Liability for Unpaid Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 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 incurred but not reported (IBNR) claims as of the balance sheet date.

The table below shows the analysis of our reserve for unpaid losses for the nine months ended September 30, 2017 and September 30, 2016 on a GAAP basis:



	September 30,
	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

Acquisition of IIC reserves	—			22,576
Acquisition of AMCO reserves (net of reinsurance recoverables of $19,945)	40,583			—

Incurred related to:
Current year	296,217			190,031
Prior years	(2,819		)	9,585
Total incurred	$	293,398		$	199,616
Paid related to:
Current year	160,952			129,927
Prior years	84,497			53,437
Total paid	$	245,449		$	183,364

Net balance at September 30	$	210,663		$	113,506
Plus: reinsurance recoverable on unpaid losses	471,498			9,154
Balance at September 30	$	682,161		$	122,660

Composition of reserve for unpaid losses and LAE:
Case reserves	$	289,938		$	75,305
IBNR reserves	392,223			47,355
Balance at September 30	$	682,161		$	122,660

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.