Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2013

Reinsurance/Losses and Loss Adjustment Expenses [Abstract]

Losses and Loss Adjustment Expenses

Note 8 — Losses and Loss Adjustment Expenses

The liability for losses and loss adjustment expenses is determined on an individual case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claim development and losses incurred, but not reported.

Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows (in thousands):

	Three Months Ended March 31,
	2013			2012
Balance, beginning of period	$	41,168			27,424
Incurred related to:
Current period		16,931			18,406
Prior period		(1,059	)		762
Total incurred		15,872			19,168
Paid related to:
Current period		(3,732	)		(4,391	)
Prior period		(11,557	)		(8,725	)
Total paid		(15,289	)		(13,116	)
Balance, end of period	$	41,751			33,476

The establishment of loss reserves is an inherently uncertain process and changes in loss reserve estimates are expected as such estimates are subject to the outcome of future events. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made. During the three months ended March 31, 2013, the Company experienced overall favorable development of approximately $1.1 million with respect to its net unpaid losses and loss adjustment expenses established as of December 31, 2012, which contributed to the overall favorable variance of approximately $3.3 million with respect to the total losses and loss adjustment expenses incurred during the three months ended March 31, 2013 as compared to the three months ended March 31, 2012.

The Company writes insurance in the state of Florida, which could be exposed to hurricanes or other natural catastrophes. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, the Company believes that such an event would not be so material as to disrupt the overall normal operations of the Company. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.