Liability for Unpaid Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2020

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, 2020 and 2019 on a GAAP basis:


	September 30,
	2020		2019
Balance at January 1	$	760,357	$	661,203
Less: reinsurance recoverable on unpaid losses	482,315		477,870
Net balance at January 1	$	278,042	$	183,333

Incurred related to:
Current year	429,347		335,708
Prior years	(6,165)		33,216
Total incurred	$	423,182	$	368,924
Paid related to:
Current year	195,728		185,257
Prior years	125,085		115,890
Total paid	$	320,813	$	301,147

Net balance at September 30	$	380,411	$	251,110
Plus: reinsurance recoverable on unpaid losses	701,715		573,037
Balance at September 30	$	1,082,126	$	824,147

Composition of reserve for unpaid losses and LAE:
Case reserves	$	361,672	$	271,073
IBNR reserves	720,454		553,074
Balance at September 30	$	1,082,126	$	824,147

Based upon our internal analysis and our review of the annual statement of actuarial opinion provided by our actuarial consultants at December 31, 2019, 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 in the table above, we had favorable development in 2020 related to prior year losses. This favorable development came as a result of the strengthening of our case reserves throughout 2019 based on a review of historical loss trends. The incurred losses and LAE for the nine months ended September 30, 2020 was higher than the incurred losses and LAE for the nine months ended September 30, 2019 due to a higher frequency of catastrophe activity during the third quarter of 2020 when compared to the prior period. The loss payments made by the Company during the nine months ended September 30, 2020 were in line with the loss payments we made during the nine months ended September 30, 2019. IBNR reserves increased when compared to the prior period as a result of higher ultimate loss estimates related to Hurricane Irma.