XML 31 R12.htm IDEA: XBRL DOCUMENT v3.20.2
LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
 6 Months Ended
Jun. 30, 2020
Insurance Loss Reserves [Abstract]  
LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
At June 30, 2020, the loss and loss adjustment expenses reserves included estimated amounts for several catastrophe events. For significant catastrophe events including, but not limited to, hurricanes, typhoons, floods, wildfires and pandemics, loss reserves are generally established based on loss payments and case reserves reported by clients when, and if, received. To establish IBNR loss estimates, the Company makes use of, among other things, the following:

•estimates communicated by ceding companies;
•industry data;
•information received from clients, brokers and loss adjusters;
•an understanding of the underlying business written and its exposures to catastrophe event related losses;
•catastrophe scenario modelling software; and
•management’s judgement.

The COVID-19 pandemic is unprecedented. Therefore, the Company does not have previous loss experience on which to base its estimates for loss and loss adjustment expenses related to the COVID-19 pandemic. The determination of the Company's estimate was based on:

•a review of in-force treaties that may provide coverage and incur losses;
•catastrophe and scenario modeling analyses and results shared by cedents;
•preliminary loss estimates received from clients and their analysts and loss adjusters;
•reviews of industry insured loss estimates and market share analyses; and
•management’s judgement.

Significant assumptions on which the Company's estimates of reserves for the COVID-19 pandemic losses and loss adjustment expenses are based include:

•the scope of coverage provided by the underlying policies, particularly those that provide for business interruption coverage;
•the regulatory, legislative or judicial actions and social impact that could influence contract interpretations across the insurance industry;
•the extent of economic contraction caused by the COVID-19 pandemic, particularly in the United States; and
•the ability of the cedents and insured to mitigate some or all of their losses.

While the Company believes its estimate of loss and loss adjustment expense reserves for the COVID-19 pandemic is adequate as of June 30, 2020 based on available information, actual losses may ultimately differ materially from the Company's current estimates. The Company will continue to monitor the appropriateness of its assumptions as new information becomes available and will adjust its estimates accordingly. Such adjustments may be material to the Company's results of operations and financial condition.

There were no significant changes in the actuarial methodology or reserving process related to the Company’s loss and loss adjustment expense reserves for the six months ended June 30, 2020.
At June 30, 2020 and December 31, 2019, loss and loss adjustment expense reserves were composed of the following:
June 30, 2020December 31, 2019
 ($ in thousands)
Case reserves$207,753  $217,834  
IBNR259,902  252,754  
Total$467,655  $470,588  

A summary of changes in outstanding loss and loss adjustment expense reserves for all lines of business consolidated
for the six months ended June 30, 2020 and 2019 is as follows: 
Consolidated20202019
 ($ in thousands)
Gross balance at January 1$470,588  $482,662  
Less: Losses recoverable(27,531) (43,705) 
Net balance at January 1443,057  438,957  
Incurred losses related to:  
Current year159,225  171,437  
Prior years5,666  29,904  
Total incurred164,891  201,341  
Paid losses related to:  
Current year(35,874) (48,554) 
Prior years(122,532) (162,363) 
Total paid(158,406) (210,917) 
Foreign currency revaluation(2,112) (102) 
Net balance at June 30447,430  429,279  
Add: Losses recoverable20,225  40,787  
Gross balance at June 30$467,655  $470,066  
        

The changes in the outstanding loss and loss adjustment expense reserves for health claims for the six months ended June 30, 2020 and 2019 are as follows:
Health20202019
 ($ in thousands)
Gross balance at January 1$18,063  $24,502  
Less: Losses recoverable—  —  
Net balance at January 118,063  24,502  
Incurred losses related to: 
Current year15,811  19,241  
Prior years1,972  2,245  
Total incurred17,783  21,486  
Paid losses related to: 
Current year(7,063) (8,046) 
Prior years(13,909) (21,897) 
Total paid(20,972) (29,943) 
Foreign currency revaluation—  —  
Net balance at June 3014,874  16,045  
Add: Losses recoverable—  —  
Gross balance at June 30$14,874  $16,045  
For the six months ended June 30, 2020, the estimate of net losses incurred relating to prior accident years increased by $5.7 million, primarily in relation to certain general liability, health and multi-line contracts, partially offset by favorable loss development on professional liability contracts. The net financial impact of the prior year unfavorable loss development for the six months ended June 30, 2020, taking into account earned reinstatement premiums assumed and ceded, adjustments to assumed and ceded acquisition costs and adjustments to deposit accounted contracts, was a loss of $5.0 million.

For the six months ended June 30, 2019, the estimate of net losses incurred relating to prior accident years increased by $29.9 million that originated primarily from private passenger automobile contracts. These unanticipated automobile losses were the result of adverse rulings that affected a significant number of loss events that occurred in Florida between 2015 and early 2018, including many claims that had previously been considered closed. The net financial impact of the prior year adverse loss development for the six months ended June 30, 2019 was a loss of $27.7 million.