RESERVE FOR LOSSES AND LOSS EXPENSES

6 Months Ended

Jun. 30, 2021

Insurance [Abstract]

RESERVE FOR LOSSES AND LOSS EXPENSES

Reserve Roll-Forward

The following table presents a reconciliation of the Company's beginning and ending gross reserve for losses and loss expenses and net reserves for unpaid losses and loss expenses:

	Six months ended June 30,
	2021		2020
Gross reserve for losses and loss expenses, beginning of period	$	13,926,766	$	12,752,081
Less reinsurance recoverable on unpaid losses and loss expenses, beginning of period	(4,496,641)		(3,877,756)
Net reserve for unpaid losses and loss expenses, beginning of period	9,430,125		8,874,325
Net incurred losses and loss expenses related to:
Current year	1,393,316		1,593,102
Prior years	(12,126)		(8,767)
	1,381,190		1,584,335
Net paid losses and loss expenses related to:
Current year	(109,482)		(89,724)
Prior years	(1,239,814)		(1,271,987)
	(1,349,296)		(1,361,711)
Foreign exchange and other	68,880		(78,304)
Net reserve for unpaid losses and loss expenses, end of period	9,530,899		9,018,645
Reinsurance recoverable on unpaid losses and loss expenses, end of period	4,626,454		4,160,521
Gross reserve for losses and loss expenses, end of period	$	14,157,353	$	13,179,166

The Company writes business with loss experience generally characterized as low frequency and high severity in nature, which can result in volatility in its financial results. During the six months ended June 30, 2021, the Company recognized catastrophe and weather-related losses, net of reinstatement premiums of $139 million (2020: $336 million).

At June 30, 2021, foreign exchange and other included a reduction in reinsurance recoverable on unpaid losses of $49 million related to the Reinsurance to Close of the 2018 year of account of Syndicate 2007.

Estimates for Significant Catastrophe Events

At June 30, 2021, net reserves for losses and loss expenses included estimated amounts for numerous catastrophe events. The magnitude and complexity of losses arising from certain of these events inherently increase the level of uncertainty and, therefore, the level of management judgment involved in arriving at estimated net reserves for losses and loss expenses. These events include the U.S. Winter Storms Uri and Viola in 2021, the COVID-19 pandemic, Hurricanes Laura, Sally, Zeta and Delta, the Midwest derecho and wildfires across the West Coast of the United States in 2020, Japanese Typhoons Hagibis, Faxai and Tapah, Hurricane Dorian and the Australia Wildfires in 2019 and Hurricanes Michael and Florence, California Wildfires and Typhoon Jebi in 2018. As a result, actual losses for these events may ultimately differ materially from current estimates.

Prior Year Reserve Development

The Company's net favorable prior year reserve development arises from changes to estimates of losses and loss expenses related to loss events that occurred in previous calendar years. The following table presents net prior year reserve development by segment:

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)
Insurance	$	6,427	$	420	$	7,932	$	4,251
Reinsurance	381		2,235		4,194		4,516
Total	$	6,808	$	2,655	$	12,126	$	8,767

The following sections provide further details on net prior year reserve development by segment, reserving class and accident year.

Insurance Segment:

The following table maps lines of business to reserve classes and the expected claim tails:

Insurance segment
	Reserve class and tail
	Property and other	Marine	Aviation	Credit and political risk	Professional lines	Liability
	Short	Short	Short/Medium	Medium	Medium	Long
Reported lines of business
Property	X
Marine		X
Terrorism	X
Aviation			X
Credit and political risk				X
Professional lines					X
Liability						X
Accident and health	X
Discontinued lines - Novae	X				X	X

Prior year reserve development by reserve class was as follows:

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)
Property and other	$	35,290	$	25,117	$	50,681	$	37,607
Marine	7,348		(1,262)		19,221		(3,464)
Aviation	4,808		2,002		5,844		5,993
Credit and political risk	4,055		(178)		(1,316)		(1,094)
Professional lines	(33,054)		(8,519)		(47,646)		(13,606)
Liability	(12,020)		(16,740)		(18,852)		(21,185)
Total	$	6,427	$	420	$	7,932	$	4,251

For the three months ended June 30, 2021, we recognized $6 million of net favorable prior year reserve development, the principal components of which were: 

•$35 million of net favorable prior year reserve development on property and other business primarily due to decreases in loss estimates attributable to specific claims related to the 2006 through 2012 accident years, better than expected loss emergence attributable to the 2018 and 2020 catastrophe events and better than expected loss emergence attributable to the accident and health book of business related to the 2019 and 2020 accident years.

•$7 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to cargo and energy offshore books of business mainly related to the 2020 accident year and decreases in loss estimates attributable to specific claims related to the 2006 through 2012 accident years.

•$5 million of net favorable prior year reserve development on aviation business primarily due to better than expected loss emergence related to the 2014 and 2020 accident years.

•$33 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the International management liability solutions and financial institutions books of businesses mainly related to the 2018 accident year and the U.S. commercial management solutions book of business mainly related to the 2018 and 2019 accident years.

•$12 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the program book of business mainly related to the 2018 and 2019 accident years.

For the three months ended June 30, 2020, we recognized $0.4 million of net favorable prior year reserve development, the principal components of which were: 

•$25 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence related to the 2019 accident year, better than expected loss emergence attributable to the 2017, 2018 and 2019 catastrophe events and decreases in loss estimates attributable to specific claims related to the 2014, 2016 and 2019 accident years.

•$17 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S. excess casualty and programs books of business mainly related to the 2017 and 2018 accident years.

•$9 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening related to the 2018 and 2019 accident years.

For the six months ended June 30, 2021, we recognized $8 million of net favorable prior year reserve development, the principal components of which were: 

•$51 million of net favorable prior year reserve development on property and other business primarily due to decreases in loss estimates attributable to specific claims related to the 2006 through 2012 accident years and better than expected loss emergence attributable to the accident and health book of business related to the 2019 and 2020 accident years.

•$19 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to cargo and energy offshore books of business mainly related to the 2017 and 2020 accident years and decreases in loss estimates attributable to specific claims related to the 2006 through 2012 accident years.

•$6 million of net favorable prior year reserve development on aviation business primarily due to better than expected loss emergence related to the 2020 accident year.

•$48 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the International management liability solutions and financial institutions books of businesses mainly related to the 2018 accident year and the U.S. commercial management solutions book of business mainly related to the 2018 and 2019 accident years and European program and European management liability solutions books of business mainly related to the 2018 accident year.

•$19 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the program book of business mainly related to the 2018 and 2019 accident years.

For the six months ended June 30, 2020, we recognized $4 million of net favorable prior year reserve development, the principal components of which were: 

•$38 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence related to 2018 and 2019 accident years, better than expected loss emergence attributable to the 2017, 2018 and 2019 catastrophe events, and decreases in loss estimates attributable to specific claims related to the 2014, 2016 and 2019 accident years.

•$6 million of net favorable prior year reserve development on aviation business primarily due to better than expected loss emergence related to the 2018 and 2019 accident years.

•$21 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S. excess casualty and programs books of business mainly related to the 2017 and 2018 accident years.

•$14 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening related to the 2018 and 2019 accident years.

Reinsurance Segment:

The following table maps lines of business to reserve classes and the expected claim tails:

Reinsurance segment
	Reserve class and tail
	Property and other	Credit and surety	Professional lines	Motor	Liability
	Short	Medium	Medium	Long	Long
Reported lines of business
Catastrophe	X
Property	X
Credit and surety		X
Professional lines			X
Motor				X
Liability					X
Engineering	X
Agriculture	X
Marine and aviation	X
Accident and health	X
Discontinued lines - Novae	X			X	X

Prior year reserve development by reserve class was as follows:

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)
Property and other	$	12,310	$	(4,162)	$	13,278	$	(8,065)
Credit and surety	(4,917)		10,483		(9,854)		15,335
Professional lines	(8,600)		(4,879)		(10,804)		283
Motor	12,946		4,448		30,086		17,533
Liability	(11,358)		(3,655)		(18,512)		(20,570)
Total	$	381	$	2,235	$	4,194	$	4,516

For the three months ended June 30, 2021, we recognized $0.4 million of net favorable prior year reserve development, the principal components of which were:

•$13 million of net favorable prior year reserve development on motor business primarily due to proportional and non-proportional treaty business mainly related to older accident years.

•$12 million of net favorable prior year development on property and other business primarily due to decreases in the loss estimates attributable to specific claims related to the 2009, 2019 and 2020 accident years and better than expected loss emergence attributable to the 2017, 2018 and 2019 catastrophe events.

•$11 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the commercial auto liability book of business related to the 2018 accident year.

•$9 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the North America books of business related to the 2018 and 2019 accident years.

•$5 million of net adverse prior year reserve development on credit and surety business primarily due to reserve strengthening within the European and Latin American surety books of business related to the 2015 through 2018 accident years.

For the three months ended June 30, 2020, we recognized $2 million of net favorable prior year reserve development, the principal components of which were:

•$10 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence related to multiple accident years.

•$4 million of net favorable prior year reserve development on motor business primarily due to non-proportional treaty business mainly related to the 2015 and 2016 accident years.

•$5 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening related to the 2015 to 2017 accident years.

•$4 million of net adverse prior year development on property and other business primarily due to reserve strengthening within the European and the Bermuda proportional books of business related to the 2017 and 2018 accident years, partially offset by net favorable prior year reserve development on accident and health business attributable to the North America book of business related to the 2019 accident year.

For the six months ended June 30, 2021, we recognized $4 million of net favorable prior year reserve development, the principal components of which were:

•$30 million of net favorable prior year reserve development on motor business primarily due to proportional and non-proportional treaty business mainly related to older accident years and the 2016 accident year.

•$13 million of net favorable prior year development on property and other business primarily due to decreases in the loss estimates attributable to specific claims related to the 2009, 2019 and 2020 accident years and better than expected loss emergence attributable to the 2017, 2018 and 2019 catastrophe events.

•$19 million of net adverse prior year reserve development on liability business primarily due to an increase in the loss estimate attributable to a specific large loss related to the 2017 accident year and reserve strengthening within the commercial auto liability book of business related to the 2018 accident year.

•$11 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the North America books of business related to the 2017 and 2019 accident years.

•$10 million of net adverse prior year reserve development on credit and surety business primarily due to reserve strengthening within the European and Latin American surety books of business related to the 2015 through 2018 accident years and an increase in the loss estimate attributable to a specific large loss related to the 2020 accident year.

For the six months ended June 30, 2020, we recognized $5 million of net favorable prior year reserve development, the principal components of which were:

•$18 million of net favorable prior year reserve development on motor business primarily due to non-proportional treaty business mainly related to the 2016 and older accident years.

•$15 million of net favorable prior year reserve development on credit and surety business primarily due to generally better than expected loss emergence related to multiple accident years.

•$21 million of net adverse prior year development on liability business primarily due to reserve strengthening associated with large U.S. commercial cedants and reserve strengthening within the U.S. multiline/regional, U.S. auto and the European non-proportional books of business related to the 2015 through 2019 accident years.

•$8 million of net adverse prior year development on property and other business primarily due to reserve strengthening within the engineering line of business related to the 2016 to 2019 accident years and the marine and other line of business related to the 2018 and 2019 accident years, partially offset by net favorable prior year reserve development on accident and health business attributable to the North America book of business related to the 2019 accident year and the agriculture line of business related to the 2018 and 2019 accident years.