
2017— — $32,342 $147,515 $288,695 $351,548 $419,180 $467,423 $496,970 520,794 
2018— — — $34,238 $159,657 $279,204 $367,522 $450,952 $520,383 561,247 
2019— — — — $37,755 $144,225 $259,889 $364,411 $463,007 528,008 
2020— — — — — $32,270 $117,153 $234,804 $341,481 429,227 
2021— — — — — — $23,494 $110,483 $205,414 286,729 
2022— — — — — — — $24,792 $103,111 210,069 
2023— — — — — — — — $26,206 97,852 
2024— — — — — — — — — 27,029 
Total3,672,710 
All outstanding liabilities before 2015, net of reinsurance
19,970 
Liabilities for losses and loss adjustment expenses, net of reinsurance$1,770,454 
Medical Professional Liability Occurrence
Incurred Claims and Allocated Claim Adjustment Expenses, Net of ReinsuranceDecember 31, 2024
($ in thousands)Year Ended December 31IBNR*Cumulative Number of Reported Claims
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$52,531 $54,890 $56,621 $57,606 $52,455 $51,276 $56,468 $61,198 $57,560 $56,817 $573 626 
2016— $56,089 $49,795 $53,358 $56,345 $66,886 $64,122 $68,674 $68,079 70,844 $1,302 787 
2017— — $45,463 $42,338 $40,983 $44,449 $46,865 $50,652 $50,747 49,727 $2,551 775 
2018— — — $59,351 $61,880 $63,576 $73,599 $74,419 $76,975 75,255 $5,977 752 
2019— — — — $63,548 $58,555 $70,926 $86,543 $87,535 83,533 $885 881 
2020— — — — — $165,955 $178,804 $181,643 $183,767 168,435 $37,585 1,974 
2021— — — — — — $82,590 $81,254 $86,436 87,403 $7,907 695 
2022— — — — — — — $82,436 $66,926 64,944 $21,656 482 
2023— — — — — — — — $56,795 58,064 $36,607 288 
2024— — — — — — — — — 62,272 $59,501 96 
Total$777,294 
* Includes expected development on reported claims
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
(In thousands)Year Ended December 31
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$(180)$2,617 $9,953 $20,627 $28,482 $36,413 $41,800 $52,017 $54,100 $54,823 
2016— $44 $2,750 $15,433 $28,362 $40,766 $48,691 $54,324 $58,386 60,862 
2017— — $(6,631)$(3,385)$3,592 $11,051 $19,696 $30,489 $38,687 42,585 
2018— — — $444 $6,193 $15,229 $26,932 $37,828 $49,549 56,309 
2019— — — — $628 $4,575 $10,399 $26,359 $44,758 57,332 
2020— — — — — $397 $6,194 $21,100 $42,129 54,935 
2021— — — — — — $762 $4,335 $16,268 30,686 
2022— — — — — — — $675 $3,329 13,579 
2023— — — — — — — — $463 4,962 
2024— — — — — — — — — 469 
Total376,542 
All outstanding liabilities before 2015, net of reinsurance7,430 
Liabilities for losses and loss adjustment expenses, net of reinsurance$408,182 
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years12345678910
Unaudited
Medical Professional Liability Claims-Made5.4%17.7%21.8%16.1%12.9%8.5%5.0%3.9%0.6%0.8%
Medical Professional Liability Occurrence(0.9%)5.2%12.8%16.5%15.5%15.5%10.7%10.5%3.6%1.3%
Medical Technology Liability Reserve
The risks insured in the Medical Technology Liability line of business are more varied, and policies are individually priced based on the risk characteristics of the policy and the account. These policies often have substantial deductibles or self-insured retentions, and the insured risks range from startup operations to large multinational entities. Premiums are established using the most recently developed actuarial estimates of losses expected to be incurred based on factors which include: results from prior analysis of similar business, industry indications, observed trends and judgment. Claims in this line of business primarily involve bodily injury to individuals and are affected by factors similar to those of the MPL line of business. For the Medical Technology Liability line of business, ProAssurance also establishes an initial reserve using a loss ratio approach, including a provision in consideration of historical loss volatility that this line of business has exhibited.
Medical Technology Liability Claims-Made
Incurred Claims and Allocated Claim Adjustment Expenses, Net of ReinsuranceDecember 31, 2024
($ in thousands)Year Ended December 31IBNR*Cumulative Number of Reported Claims
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$9,376 $8,757 $7,193 $5,929 $5,081 $4,664 $4,192 $3,499 $4,348 $4,568 $104 157 
2016— $9,200 $8,467 $7,413 $6,422 $6,241 $4,491 $5,145 $4,721 4,901 $157 182 
2017— — $11,049 $10,143 $8,306 $4,919 $3,381 $5,351 $4,349 4,299 $227 98 
2018— — — $10,141 $8,108 $7,506 $4,961 $4,646 $5,233 5,483 $1,129 216 
2019— — — — $10,072 $8,324 $9,588 $7,658 $8,907 7,332 $160 336 
2020— — — — — $11,082 $10,671 $9,150 $7,949 6,468 $2,718 179 
2021— — — — — — $13,914 $11,909 $9,927 10,512 $4,192 174 
2022— — — — — — — $15,014 $14,718 12,160 $9,083 181 
2023— — — — — — — — $16,268 15,543 $14,578 249 
2024— — — — — — — — — 16,860 $16,420 253 
Total$88,126 
* Includes expected development on reported claims
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
(In thousands)Year Ended December 31
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$25 $440 $1,625 $2,097 $2,567 $2,911 $2,987 $2,989 $2,989 $2,989 
2016— $53 $1,690 $2,365 $2,959 $4,295 $4,342 $4,383 $4,415 4,593 
2017— — $56 $1,681 $2,017 $2,360 $2,867 $4,073 $4,072 4,072 
2018— — — $6 $191 $1,850 $2,651 $3,065 $4,185 4,188 
2019— — — — $584 $2,552 $3,902 $5,321 $5,700 6,384 
2020— — — — — $40 $526 $1,034 $2,412 3,584 
2021— — — — — — $4 $384 $3,374 3,816 
2022— — — — — — — $24 $500 2,128 
2023— — — — — — — — $— 129 
2024— — — — — — — — — 35 
Total31,918 
All outstanding liabilities before 2015, net of reinsurance103 
Liabilities for losses and loss adjustment expenses, net of reinsurance$56,311 
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years12345678910
Unaudited
Medical Technology Liability1.2 %14.0 %18.2 %12.8 %13.4 %13.3 %0.6 %0.2 %1.8 %— %
Workers' Compensation Insurance Reserve
Many factors affect the ultimate losses incurred for the workers' compensation coverages in the Workers' Compensation Insurance segment including, but not limited to, the type and severity of the injury, the age and occupation of the injured worker, the estimated length of disability, medical treatment and related costs, and the jurisdiction and workers' compensation laws of the injury occurrence. ProAssurance uses various actuarial methodologies in developing the workers’ compensation reserve combined with a review of the exposure base generally based upon payroll of the insured. For the current accident year, given the lack of seasoned information, the different actuarial methodologies produce results with considerable variability; therefore, more emphasis is placed on supplementing results from the actuarial methodologies with trends in exposure base, medical expense inflation, general inflation, severity, and claim counts, among other things, to select an expected loss ratio.
Workers' Compensation Insurance
Incurred Claims and Allocated Claim Adjustment Expenses, Net of ReinsuranceDecember 31, 2024
($ in thousands)Year Ended December 31IBNR*Cumulative Number of Reported Claims
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$100,101 $100,454 $98,454 $97,654 $96,354 $93,054 $91,840 $90,547 $90,362 $90,190 $— 16,551 
2016— $101,348 $97,348 $92,148 $84,799 $82,799 $80,751 $78,808 $78,892 78,889 $— 15,979 
2017— — $99,874 $99,874 $99,874 $97,874 $95,674 $92,715 $92,000 91,411 $75 16,085 
2018— — — $118,095 $118,095 $120,095 $120,095 $120,056 $119,086 118,249 $136 18,017 
2019— — — — $115,852 $115,852 $115,352 $112,534 $111,296 110,159 $147 17,531 
2020— — — — — $102,475 $102,475 $101,621 $100,486 100,608 $143 14,529 
2021— — — — — — $105,722 $108,722 $112,606 112,642 $398 15,497 
2022— — — — — — — $104,675 $112,858 113,386 $751 15,154 
2023— — — — — — — — $114,013 112,931 $7,000 15,087 
2024— — — — — — — — — 116,609 $39,400 15,260 
Total$1,045,074 
* Includes expected development on reported claims
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
(In thousands)Year Ended December 31
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$32,078 $65,070 $78,947 $83,483 $86,528 $87,884 $88,476 $89,089 $89,212 $89,314 
2016— $28,377 $58,192 $69,237 $74,886 $76,954 $77,546 $77,265 $77,575 77,757 
2017— — $31,586 $70,333 $82,289 $87,129 $88,504 $88,953 $89,421 89,931 
2018— — — $41,619 $86,063 $104,216 $110,928 $114,525 $115,792 116,256 
2019— — — — $40,994 $84,108 $100,373 $105,724 $107,525 107,945 
2020— — — — — $32,447 $74,532 $90,174 $95,213 97,114 
2021— — — — — — $39,634 $81,499 $98,292 103,578 
2022— — — — — — — $38,734 $85,584 101,291 
2023— — — — — — — — $38,921 85,066 
2024— — — — — — — — — 39,056 
Total907,308 
All outstanding liabilities before 2015, net of reinsurance4,004 
Liabilities for losses and loss adjustment expenses, net of reinsurance$141,770 
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years12345678910
Unaudited
Workers' Compensation Insurance34.8 %39.4 %14.6 %5.4 %2.3 %0.8 %0.3 %0.5 %0.2 %0.1 %
Segregated Portfolio Cell Reinsurance - Workers' Compensation Reserve
The Company estimates and reserves for the workers' compensation business assumed by the Segregated Portfolio Cell Reinsurance segment in the same manner as for its workers' compensation business in the Workers' Compensation Insurance segment, as previously discussed.
Segregated Portfolio Cell Reinsurance - Workers' Compensation
Incurred Claims and Allocated Claim Adjustment Expenses, Net of ReinsuranceDecember 31, 2024
($ in thousands)Year Ended December 31IBNR*Cumulative Number of Reported Claims
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$36,423 $32,519 $28,746 $27,548 $26,720 $26,121 $25,566 $25,575 $25,528 $25,432 $— 4,949 
2016— $37,601 $34,055 $30,998 $29,424 $28,437 $28,411 $28,175 $27,873 27,740 $— 5,327 
2017— — $42,725 $38,594 $34,246 $32,879 $32,763 $32,514 $32,544 32,552 $122 5,707 
2018— — — $43,654 $41,283 $40,017 $38,569 $38,197 $37,376 36,951 $215 6,342 
2019— — — — $48,505 $42,345 $38,815 $37,490 $36,608 36,562 $334 6,157 
2020— — — — — $40,094 $38,602 $36,107 $34,924 34,547 $362 5,795 
2021— — — — — — $39,510 $37,185 $34,518 33,227 $631 5,182 
2022— — — — — — — $37,978 $38,811 38,417 $1,752 4,714 
2023— — — — — — — — $35,305 35,062 $3,784 4,063 
2024— — — — — — — — — 34,348 $11,749 3,769 
Total$334,838 
* Includes expected development on reported claims
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
(In thousands)Year Ended December 31
2015201620172018201920202021202220232024
Accident YearUnaudited
2015$11,257 $21,706 $23,977 $24,781 $25,033 $25,125 $25,144 $25,266 $25,300 $25,316 
2016— $10,980 $23,003 $26,285 $27,162 $27,211 $27,585 $27,583 $27,640 27,646 
2017— — $12,404 $24,791 $28,853 $31,140 $31,631 $31,875 $31,904 31,985 
2018— — — $12,517 $27,501 $33,236 $35,575 $36,010 $36,117 36,229 
2019— — — — $15,100 $29,604 $33,314 $34,829 $35,323 35,426 
2020— — — — — $11,238 $26,626 $30,680 $32,961 33,623 
2021— — — — — — $12,465 $26,495 $30,441 31,671 
2022— — — — — — — $13,420 $28,749 33,265 
2023— — — — — — — — $11,304 24,947 
2024— — — — — — — — — 13,553 
Total293,661 
All outstanding liabilities before 2015, net of reinsurance392 
Liabilities for losses and loss adjustment expenses, net of reinsurance$41,569 
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years12345678910
Unaudited
Segregated Portfolio Cell Reinsurance - workers' compensation37.4 %40.9 %11.8 %4.9 %1.1 %0.6 %0.1 %0.3 %0.1 %0.1 %
Below is a reconciliation of the claims development information to the Consolidated Balance Sheet:
(In thousands)
December 31, 2024
Net outstanding liabilities
Medical Professional Liability claims-made$1,770,454 
Medical Professional Liability occurrence408,182 
Medical Technology Liability claims-made56,311 
Workers' Compensation Insurance141,770 
Segregated Portfolio Cell Reinsurance - workers' compensation41,569 
Other short-duration lines187,880 
Liabilities for losses and loss adjustment expenses, net of reinsurance2,606,166 
Reinsurance recoverable on unpaid losses
Medical Professional Liability claims-made212,272 
Medical Professional Liability occurrence52,524 
Medical Technology Liability claims-made38,197 
Workers' Compensation Insurance39,118 
Segregated Portfolio Cell Reinsurance - Workers' Compensation25,789 
Other short-duration lines41,169 
Total reinsurance recoverable on unpaid losses and loss adjustment expenses409,069 
Reserve for the future utilization of the DDR benefit101,151 
Unallocated loss adjustment expenses120,965 
Annual Aggregate Deductible8,965 
Loss portfolio transfer (1)
1,592 
Purchase accounting adjustments (2)
9,783 
Other5 
242,461 
Gross liability for losses and loss adjustment expenses$3,257,696 
(1) Represents the reserve for retroactive coverages, net of any applicable deferred gains, related to the loss portfolio transfer entered into during 2019.
(2) Represents the remaining unamortized fair value adjustment on the net reserve for losses and loss adjustment expenses, the negative net VOBA recorded on the assumed unearned premium and negative VOBA recorded on the DDR reserve associated with the Company's acquisition of NORCAL.