Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

ProAssurance is involved in various legal actions related to insurance policies and claims handling including, but not limited to, claims asserted by policyholders. These types of legal actions arise in the Company's ordinary course of business and, in accordance with GAAP for insurance entities, are considered as a part of the Company's loss reserving process, which is described in detail under the heading "Losses and Loss Adjustment Expenses" in the Accounting Policies section in Note 1. ProAssurance also has other direct actions against the Company unrelated to its claims activity which are evaluated and accounted for as a part of other liabilities. For these corporate legal actions, the Company evaluates each case separately and establishes what it believes is an appropriate reserve based on GAAP guidance related to contingent liabilities. As of December 31, 2024, there were no material reserves established for corporate legal actions.

ProAssurance has entered into financial instrument transactions that may present off-balance sheet credit risk or market risk. These transactions include a short-term loan commitment and commitments to provide funding to non-public investment entities. Under the short-term loan commitment, ProAssurance has agreed to advance funds on a 30 day basis to a counterparty provided there is no violation of any condition established in the contract. As of December 31, 2024, ProAssurance had total funding commitments related to non-public investment entities as well as the short-term loan commitment of approximately $172.1 million which included the amount at risk if the full short-term loan is extended and the counterparties default.

However, the credit risk associated with the short-term loan commitment is minimal as the counterparties to the contract are highly rated commercial institutions and to-date have been performing in accordance with their contractual obligations. As such, ProAssurance’s expected credit losses associated with this short-term loan commitment were nominal in amount as of December 31, 2024.

The purchase consideration in the 2021 NORCAL acquisition included contingent consideration. NORCAL policyholders who elected to receive NORCAL stock and tender it to ProAssurance were eligible for a share of contingent consideration in an amount of up to approximately $84 million. As defined in the purchase agreement, the contingent consideration was dependent upon the after-tax development of NORCAL's ultimate net losses for accident years ended on or before December 31, 2020 determined as of December 31, 2023 by a mutually agreed upon independent actuarial consultant. In June 2024, the independent actuarial consulting firm completed its estimate, and based on that estimate no additional consideration was due. The Committee appointed by NORCAL prior to the close of the acquisition reviewed the work of the independent actuarial consultant and accepted the conclusion that no additional consideration was due; therefore, the liability was reduced to zero as of June 30, 2024. As of December 31, 2023, the contingent consideration liability was $6.5 million carried at fair value utilizing a stochastic model. As of December 31, 2023, the remaining uncertainty around the analysis to be performed by the independent actuary was a significant component in the determination of the fair value of the liability. See further discussion around the contingent consideration in Note 2.