LOSSES AND LOSS ADJUSTMENT EXPENSES

The liability for losses and loss adjustment expenses ("LAE") includes an amount determined from reported claims and an amount based on historical loss experience and industry statistics for incurred but not reported ("IBNR") using a variety of actuarial methods. Our loss reserves cover multiple lines of business, which include workers' compensation, general casualty, asbestos and environmental, marine, aviation and transit, construction defects and other non-life lines of business. Refer to Note 9 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 for more information on establishing the liability for losses and LAE.

The following table summarizes the liability for losses and LAE by segment as at March 31, 2016 and December 31, 2015:



	March 31, 2016											December 31, 2015
	Non-life Run-off			Atrium		StarStone			Total			Non-life Run-off			Atrium		StarStone			Total
Outstanding losses	$	3,124,006		$	68,124	$	464,088		$	3,656,218		$	2,757,774		$	68,913	$	457,175		$	3,283,862
IBNR	2,501,564			126,152		509,359			3,137,075			1,991,009			115,613		477,990			2,584,612
Fair value adjustments	(166,354		)	15,643		(1,075		)	(151,786		)	(163,329		)	16,491		(1,487		)	(148,325		)
Total	$	5,459,216		$	209,919	$	972,372		$	6,641,507		$	4,585,454		$	201,017	$	933,678		$	5,720,149

The overall increase in the liability for losses and LAE between December 31, 2015 and March 31, 2016 was primarily attributable to the assumed reinsurance agreement with Allianz in our Non-life Run-off segment as described in Note 2 - "Significant New Business."

The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the three months ended March 31, 2016 and 2015:



	Three Months Ended March 31,
	2016		2015
Balance as at January 1	$	5,720,149	$	4,509,421
Less: reinsurance reserves recoverable	1,360,382		1,154,196
Less: deferred charges on retroactive reinsurance	255,911		—
Net balance as at January 1	4,103,856		3,355,225
Net incurred losses and LAE:
Current period	115,301		113,014
Prior periods	(32,083)		(42,878)
Total net incurred losses and LAE	83,218		70,136
Net paid losses:
Current period	(5,334)		(11,164)
Prior periods	(186,403)		(118,155)
Total net paid losses	(191,737)		(129,319)
Effect of exchange rate movement	4,881		(54,146		)
Acquired on purchase of subsidiaries	—		774,758
Assumed business	1,084,251		189,868
Net balance as at March 31	5,084,469		4,206,522
Plus: reinsurance reserves recoverable	1,302,738		1,518,102
Plus: deferred charge on retroactive reinsurance	254,300		—
Balance as at March 31	$	6,641,507	$	5,724,624

The tables below provide the net incurred losses and LAE in the Non-life Run-off, Atrium and StarStone segments for the three months ended March 31, 2016 and 2015:



	Three Months Ended March 31, 2016
	Non-life Run-off			Atrium			StarStone			Total
Net losses paid	$	132,313		$	7,748		$	51,676		$	191,737
Net change in case and LAE reserves	(108,785		)	(1,772		)	12,655			(97,902		)
Net change in IBNR reserves	(37,063		)	9,891			27,086			(86		)
Increase (reduction) in estimates of net ultimate losses	(13,535		)	15,867			91,417			93,749
Reduction in provisions for bad debt	(1,448		)	—			—			(1,448		)
Increase (reduction) in provisions for unallocated LAE	(7,788		)	84			1,011			(6,693		)
Amortization of fair value adjustments	(783		)	(362		)	(1,245		)	(2,390		)
Net incurred losses and LAE	$	(23,554	)	$	15,589		$	91,183		$	83,218



	Three Months Ended March 31, 2015
	Non-life Run-off			Atrium			StarStone			Total
Net losses paid	$	65,260		$	11,911		$	52,148		$	129,319
Net change in case and LAE reserves	(7,000		)	(1,019		)	(1,786		)	(9,805		)
Net change in IBNR reserves	(37,278		)	(3,810		)	25,739			(15,349		)
Increase (reduction) in estimates of net ultimate losses	20,982			7,082			76,101			104,165
Reduction in provisions for bad debt	(19,814		)	—			—			(19,814		)
Increase (reduction) in provisions for unallocated LAE	(13,975		)	(62		)	656			(13,381		)
Amortization of fair value adjustments	(293		)	—			(541		)	(834		)
Net incurred losses and LAE	$	(13,100	)	$	7,020		$	76,216		$	70,136

Non-Life Run-off Segment

The table below provides a reconciliation of the beginning and ending reserves for losses and LAE for the three months ended March 31, 2016 and 2015 for the Non-life Run-off segment:



	Three Months Ended March 31,
	2016			2015
Balance as at January 1	$	4,585,454		$	3,435,010
Less: reinsurance reserves recoverable	1,034,747			800,709
Less: deferred charges on retroactive insurance	255,911			—
Net balance as at January 1	3,294,796			2,634,301
Net incurred losses and LAE:
Current period	6,069			20,726
Prior periods	(29,623		)	(33,826		)
Total net incurred losses and LAE	(23,554		)	(13,100		)
Net paid losses:
Current period	(1,990		)	(4,571		)
Prior periods	(130,323		)	(60,689		)
Total net paid losses	(132,313		)	(65,260		)
Effect of exchange rate movement	4,640			(38,238		)
Acquired on purchase of subsidiaries	—			774,758
Assumed business	1,084,251			189,868
Net balance as at March 31	4,227,820			3,482,329
Plus: reinsurance reserves recoverable	977,096			1,210,933
Plus: deferred charges on retroactive reinsurance	254,300			—
Balance as at March 31	$	5,459,216		$	4,693,262

Net incurred losses and LAE in the Non-life Run-off segment for the three months ended March 31, 2016 and 2015 were as follows:



	Three Months Ended March 31,
	2016								2015
	Prior Period			Current Period		Total			Prior Period			Current Period		Total
Net losses paid	$	130,323		$	1,990	$	132,313		$	60,689		$	4,571	$	65,260
Net change in case and LAE reserves	(108,969		)	184		(108,785		)	(9,994		)	2,994		(7,000		)
Net change in IBNR reserves	(40,513		)	3,450		(37,063		)	(50,439		)	13,161		(37,278		)
Increase (reduction) in estimates of net ultimate losses	(19,159		)	5,624		(13,535		)	256			20,726		20,982
Increase (reduction) in provisions for bad debt	(1,448		)	—		(1,448		)	(19,814		)	—		(19,814		)
Increase (reduction) in provisions for unallocated LAE	(8,233		)	445		(7,788		)	(13,975		)	—		(13,975		)
Amortization of fair value adjustments	(783		)	—		(783		)	(293		)	—		(293		)
Net incurred losses and LAE	$	(29,623	)	$	6,069	$	(23,554	)	$	(33,826	)	$	20,726	$	(13,100	)

Net change in case and LAE reserves comprises the movement during the year in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims. Net change in IBNR represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.

Three Months Ended March 31, 2016

The net reduction in incurred losses and LAE for the three months ended March 31, 2016 of $23.6 million included net incurred losses and LAE of $6.1 million related to current period net earned premium of $5.6 million, primarily for the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $6.1 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $29.6 million, which was attributable to a reduction in estimates of net ultimate losses of $19.2 million, a reduction in provisions for bad debt of $1.4 million and a reduction in provisions for unallocated LAE of $8.2 million, relating to 2016 run-off activity and amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $0.8 million.

The reduction in provisions for bad debt of $1.4 million was a result of the collection of certain reinsurance recoverables against which bad debt provisions had been provided in earlier periods.

Three Months Ended March 31, 2015

The net reduction in incurred losses and LAE for the year ended March 31, 2015 of $13.1 million included net incurred losses and LAE of $20.7 million related to current period net earned premium of $19.3 million, primarily for the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $20.7 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $33.8 million, which was attributable to a reduction in provisions for bad debts of $19.8 million and a reduction in provisions for unallocated LAE of $14.0 million, relating to 2015 run-off activity, and amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $0.3 million, partially offset by an increase in estimates of net incurred losses of $0.3 million.

The reduction in provisions for bad debt of $19.8 million for the three months ended March 31, 2015 resulted from the cash collection and commutation of certain reinsurance receivables against which bad debt provisions had been provided for in earlier periods.

Atrium

The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the three months ended March 31, 2016 and 2015:



	Three Months Ended March 31,
	2016		2015
Balance as at January 1	$	201,017	$	212,611
Less: reinsurance reserves recoverable	25,852		28,278
Net balance as at January 1	175,165		184,333
Net incurred losses and LAE:
Current period	16,062		14,878
Prior periods	(473)		(7,858)
Total net incurred losses and LAE	15,589		7,020
Net paid losses:
Current period	(2,238)		(2,870)
Prior periods	(5,510)		(9,041)
Total net paid losses	(7,748)		(11,911)
Effect of exchange rate movement	664		(3,198)
Net balance as at March 31	183,670		176,244
Plus: reinsurance reserves recoverable	26,249		26,629
Balance as at March 31	$	209,919	$	202,873

Net Incurred losses and LAE in the Atrium segment for the three months ended March 31, 2016 and 2015 were as follows:



	Three Months Ended March 31,
	2016								2015
	Prior Period			Current Period		Total			Prior Period			Current Period		Total
Net losses paid	$	5,510		$	2,238	$	7,748		$	9,041		$	2,870	$	11,911
Net change in case and LAE reserves	(3,960		)	2,188		(1,772		)	(3,711		)	2,692		(1,019		)
Net change in IBNR reserves	(1,591		)	11,482		9,891			(12,993		)	9,183		(3,810		)
Increase (reduction) in estimates of net ultimate losses	(41		)	15,908		15,867			(7,663		)	14,745		7,082
Increase (reduction) in provisions for unallocated LAE	(70		)	154		84			(195		)	133		(62		)
Amortization of fair value adjustments	(362		)	—		(362		)	—			—		—
Net incurred losses and LAE	$	(473	)	$	16,062	$	15,589		$	(7,858	)	$	14,878	$	7,020

StarStone

The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the three months ended March 31, 2016 and 2015:



	Three Months Ended March 31,
	2016			2015
Balance as at January 1	$	933,678		$	861,800
Less: reinsurance reserves recoverable	299,783			325,209
Net balance as at January 1	633,895			536,591
Net incurred losses and LAE:
Current period	93,170			77,410
Prior periods	(1,987		)	(1,194		)
Total net incurred losses and LAE	91,183			76,216
Net paid losses:
Current period	(1,106		)	(3,723		)
Prior periods	(50,570		)	(48,425		)
Total net paid losses	(51,676		)	(52,148		)
Effect of exchange rate movement	(423		)	(12,711		)
Net balance as at March 31	672,979			547,948
Plus: reinsurance reserves recoverable	299,393			280,540
Balance as at March 31	$	972,372		$	828,488

Net incurred losses and LAE in the Starstone segment for the three months ended March 31, 2016 and 2015 were as follows:



	Three Months Ended March 31,
	2016								2015
	Prior Period			Current Period		Total			Prior Period			Current Period		Total
Net losses paid	$	50,570		$	1,106	$	51,676		$	48,425		$	3,723	$	52,148
Net change in case and LAE reserves	4,636			8,019		12,655			(10,331		)	8,545		(1,786		)
Net change in IBNR reserves	(54,913		)	81,999		27,086			(37,677		)	63,416		25,739
Increase (reduction) in estimates of net ultimate losses	293			91,124		91,417			417			75,684		76,101
Increase (reduction) in provisions for unallocated LAE	(1,035		)	2,046		1,011			(1,070		)	1,726		656
Amortization of fair value adjustments	(1,245		)	—		(1,245		)	(541		)	—		(541		)
Net incurred losses and LAE	$	(1,987	)	$	93,170	$	91,183		$	(1,194	)	$	77,410	$	76,216