RESERVE FOR LOSSES AND LOSS EXPENSES

6 Months Ended

Jun. 30, 2023

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 reserve for unpaid losses and loss expenses:

	Six months ended June 30,
	2023		2022
Gross reserve for losses and loss expenses, beginning of period	$	15,168,863	$	14,653,094
Less reinsurance recoverable on unpaid losses and loss expenses, beginning of period	(5,831,172)		(5,017,611)
Net reserve for unpaid losses and loss expenses, beginning of period	9,337,691		9,635,483
Net incurred losses and loss expenses related to:
Current year	1,467,256		1,515,182
Prior years	(10,357)		(12,897)
	1,456,899		1,502,285
Net paid losses and loss expenses related to:
Current year	(129,414)		(120,713)
Prior years	(1,210,101)		(1,354,605)
	(1,339,515)		(1,475,318)
Foreign exchange and other	98,814		(272,994)
Net reserve for unpaid losses and loss expenses, end of period	9,553,889		9,389,456
Reinsurance recoverable on unpaid losses and loss expenses, end of period	5,865,609		5,008,583
Gross reserve for losses and loss expenses, end of period	$	15,419,498	$	14,398,039

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, 2023, the Company recognized catastrophe and weather-related losses, net of reinstatement premiums, of $70 million (2022: $127 million).

Estimates for Significant Catastrophe Events

At June 30, 2023, 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 New Zealand floods and Cyclone Gabrielle in 2023, Hurricane Ian, Winter Storm Elliot, June European Convective Storms, the Russia-Ukraine war and COVID-19 in 2022, Hurricane Ida, U.S. Winter Storms Uri and Viola and July European Floods in 2021, and 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. 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,
	2023		2022		2023		2022
	Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)
Insurance	$	2,784	$	2,773	$	3,825	$	9,838
Reinsurance	3,535		1,167		6,532		3,059
Total	$	6,319	$	3,940	$	10,357	$	12,897

The following sections provide further details on net prior year reserve development by segment, line of business and accident year:

Insurance Segment:

The following table maps the Company's lines of business to expected claim tails:

Insurance segment
	Expected claims tail
	Short	Medium	Long
Lines of business
Property	X
Accident and health	X
Marine and aviation	X
Cyber		X
Professional lines		X
Credit and political risk		X
Liability			X

Prior year reserve development by line of business was as follows:

	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)
Property	$	(208)	$	2,721	$	5,692	$	10,783
Accident and health	(248)		(1,334)		(552)		2,298
Marine and aviation	2,682		2,927		15,903		17,575
Cyber	676		7,783		9,128		7,097
Professional lines	(3,498)		(2,350)		(16,092)		(8,286)
Credit and political risk	8,430		4,287		12,949		5,182
Liability	(5,050)		(11,261)		(23,203)		(24,811)
Total	$	2,784	$	2,773	$	3,825	$	9,838

For the three months ended June 30, 2023, the Company recognized $3 million of net favorable prior year reserve development, the principal components of which were: 

•$8 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2018 through 2022 accident years.

•$3 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine cargo book of business related to 2022 catastrophe events, partially offset by increases in the loss estimates within the marine liability book of business related to the 2020 and 2021 accident years.

•$5 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S. excess casualty general liability and U.S. programs books of business mainly related to the 2017 through 2019 accident years.

•$3 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the U.S. financial institutions book of business mainly related to the 2009 and 2018 accident years, U.S. commercial management solutions book of business mainly related to the 2017 through 2019 accident years, and an increase in the loss estimate attributable to a specific large claim within the U.S. design professional and environmental book of business mainly related to the 2019 accident year.

For the three months ended June 30, 2022, the Company recognized $3 million of net favorable prior year reserve development, the principal components of which were: 

•$8 million of net favorable prior year reserve development on cyber business primarily due to better than expected loss emergence mainly related to 2020 and older accident years.

•$4 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2020 and 2021 accident years.

•$11 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 2017 through 2021 accident years and reserve strengthening within the U.S. primary casualty book of business mainly related to the 2015 and 2017 accident years.

For the six months ended June 30, 2023, the Company recognized $4 million of net favorable prior year reserve development, the principal components of which were:

•$16 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine cargo book of business related to 2022 catastrophe events, partially offset by increases in the loss estimates within the marine liability book of business related to the 2020 and 2021 accident years.

•$13 million of net favorable prior year reserve development on credit and political risk business primarily due to a decrease in the loss estimate attributable to a specific large claim related to the 2020 accident year and better than expected loss emergence related to recent accident years.

•$9 million of net favorable prior year reserve development on cyber business primarily due to better than expected loss emergence mainly related to 2019 and older accident years.

•$6 million of net favorable prior year reserve development on property business primarily due to better than expected loss emergence attributable to 2022 catastrophe events, partially offset by reserve strengthening related to the 2021 accident year.

•$23 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S. primary casualty book of business mainly related to the 2015, 2018 and 2021 accident years, and U.S. excess casualty general liability and U.S. programs book of business mainly related to the 2017 through 2019 accident years.

•$16 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the U.S. financial institutions book of business mainly related to the 2009 and 2018 accident years, U.S. commercial management solutions book of business mainly related the 2017 through 2019 accident years, and U.S. design professional and environmental book of business mainly related to the 2019 accident year.

For the six months ended June 30, 2022, we recognized $10 million of net favorable prior year reserve development, the principal components of which were: 

•$18 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine cargo and marine offshore energy books of business mainly related to the 2018 and 2021 accident years, and aviation business mainly related to the 2021 accident year.

•$11 million of net favorable prior year reserve development on property business primarily due to decreases in loss estimates attributable to specific large claims related to the 2017 accident year, and better than expected loss emergence attributable to 2018 catastrophe events.

•$7 million of net favorable prior year reserve development on cyber business primarily due to better than expected loss emergence related to several accident years.

•$5 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2017, 2020 and 2021 accident years.

•$25 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 2017 through 2021 accident years and an increase in the loss estimate attributable to a specific large claim related to the 2017 accident year.

•$8 million of net adverse prior year reserve development on professional lines business primarily due to increases in loss estimates attributable to specific large claims related to the 2015 and 2017 accident years, and reserve strengthening within run-off lines of business mainly related to the 2016 and 2018 accident years.

Reinsurance Segment:

The following table maps the Company's lines of business to expected claim tails:

Reinsurance segment
	Expected claims tail
	Short	Medium	Long
Lines of business
Accident and health	X
Agriculture	X
Marine and aviation	X
Professional lines		X
Credit and surety		X
Motor			X
Liability			X
Run-off lines
Catastrophe	X
Property	X
Engineering	X

Prior year reserve development by line of business was as follows:

	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)
Accident and health	$	7,284	$	2,186	$	14,273	$	1,687
Agriculture	2,122		7,141		14,013		8,372
Marine and aviation	5,197		(896)		4,947		(400)
Professional lines	(10,504)		(6,000)		(13,728)		(30,522)
Credit and surety	(582)		3,582		(1,128)		11,047
Motor	(4,825)		3,860		(21,946)		2,130
Liability	(7,017)		(6,823)		(39,870)		(10,928)
Total	(8,325)		3,050		(43,439)		(18,614)
Run-off lines
Catastrophe	7,487		(694)		38,546		(940)
Property	2,264		2,053		9,147		24,592
Engineering	2,109		(3,242)		2,278		(1,979)
Total run-off lines	11,860		(1,883)		49,971		21,673
Total	$	3,535	$	1,167	$	6,532	$	3,059

For the three months ended June 30, 2023, the Company recognized $4 million of net favorable prior year reserve development, the principal components of which were:

•$7 million of net favorable development on accident and health business primarily due to better than expected loss emergence mainly related to the 2022 accident year, partially offset by reserve strengthening mainly related to the 2021 accident year.

•$5 million of net favorable development on marine and aviation business primarily due to better than expected loss emergence mainly related to the 2020 and 2022 accident years.

•$11 million of net adverse development on professional lines business primarily due to reserve strengthening within the European proportional book of business related to several accidents years and reserve strengthening attributable to one cedant within the U.S. proportional book of business related to 2019 and older accident years.

•$7 million of net adverse development on liability business primarily due to reserve strengthening within the U.S. proportional book of business related to 2018 and older accident years, increases in loss estimates attributable to several cedants within the European book of business related to the 2016 though 2018 accident years and increases in loss estimates attributable to several claims within the Multiline book of business related to older accident years.

•$5 million of net adverse development on motor business primarily due to reserve strengthening related to the 2018 through 2022 accident years.

Run-off lines

•$7 million of net favorable development on catastrophe business primarily due to better than expected loss emergence mainly related to the 2018 and 2022 accident years.

For the three months ended June 30, 2022, the Company recognized $1 million of net favorable prior year reserve development, the principal components of which were:

•$7 million of net favorable prior year development on the agriculture book of business mainly related to the 2021 accident year.

•$4 million of net favorable prior year reserve development on motor business primarily due to better than expected loss emergence mainly related to the 2018 and 2019 accidents years.

•$4 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence mainly related to the 2018 and 2020 accidents years.

•$7 million of net adverse prior year development on liability business primarily due to an increase in the loss estimate attributable to a specific large claim related to the 2021 accident year.

•$6 million of net adverse prior year development on professional lines business primarily due to reserve strengthening within the U.S. public D&O book of business related to the 2015 through 2018 accident years, partially offset by better than expected loss emergence attributable to the U.S. and Europe non-proportional books of business related to several accident years.

For the six months ended June 30, 2023, the Company recognized $7 million of net favorable prior year reserve development, the principal components of which were:

•$14 million of net favorable development on accident and health business primarily due to better than expected loss emergence mainly related to the 2019, 2020 and 2022 accident years.

•$14 million of net favorable development on agriculture business primarily due to better than expected loss emergence mainly related to the 2022 accident year.

•$5 million of net favorable development on marine and aviation business primarily due to better than expected loss emergence mainly related to the 2021 and 2022 accident years.

•$40 million of net adverse development on liability business primarily due to reserve strengthening to reflect increased estimates of future loss trend due to inflation, an increase in the loss estimate attributable to a specific large claim within the European book of business related to the 2021 accident year and reserve strengthening within the U.S. proportional book of business related to 2019 and older accident years.

•$22 million of net adverse development on motor business primarily due to reserve strengthening to reflect increased estimates of future loss trend due to inflation and reserve strengthening related to the 2018 through 2022 accident years.

•$14 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the European proportional book of business related to several accident years and reserve strengthening attributable to one cedant within the U.S. proportional book of business related to 2019 and older accident years.

Run-off lines

•$39 million of net favorable development on catastrophe business primarily due to better than expected loss emergence mainly related to the 2022 accident year.

•$9 million of net favorable development on property business primarily due to better than expected loss emergence attributable to the European book of business mainly related to the 2018 and 2019 accident years.

For the six months ended June 30, 2022, we recognized $3 million of net favorable prior year reserve development, the principal components of which were:

•$11 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence mainly related the 2016, 2018 and 2020 accidents years.

•$8 million of net favorable prior year reserve development on agriculture business mainly related to the 2021 accident year.

•$31 million of net adverse prior year development on professional lines business primarily due to increases in loss estimates attributable to one cedant related to the 2016 to 2018 accident years, a specific large claim related to the 2017 accident year, and reserve strengthening within the U.S. public D&O book of business related to several accident years.

•$11 million of net adverse prior year development on liability business primarily due to increases in loss estimates attributable to specific large claims related to the 2018 and 2021 accident years.

Run-off lines

•$25 million of net favorable prior year development on property business primarily due to better than expected loss emergence attributable to 2018 through 2021 catastrophe events.