LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

6 Months Ended

Jun. 30, 2022

Insurance Loss Reserves [Abstract]

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

At June 30, 2022, the Company’s loss and loss adjustment expense reserves included estimated amounts for several catastrophe events. For significant catastrophe events, including, but not limited to, hurricanes, tornados, typhoons, floods, earthquakes, wildfires, and pandemics, loss reserves are generally established based on loss payments and case reserves reported by clients when received. To establish IBNR loss estimates, the Company makes use of, among other things, the following information:

•estimates communicated by ceding companies;

•information received from clients, brokers, and loss adjusters;

•an understanding of the underlying business written and its exposures to catastrophe event-related losses;

•industry data;

•catastrophe scenario modeling software; and

•management’s judgment.

At June 30, 2022, the Company’s loss and loss adjustment expense reserves included $13.6 million from the Russian-Ukrainian conflict. Additional information the Company considered in estimating its loss reserves included the following:

•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, brokers, and loss adjusters;

•reviews of industry insured loss estimates and market share analyses; and

•management’s judgment.

The Company’s Russian-Ukrainian conflict loss estimates include actuarial assumptions, including:

•the areas within the affected regions that have incurred losses;

•the scope of coverage provided by the underlying policies;

•the interpretation of contract terms;

•the determination of loss-triggering events;

•regulatory, legislative, and judicial actions that could influence contract interpretations across the insurance industry; and

•the ability of the cedents and insured to mitigate some or all of their losses.

Due to the uncertainty associated with the foregoing assumptions, the Company’s loss estimates are subject to significant variability, and actual losses may ultimately differ materially from the Company's current estimates. The Company will evaluate its assumptions as new information becomes available and may adjust its loss estimates in future periods. Such adjustments may be material to the Company's results of operations and financial condition.

Additionally, if the Russian-Ukrainian conflict is prolonged, the Company may incur additional losses in subsequent periods.

The Company made no significant changes in the actuarial methodology or reserving process related to its loss and loss adjustment expense reserves for the six months ended June 30, 2022.

At June 30, 2022 and December 31, 2021, loss and loss adjustment expense reserves were composed of the following:

	June 30, 2022		December 31, 2021
	($ in thousands)
Case reserves	$	182,624	$	190,220
IBNR	343,821		333,790
Total	$	526,445	$	524,010

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, 2022 and 2021 is as follows: 

Consolidated	2022		2021
	($ in thousands)
Gross balance at January 1	$	524,010	$	494,179
Less: Losses recoverable	(11,100)		(16,851)
Net balance at January 1	512,910		477,328
Incurred losses related to:
Current year	158,788		185,281
Prior years	(558)		(603)
Total incurred	158,230		184,678
Paid losses related to:
Current year	(27,896)		(47,262)
Prior years	(116,200)		(114,680)
Total paid	(144,096)		(161,942)
Foreign currency revaluation	(10,025)		246
Net balance at June 30	517,019		500,310
Add: Losses recoverable	9,426		14,332
Gross balance at June 30	$	526,445	$	514,642

For the six months ended June 30, 2022, the estimate of net losses incurred relating to prior accident years decreased by $0.6 million, primarily due to favorable development on mortgage contracts. This favorable development was partially offset by adverse development on motor and health business driven by the inflationary increase in claims costs and additional losses from the COVID-19 pandemic.

For the six months ended June 30, 2021, the estimate of net losses incurred relating to prior accident years decreased by $0.6 million due primarily to favorable development on certain catastrophe, mortgage, and health contracts. The decrease was partially offset by adverse loss development on certain casualty contracts written between 2014 and 2018.

The changes in the outstanding loss and loss adjustment expense reserves for health claims for the six months ended June 30, 2022 and 2021 are as follows:

Health	2022		2021
	($ in thousands)
Gross balance at January 1	$	9,939	$	17,485
Less: Losses recoverable	—		—
Net balance at January 1	9,939		17,485
Incurred losses related to:
Current year	5,293		22,895
Prior years	3,466		(1,667)
Total incurred	8,759		21,228
Paid losses related to:
Current year	(1,843)		(11,941)
Prior years	(9,653)		(12,188)
Total paid	(11,496)		(24,129)
Foreign currency revaluation	—		—
Net balance at June 30	7,202		14,584
Add: Losses recoverable	—		—
Gross balance at June 30	$	7,202	$	14,584