NOTE 8. Reserve for Known and Incurred But Not Reported Claims:

Activity in the reserve for known and incurred but not reported claims is summarized as follows:

	December 31,
	2015			2014		2013
	(in thousands)
Balance at beginning of year	$	1,011,780		$	1,018,365	$	976,462
Provision related to:
Current year		395,459			383,181		378,968
Prior years		95,633			66,842		151,388
		491,092			450,023		530,356
Payments, net of recoveries, related to:
Current year		209,845			196,656		182,653
Prior years		266,647			273,094		296,657
		476,492			469,750		479,310
Other		(42,500	)		13,142		(9,143	)
Balance at end of year	$	983,880		$	1,011,780	$	1,018,365

Current year payments include $198.6 million, $174.4 million and $167.3 million in 2015, 2014 and 2013, respectively, that primarily relate to the Company’s specialty insurance segment. Prior year payments, net of recoveries, include $23.1 million, $23.2 million and $16.0 million in 2015, 2014 and 2013, respectively, that relate to the Company’s specialty insurance segment.

“Other” primarily includes foreign currency translation gains and losses, assets acquired in connection with claim settlements, and recoveries. Included for the year ended December 31, 2015, are recoveries of $23.8 million on reinsured losses related to a large commercial title claim. Payments and recoveries on reinsured losses for the Company’s title insurance and property and casualty businesses were immaterial during the years ended December 31, 2014 and 2013.

The provision for title insurance losses, expressed as a percentage of title insurance premiums and escrow fees, was 6.6%, 7.1% and 8.9% for the years ended December 31, 2015, 2014 and 2013, respectively.

The current year rate of 6.6% reflects an ultimate loss rate of 4.2% for the current policy year and a $93.1 million net increase in loss reserve estimates for prior policy years. The increase in loss reserve estimates for prior policy years was primarily attributable to a change in methodology used by the Company’s internal actuary to estimate total ultimate losses. Historically, the internal actuary’s model did not separate claims experience for large title claims from normal title claims activity. A large title claim is defined as a title claim with a total ultimate loss in excess of $2.5 million. With this change in methodology, the model now separates claims experience for large title claims from normal title claims activity when developing reserve estimates. As a result, loss reserve estimates for prior policy years increased, primarily for policy years 2004 through 2007. The change in methodology was implemented due to the increased frequency of large title claims experienced over the last several years and the volatility associated with the timing and severity of large title claims. The Company accounted for this change in methodology as a change in accounting estimate.

As of December 31, 2015, the IBNR claims reserve for the title insurance and services segment was $844.4 million, which reflected management’s best estimate. The Company’s internal actuary determined a range of reasonable estimates of $719.5 million to $922.0 million. The range limits are $124.9 million below and $77.6 million above management’s best estimate, respectively, and represent an estimate of the range of variation among reasonable estimates of the IBNR reserve. Actuarial estimates are sensitive to assumptions used in models, as well as the structures of the models themselves, and to changes in claims payment and incurral patterns, which can vary materially due to economic conditions, among other factors.

The prior year rate of 7.1% reflected an ultimate loss rate of 5.3% for policy year 2014 and a net increase in loss reserve estimates for prior policy years of $64.1 million. The increase in loss reserve estimates for prior policy years reflected claims development above expected levels during 2014, primarily from domestic commercial policies. The reserve strengthening associated with domestic commercial policies was $41.4 million and was primarily attributable to several large commercial claims, net of anticipated recoveries, mainly from mechanics liens, and primarily related to policy years 2003, 2005 and 2007. Other factors, including a large international commercial claim from policy year 2004, also contributed to the net increase in loss reserve estimates for prior policy years.

The 2013 rate of 8.9% reflected an ultimate loss rate of 5.0% for policy year 2013 and a net increase in loss reserve estimates for prior policy years of $150.2 million. The increase in loss reserve estimates for prior policy years reflected claims development above expected levels during 2013, primarily from domestic lenders policies, commercial policies and the Company’s guaranteed valuation product offered in Canada. The reserve strengthening associated with domestic lenders policies was $67.4 million and was primarily attributable to increased claims frequency for policy years 2004 through 2008. The increased claims frequency was primarily due to mortgage lenders and servicers processing a large volume of foreclosures during 2013. As foreclosure processing increases, lenders claims generally increase, because lenders claims typically come from foreclosures in which the lender suffers a loss. At December 31, 2013, the Company expected the high level of foreclosure processing to continue in the near term as mortgage lenders and servicers worked through their foreclosure inventory. The reserve strengthening associated with domestic lenders policies reflected these expectations. The reserve strengthening associated with commercial policies was $38.8 million and was primarily attributable to several large commercial claims, mainly from mechanics liens, and primarily related to policy years 2007 and 2008. The reserve strengthening associated with the guaranteed valuation product offered in Canada was $21.7 million and was primarily attributable to claims frequency exceeding the Company’s expectations during 2013. The increase in frequency primarily related to policy years 2007 and 2010.

The projected ultimate loss ratios, as of December 31, 2015, for policy years 2015, 2014 and 2013 were 4.2%, 4.7% and 3.7%, respectively.

A summary of the Company’s loss reserves is as follows:

(in thousands, except percentages)	December 31, 2015				December 31, 2014
Known title claims	$	87,543	8.9	%	$	165,330	16.3	%
Incurred but not reported claims		844,364	85.8	%		802,069	79.3	%
Total title claims		931,907	94.7	%		967,399	95.6	%
Non-title claims		51,973	5.3	%		44,381	4.4	%
Total loss reserves	$	983,880	100.0	%	$	1,011,780	100.0	%

The Company’s reserve for known title claims was $87.5 million at December 31, 2015, a decline of $77.8 million, or 47.0%, from the balance at December 31, 2014. This decline is primarily attributable to settlement payments associated with certain large claims during the first quarter of 2015. The reserve for known title claims associated with these claims recorded at December 31, 2014 was $56.0 million. The Company paid $35.0 million, net of $21.0 million recovered through reinsurance, during the first quarter of 2015 to settle these claims.