UNPAID LOSSES

We determine the reserve for unpaid losses on an individual-case basis for all incidents reported. The liability also includes amounts for IBNR claims as of the balance sheet date.

The table below summarizes the activity related to our reserve for unpaid losses:



	2011			2010		2009
Balance at January 1	$	47,414		$	44,112	$	40,098
Less: reinsurance recoverable on unpaid losses	23,814			23,447		20,906
Net balance at January 1	$	23,600		$	20,665	$	19,192
Incurred related to:
Current year	43,019			41,527		43,731
Prior years	(4,158		)	1,006		(2,976		)
Total incurred	$	38,861		$	42,533	$	40,755
Paid related to:
Current year	28,857			27,065		30,637
Prior years	3,322			12,533		8,645
Total paid	$	32,179		$	39,598	$	39,282

Net balance at December 31	$	30,282		$	23,600	$	20,665
Plus: reinsurance recoverable on unpaid losses	3,318			23,814		23,447
Balance at December 31	$	33,600		$	47,414	$	44,112

Based upon our internal analysis and our review of the statement of actuarial opinion provided by our actuarial consultants, we believe that the reserve for unpaid losses reasonably represents the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

As reflected by our losses incurred related to prior years, we had a reserve redundancy in 2011 compared to a reserve deficiency in 2010. Since we place substantial reliance on loss-development-based actuarial models when determining our estimate of ultimate losses, the redundancy in 2011 resulted from reductions to our estimate of ultimate losses because of continued favorable loss development on claims incurred in prior years.