Reserve For Losses And Loss Expenses

3 Months Ended

Mar. 31, 2014

Insurance Loss Reserves [Abstract]

Reserve for Losses and Loss Expenses

RESERVE FOR LOSSES AND LOSS EXPENSES

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

	March 31, 2014		December 31, 2013
Outstanding loss reserves	$	1,474,376	$	1,520,867
Reserves for losses incurred but not reported	4,382,422		4,245,662
Reserve for losses and loss expenses	$	5,856,798	$	5,766,529

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.

	Three Months Ended   March 31,
	2014			2013
Gross liability at beginning of period	$	5,766,529		$	5,645,549
Reinsurance recoverable at beginning of period	(1,234,504		)	(1,141,110		)
Net liability at beginning of period	4,532,025			4,504,439
Net losses incurred related to:
Current year	324,147			299,248
Prior years	(48,861		)	(44,070		)
Total incurred	275,286			255,178
Net paid losses related to:
Current year	3,743			3,581
Prior years	228,594			241,121
Total paid	232,337			244,702
Foreign exchange revaluation	1,299			(5,198		)
Net liability at end of period	4,576,273			4,509,717
Reinsurance recoverable at end of period	1,280,525			1,163,503
Gross liability at end of period	$	5,856,798		$	5,673,220

For the three months ended March 31, 2014, the Company recorded net unfavorable reserve development in its U.S. insurance segment and net favorable prior year development in its international insurance and reinsurance segments. The net unfavorable prior year reserve development in the U.S. insurance segment for the 2011 loss year was in the Company's healthcare line of business and was due to adverse development on several claims above its previous expectations in the managed care errors and omissions class of business and higher than expected loss frequency in the medical malpractice class of business. The international insurance segment had favorable prior year reserve development for the 2007 loss year due to favorable development on an individual professional liability claim, and unfavorable reserve development for the 2013 loss year due to a single claim in the healthcare line of business. The net favorable prior year reserve development in the reinsurance segment for the 2013 loss year was primarily due to benign property loss activity.

For the three months ended March 31, 2013, the Company had net favorable reserve development in its international and reinsurance segments due to actual loss emergence being lower than initially expected. The U.S. insurance segment had net unfavorable reserve development primarily due to adverse loss emergence trends for the 2011 and 2012 loss years for certain errors and omissions and directors’ and officers’ classes of business.

While the Company has experienced favorable reserve 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.