Liability for Unpaid Losses and Loss Adjustment Expenses Liability for Unpaid Losses and Loss Adjustment Expense

3 Months Ended

Mar. 31, 2017

Short-Duration Insurance and Deposit Contracts

LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE

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 shows the analysis of our reserve for unpaid losses for the three months ended March 31, 2017 and March 31, 2016 on a GAAP basis:



	March 31,
	2017			2016
Balance at January 1	$	140,855		$	76,792
Less: reinsurance recoverable on unpaid losses	18,724			2,114
Net balance at January 1	$	122,131		$	74,678
Incurred related to:
Current year	63,859			61,072
Prior years	(526		)	3,186
Total incurred	$	63,333		$	64,258
Paid related to:
Current year	21,986			23,691
Prior years	42,528			27,710
Total paid	$	64,514		$	51,401

Net balance at March 31	$	120,950		$	87,535
Plus: reinsurance recoverable on unpaid losses	20,152			911
Balance at March 31	$	141,102		$	88,446

Composition of reserve for unpaid losses and LAE:
Case reserves	$	82,987		$	53,006
IBNR reserves	58,115			35,440
Balance at March 31	$	141,102		$	88,446

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, the favorable development experienced in 2017 was primarily the result of losses related to the 2016 and 2015 accident years coming in better than expected. During 2016, we had a reserve deficiency. Since we place substantial reliance on loss-development-based actuarial models when determining our estimate of ultimate losses, the deficiencies resulted from additional development on prior accident years which caused our ultimate losses to increase.