Liability for Unpaid Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2019

Liability for unpaid losses and loss adjustment expenses

LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE (LAE)

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, 2019 and 2018 on a GAAP basis:



	September 30,
	2019		2018
Balance at January 1	$	661,203	$	482,232
Less: reinsurance recoverable on unpaid losses	477,870		305,673
Net balance at January 1	$	183,333	$	176,559

Incurred related to:
Current year	335,708		290,600
Prior years	33,216		(4,207		)
Total incurred	$	368,924	$	286,393
Paid related to:
Current year	185,257		163,589
Prior years	115,890		102,750
Total paid	$	301,147	$	266,339

Net balance at September 30	$	251,110	$	196,613
Plus: reinsurance recoverable on unpaid losses	573,037		332,229
Balance at September 30	$	824,147	$	528,842

Composition of reserve for unpaid losses and LAE:
Case reserves	$	271,073	$	259,678
IBNR reserves	553,074		269,164
Balance at September 30	$	824,147	$	528,842

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

As reflected by our losses incurred related to prior years, the unfavorable development experienced for the nine months ending September 30, 2019 was primarily the result of greater losses than expected, as compared to the same period in the 2018 accident year due to increased severity and frequency. The favorable development experienced at September 30, 2018, in contrast, was primarily the result of lower losses than expected.