Reserve For Losses And Loss Expenses

9 Months Ended

Sep. 30, 2011

Reserve For Losses And Loss Expenses [Abstract]

Reserve For Losses And Loss Expenses

7. RESERVE FOR LOSSES AND LOSS EXPENSES

     The reserve for losses and loss expenses consists of the following:

	September 30,		December 31,
	2011		2010
Outstanding loss reserves	$	1,404,996	$	1,166,516
Reserves for losses incurred but not reported		3,840,557		3,712,672
Reserve for losses and loss expenses	$	5,245,553	$	4,879,188

     The table below is a reconciliation of the beginning and ending liability for unpaid losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Gross liability at beginning of period	$	5,251,304		$	4,920,435		$	4,879,188		$	4,761,772
Reinsurance recoverable at beginning of period		(1,013,951	)		(932,435	)		(927,588	)		(919,991	)
Net liability at beginning of period		4,237,353			3,988,000			3,951,600			3,841,781
Net losses incurred related to:
Commutation of variable-rated reinsurance contracts		—			—			11,529			8,864
Current year		267,070			228,362			895,386			778,424
Prior years		(61,524	)		(101,374	)		(161,104	)		(239,424	)
Total incurred		205,546			126,988			745,811			547,864
Net paid losses related to:
Current year		43,723			37,291			65,002			70,701
Prior years		150,767			135,861			394,363			367,851
Total paid		194,490			173,152			459,365			438,552
Foreign exchange revaluation		(12,499	)		8,033			(2,136	)		(1,224	)
Net liability at end of period		4,235,910			3,949,869			4,235,910			3,949,869
Reinsurance recoverable at end of period		1,009,643			939,956			1,009,643			939,956
Gross liability at end of period	$	5,245,553		$	4,889,825		$	5,245,553		$	4,889,825

     During the nine months ended September 30, 2011, the Company commuted certain variable-rated reinsurance contracts that have swing-rated provisions, reducing ceded losses by $11,529 in accordance with the terms of the contracts resulting in a net gain of $865.

     For the three months ended September 30, 2011, the Company had net favorable reserve development in each of its segments due to actual loss emergence being lower than the initial expected loss emergence. The majority of the net favorable reserve development was recognized in each segment in the 2004 through 2007 loss years related to the general casualty and professional liability insurance and reinsurance lines of business and the healthcare insurance line of business.

     For the nine months ended September 30, 2011, the Company had net favorable reserve development in each of its segments due to actual loss emergence being lower than the initial expected loss emergence. The majority of the net favorable reserve development was recognized in the international insurance and reinsurance segments in the 2004 through 2007 loss years related to the general casualty and professional liability insurance and reinsurance lines of business and the healthcare insurance line of business.

     For the three and nine months ended September 30, 2010, the Company had net favorable reserve development in each of its segments due to actual loss emergence being lower than the initial expected loss emergence. For the three and nine months ended September 30, 2010, the majority of the net favorable reserve development was recognized in the international insurance segment in the 2004 through 2006 loss years related to the general casualty, healthcare and professional liability lines of business.

     While the Company has experienced favorable development in its insurance and reinsurance lines, there is no assurance that conditions and trends that have affected the development of liabilities in the past will continue. It is not appropriate to extrapolate future redundancies based on prior years' development. The methodology of estimating loss reserves is periodically reviewed to ensure that the key assumptions used in the actuarial models continue to be appropriate.