11. Insurance Operations

Reinsurance Transactions

The Company’s reinsurance agreements do not relieve its direct obligations to insureds. Thus, a credit exposure exists to the extent that any reinsurer fails to meet its obligations to the Company.

The reinsurers with the three largest uncollateralized obligations to the Company at December 31, 2019, were the Swiss Reinsurance America Corporation, Munich Reinsurance America Inc. and Harco National Insurance Company, which represented 31.3%, 14.2% and 9.0%, respectively, of the Company’s reinsurance recoverables, net of funds held and collateral. Swiss Reinsurance America Corporation and Munich Reinsurance America Inc. and are rated A+ (Superior) by A.M. Best Company. Harco National Insurance Company is rated A- (Excellent) by A.M. Best Company.

Collateral for reinsurance receivables is generally only pursued by the Company when the reinsurer’s status with the regulators of the Company’s domicile would not otherwise permit credit for reinsurance for regulatory reporting purposes.

Reinsurance receivables included an allowance for uncollectible reinsurance receivables of $10.9 million and $10.0 million, for the years ended December 31, 2019 and 2018, respectively.

In connection with the divestment of the Company’s U.K. business, New York Marine as reinsured entered into whole account quota share agreements (“WAQS”) with third party reinsurers to maintain reasonable underwriting leverage within New York Marine and its subsidiary insurance companies during a transition period following the U.K. divestment.

The effective date of the WAQS was April 1, 2017. The reinsurers’ ceding participation is an aggregate 26.0%. A provisional ceding commission of 30.0% to 30.5% is received as a reduction in the amount of ceded premium. Subject to limits, these ceding commissions will vary in subsequent periods based on contractual ultimate loss ratios.

During 2018 and following the transition of the U.S. business back to New York Marine, the WAQS were terminated. To the extent of unearned premium at the time of termination, ceded written premiums, net of the ceding commission, was returned. Reserve for unpaid losses and loss adjustment expenses on premium earned prior to the cut-off termination remained in reinsurance receivables on unpaid losses on the consolidated balance sheets. The reinsurance receivables on unpaid losses under the WAQS were $33.1 million and $43.7 million as of December 31, 2019 and 2018, respectively. Loss reserve development on the reserves ceded under the WAQS is included in continuing operations.

For the years ended December 31, 2019 and 2018 under the WAQS the Company recorded the following:


($ in thousands)	2019		2018		2017
(Return of ceded prepaid) ceded written premium	$	(3)	$	(58,857)	$	160,779
Ceded earned premium		(3)		14,560		87,362
(Increase) reduction to net loss and loss adjustment expenses incurred		(4,746)		9,514		51,897
Reduction to policy acquisition expenses		4,743		3,955		29,560
Reduction to pre-tax income	$	—	$	1,091	$	5,905

Total reinsurance ceded and assumed relating to premiums written, earned premiums and net losses and loss adjustment expenses incurred for the years ended December 31, 2019, 2018 and 2017 are as follows:


($ in thousands)	2019		2018		2017
Written premiums
Direct written premiums	$	964,512	$	889,526	$	833,536
Assumed from other companies		3,499		5,586		2,798
Ceded to other companies		115,871		45,038		276,048
Net written premiums	$	852,140	$	850,074	$	560,286

Earned premiums
Direct earned premiums	$	918,718	$	844,234	$	788,862
Assumed from other companies		3,887		10,266		2,477
Ceded to other companies		114,751		123,715		181,553
Net earned premiums	$	807,854	$	730,785	$	609,786
Percent of amount assumed to net		0.5%		1.4%		0.4%

Losses and loss adjustment expenses incurred
Direct net losses and loss adjustment expenses incurred	$	556,051	$	485,770	$	483,209
Assumed from other companies		9,298		(3,209)		720
Ceded to other companies		64,324		47,731		90,188
Net losses and loss adjustment expenses incurred	$	501,025	$	434,830	$	393,741

In 2016, the Company entered a retroactive reinsurance agreement with an authorized reinsurer covering accident year 2015 and prior Primary and Excess Workers’ Compensation net losses and loss adjustment expenses incurred. Subject carried reserves at the January 1, 2016 effective date were $306.4 million. The reinsurance provides $100.0 million limit on respective paid losses excess of $315.0 million retention. The reinsurance cover has a retrospective rating feature of $47.6 million of additional premium accumulating at approximately 3% per annum. This amount is 100% recoverable to the Company to the extent losses do not exceed the retention. At December 31, 2019, the Company’s estimate of respective loss development remains below the retention.

In 2017, the Company entered into a retroactive reinsurance agreement for the 2016 accident year. Subject carried reserves at the January 1, 2017 effective date were $96.5 million. The reinsurer provides a $35.0 million limit on respective paid losses in excess of $106.5 million. The reinsurance cover has a retrospective rating feature of $18.0 million of premium accumulating at approximately 4% per annum. These amounts are 100% recoverable to the Company to the extent losses do not exceed the retention. At December 31, 2019, the Company’s estimate of respective loss development remains below the retention and the adjustable premium is accrued as fully recoverable.

In 2018, the Company entered into a retroactive reinsurance agreement for the 2017 accident year. Subject carried reserves at the January 1, 2018 effective date were $107.8 million. The reinsurer provides a $40.0 million limit on respective paid losses in excess of $119.3 million. The reinsurance cover has a retrospective rating feature of $21.0 million of premium accumulating at approximately 4% per annum. These are 100% recoverable to the Company to the extent losses do not exceed the retention. At December 31, 2019, the Company’s estimate of respective loss development remains below the retention and the adjustable premium is accrued as fully recoverable.

Distribution Partners

The Company negotiates with distribution partners to write direct premium on behalf of the Company’s affiliates. In January 2019, a distribution partner of the Company was acquired by a third-party insurance carrier. The Company has sourced 7.1% and 13.5% of direct premium from this distribution partner as of December 31, 2019 and 2018, respectively. The Company does not anticipate any future premiums from this distribution partner other than audit premiums after the first quarter of 2019. The three distribution partners contributing the largest amounts of direct written premium (excluding the distribution partner above) totaled $267.8 million, $240.7 million and $235.0 million for the years ended December 31, 2019, 2018 and 2017 respectively.

Unpaid Losses

Unpaid losses are based on individual case estimates for losses reported and include a provision for incurred but not reported and for losses and loss adjustment expenses. The following table provides a roll forward of the Company’s reserve for unpaid losses and loss adjustment expenses:


($ in thousands)	2019		2018		2017
Gross reserve for unpaid losses and loss expenses, at beginning of year	$	1,396,812	$	1,258,237	$	1,166,619
Ceded reserve for unpaid losses and loss expenses, at beginning of year		185,295		201,156		176,651
Net reserve for unpaid losses and loss expenses, at beginning of year		1,211,517		1,057,081		989,968
Add:
Incurred losses and loss expenses occurring in the:
Current year		482,989		439,847		373,423
Prior years		3,154		(5,017)		20,318
Prior years attributable to adjusted premium		14,882		—		—
Total net losses and loss adjustment expenses incurred		501,025		434,830		393,741
Less:
Paid losses and loss expenses for claims occurring in the:
Current year		66,522		47,734		54,026
Prior years		318,324		232,660		272,602
Total paid losses and loss expenses for claims		384,846		280,394		326,628
Net reserve for unpaid losses and loss expenses, at end of year		1,327,696		1,211,517		1,057,081
Ceded reserve for unpaid losses and loss expenses, at end of year		193,952		185,295		201,156
Gross reserve for unpaid losses and loss expenses, at end of year	$	1,521,648	$	1,396,812	$	1,258,237

During the year ended December 31, 2019 the Company’s reserve for unpaid losses and loss adjustment expenses for accident years 2018 and prior developed unfavorably by $3.2 million driven primarily by unfavorable development of $16.4 million in Commercial Multiple Peril, $11.3 million in General Liability, partially offset by favorable development of $22.8 million in Workers’ Compensation. The unfavorable development in Commercial Multiple Peril was primarily from the Media and Entertainment customer segment in accident years 2013 through 2016 from a longer development trend than that underlying the historical performance of premises liability. The unfavorable development in General Liability primarily related to 2013 through 2016 accident years due to increased severities in the Real Estate customer segment and run off components within the Other customer segment. The favorable development in Workers’ Compensation derived from lower than expected claims severity across all customer segments primarily in accident years 2013 through 2015 and accident year 2017. In addition, the Company incurred $14.9 million of loss and loss adjustment expenses related to premium earned during the year ended December 31, 2019, attributable to accident year 2018.

During the year ended December 31, 2018, the Company’s reserve for unpaid losses and loss adjustment expenses for accident years 2017 and prior developed favorably by $5.0 million. Favorable development of $5.0 million for the year ended December 31, 2018, was driven primarily by favorable development of $14.4 million in Workers’ Compensation, $15.6 million in Commercial Auto and $4.1 million from Marine Liability within the All Other lines category, partially offset by $16.5 million adverse development in General Liability and $12.2 million adverse development in Commercial Multiple Peril. Lower than expected claim severity was the main driver of the favorable development in Workers’ Compensation of which $6.2 million came from 2014, 2015 and 2016 accident years in primary Workers’ Compensation and $8.2 million came from 2014 and 2015 accident years in excess Workers’ Compensation. Favorable development in Commercial Auto was driven mainly by the 2013, 2015 and 2016 accident years where severity trends of the previous two calendar year periods improved during 2018 across multiple niches. Marine Liability is a low frequency, high severity line of business and as a result, development often varies significantly from the average expectation. The $16.5 million adverse development in General Liability primarily related to 2013, 2014 and 2015 accident years due to increased severities in the Construction customer segment from reduced effectiveness of risk transfer from our general contractor insureds to subcontractors. The $12.2 million in adverse development in Commercial Multiple Peril is primarily from the Media and Entertainment customer segment driven by a longer development trend than that underlying the historic performance of premises liability.

During the year ended December 31, 2017, the Company’s reserve for unpaid losses and loss adjustment expenses for accident years 2016 and prior developed adversely by $20.3 million. Adverse development of $20.3 million was driven primarily by $33.2 million in Commercial Auto which consisted of several niches that are now terminated. Adverse development in Commercial Auto was driven primarily by higher than expected frequency and severity. The Commercial Auto experience were likely a result of industry trends such as an improving economy resulting in more drivers on the roads, the hiring of less experienced drivers, the use of personal technology while in transit and litigation of bodily-injury claims, which resulted in unexpected adverse experience from historical performance patterns. The adverse development was offset by favorable development in Workers’ Compensation of $12.4 million due to lower than expected claim severity for accident years 2016 and prior, including a decline in the frequency of large loss activity.

Incurred and Paid Claims Development

The following information presented summarizes incurred and paid claims development as of December 31, 2019, net of reinsurance, as well as cumulative claim frequency and the total of IBNR. IBNR anticipates both the development of existing claims and emergence of any new claims. The information about incurred and paid claims development for accident years 2010 through 2018 is unaudited and is presented as supplementary information. Information is also included for the portion of the reserve for unpaid losses and loss adjustment expenses, net of reinsurance that related to IBNR and the cumulative number of reported insurance claims. Claims are counted at the occurrence (e.g. date of the accident), line of business which is in accordance with the Company’s statutory filings, and policy level. For example, if a single occurrence (e.g. an auto accident) leads to a claim under an auto and an associated umbrella policy, they are each counted separately. Conversely, multiple claimants under the same occurrence/line/policy would contribute only a single count. The claim counts provided are on an accident year basis. A claim is considered reported when a reserve is established or a payment is made. Therefore, claims closed without payment are included in the claim counts as long as there was an associated case reserve at some point in its life cycle. The following tables are in thousands except claim counts.


All Lines - Incurred
	Unaudited																				IBNR as of		Cumulative
	For the Years Ended																				December 31,		Claim
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019		2019		Counts
Prior																					$	15,481
2010	$	131,617	$	137,994	$	134,941	$	134,307	$	136,115	$	143,344	$	152,840	$	145,444	$	148,117	$	150,543		3,108	3,926
2011				115,644		128,879		126,752		122,773		124,543		131,081		124,798		131,385		131,360		3,772	4,419
2012						137,380		157,477		157,985		165,015		165,889		156,355		159,120		158,523		6,491	6,622
2013								210,368		222,277		232,660		251,353		243,567		237,900		249,802		16,133	13,229
2014										286,842		312,987		323,792		333,865		342,788		356,733		30,978	16,333
2015												384,269		407,279		407,427		395,751		430,942		44,665	20,869
2016														390,430		423,538		406,204		416,266		93,163	20,049
2017																354,948		361,299		339,505		127,760	18,582
2018																		422,104		406,199		233,890	18,720
2019																				457,973		330,679	17,591
																			$	3,097,846	$	906,120

All Lines – Paid
	Unaudited
	For the Years Ended
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019
2010	$	11,912	$	38,723	$	72,312	$	85,754	$	102,016	$	114,140	$	125,646	$	132,525	$	137,470	$	140,927
2011				14,796		51,006		65,103		76,731		88,243		98,411		105,584		109,007		111,247
2012						16,619		48,276		73,249		98,960		119,374		130,200		136,909		139,793
2013								27,465		74,012		115,396		158,978		181,989		192,476		214,863
2014										44,738		111,919		166,907		217,986		250,928		280,933
2015												75,043		159,708		234,756		281,637		331,748
2016														78,271		150,198		204,589		266,496
2017																54,026		116,204		163,937
2018																		45,012		112,889
2019																				66,522
																				1,829,355
												Incurred less paid								1,268,491
												Reserves 2009 and prior								44,965
												Other(1)								14,240
												Total net reserve for unpaid losses and loss adjustment expenses							$	1,327,696

(1)

Other category represents unallocated loss adjustment expense (“ULAE”) reserves $45.6 million, discounting of loss reserves $(47.4) million and retroactive reinsurance agreements $12.3 million, allowance for uncollectible reinsurance $0.5 million and other $3.2 million.

The following table presents the historical average annual percentage payout of incurred claims, net of reinsurance, as of December 31, 2019:


Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
14	%	19	%	15	%	13	%	10	%	7	%	7	%	3	%	3	%	2	%

Commercial Auto

The following tables represent information on the Company’s unpaid losses and loss adjustment expenses incurred and cumulative paid losses, since 2010 for Commercial Auto line, in thousands except claim counts:


Commercial Auto-Incurred
	Unaudited																				IBNR as of		Cumulative
	For the Years Ended																				December 31,		Claim
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019		2019		Counts
Prior
2010	$	13,046	$	17,710	$	18,011	$	17,334	$	18,717	$	18,688	$	19,046	$	19,437	$	19,280	$	19,282	$	—	874
2011				13,864		13,462		11,260		11,231		12,547		12,547		12,508		12,476		12,476		—	1,219
2012						21,101		29,959		36,319		43,031		42,028		41,479		41,572		39,231		444	1,746
2013								47,191		50,752		63,764		77,570		76,768		72,265		81,422		993	6,224
2014										74,185		95,283		105,528		112,157		113,747		113,790		843	8,231
2015												120,137		139,415		152,268		146,757		155,266		1,981	11,153
2016														114,568		124,760		119,931		124,166		6,229	9,642
2017																81,986		79,156		71,068		12,343	7,061
2018																		87,993		78,777		28,210	7,146
2019																				115,393		72,508	8,141
																			$	810,871	$	123,551

	Commercial Auto – Paid
	Unaudited
	For the Years Ended
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019
2010	$	3,105	$	7,866	$	12,346	$	13,723	$	17,275	$	17,829	$	18,074	$	19,098	$	19,138	$	19,162
2011				4,717		7,791		7,250		9,111		11,587		12,005		12,123		12,117		12,128
2012						6,660		15,397		25,280		33,248		39,680		40,852		41,305		38,657
2013								13,015		26,773		43,403		64,073		72,906		71,010		79,066
2014										21,692		52,048		74,431		96,385		108,102		110,883
2015												37,964		74,524		107,063		126,831		142,806
2016														39,580		63,123		83,161		102,003
2017																19,950		34,659		47,199
2018																		16,709		32,698
2019																				22,082
																				606,684
														Incurred less paid					$	204,187

The following table presents the historical average annual percentage payout of incurred claims, net of reinsurance, as of December 31, 2019:


Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
23	%	22	%	19	%	17	%	12	%	1	%	6	%	(2)	%	—	%	—	%

General Liability

The following tables represent information on unpaid losses and loss adjustment expenses incurred and cumulative paid losses, since 2010 for the Company’s General Liability line, in thousands except claim counts:


General Liability – Incurred
	Unaudited																				IBNR as of		Cumulative
	For the Years Ended																				December 31,		Claim
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019		2019		Counts
Prior																					$	7,384
2010	$	56,373	$	59,577	$	64,210	$	63,596	$	62,270	$	69,103	$	72,902	$	66,226	$	68,905	$	69,586		746	1,682
2011				45,894		58,633		61,398		60,375		63,264		67,791		62,127		66,641		64,682		1,254	1,532
2012						42,685		43,677		38,288		42,401		45,771		46,312		48,096		50,509		1,998	1,483
2013								48,466		61,785		62,618		70,459		60,613		61,796		69,565		7,755	2,608
2014										70,878		77,255		78,801		93,468		104,281		114,976		15,352	3,093
2015												80,225		80,411		78,163		80,514		93,808		21,362	3,007
2016														93,737		101,479		92,401		91,228		28,786	2,868
2017																99,845		100,306		94,554		50,712	2,921
2018																		142,486		137,525		101,954	2,949
2019																				153,650		139,174	2,309
																			$	940,083	$	376,477

	General Liability – Paid
	Unaudited
	For the Years Ended
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019
2010	$	1,692	$	14,901	$	34,045	$	44,087	$	50,830	$	61,716	$	66,332	$	70,235	$	74,101	$	76,201
2011				5,009		18,912		30,123		37,344		44,166		50,136		54,250		56,659		57,932
2012						945		8,844		14,751		24,257		32,585		36,521		40,754		45,509
2013								1,930		10,941		22,152		36,493		46,821		55,148		66,439
2014										5,456		14,032		28,581		41,079		53,712		73,491
2015												5,404		14,720		25,931		39,407		61,168
2016														3,547		13,873		25,223		47,333
2017																2,596		11,279		26,354
2018																		2,223		15,625
2019																				3,487
																				473,539
											Incurred less paid								$	466,544

The following table presents the historical average annual percentage payout of incurred claims, net of reinsurance, as of December 31, 2019:


Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
3	%	12	%	15	%	16	%	14	%	13	%	10	%	6	%	4	%	3	%

Workers’ Compensation

The following tables represent information on unpaid losses and loss adjustment expenses incurred and cumulative paid losses, since 2010 for the Company’s Workers’ Compensation line, in thousands except claim counts:


Workers’ Compensation – Incurred
	Unaudited																				IBNR as of		Cumulative
	For the Years Ended																				December 31,		Claim
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019		2019		Counts
Prior																					$	5,590
2010	$	24,965	$	23,206	$	26,970	$	23,643	$	25,751	$	25,825	$	28,260	$	28,135	$	28,597	$	30,457		2,361	78
2011				28,987		22,186		23,576		21,411		19,489		21,943		18,986		21,247		23,750		2,508	202
2012						46,503		51,724		53,038		48,983		47,373		38,501		38,835		38,919		4,017	1,770
2013								76,844		71,683		70,939		68,109		71,532		69,729		64,727		7,141	2,694
2014										88,181		81,628		83,543		74,134		69,886		67,784		12,581	2,679
2015												101,762		101,410		89,383		82,212		87,570		14,957	3,881
2016														99,292		109,623		103,382		102,716		47,500	4,358
2017																102,250		101,691		93,134		52,781	4,678
2018																		116,278		118,973		77,694	5,125
2019																				97,485		76,057	4,468
																			$	725,515	$	303,187

	Workers’ Compensation – Paid
	Unaudited
	For the Years Ended
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019
2010	$	—	$	180	$	1,633	$	2,907	$	4,427	$	6,165	$	7,830	$	9,706	$	10,695	$	11,908
2011				473		4,148		5,127		5,503		7,239		8,662		8,978		9,971		10,841
2012						2,381		5,481		10,598		14,634		18,468		23,694		25,495		26,237
2013								2,639		12,579		20,520		26,088		29,036		32,962		35,793
2014										4,644		14,901		24,411		35,131		39,846		42,423
2015												6,504		18,434		27,423		33,543		38,061
2016														10,891		24,557		35,385		43,171
2017																8,631		22,462		30,776
2018																		9,563		29,008
2019																				9,745
																				277,963
													Incurred less paid						$	447,552

The following table presents the historical average annual percentage payout of incurred claims, net of reinsurance, as of December 31, 2019:


Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
8	%	14	%	10	%	9	%	6	%	7	%	4	%	4	%	3	%	4	%

Commercial Multiple Peril

The following tables represent information on unpaid losses and loss adjustment expenses incurred and cumulative paid losses, since 2010 for the Company’s Commercial Multiple Peril line, in thousands except claim counts:


Commercial Multiple Peril – Incurred
	Unaudited																			IBNR as of		Cumulative
	For the Years Ended																			December 31,		Claim
Accident Year	2010		2011	2012		2013		2014		2015		2016		2017		2018		2019		2019		Counts
Prior
2010
2011		$	—	$	—	$	11	$	7	$	6	$	6	$	2	$	2		2	$	—	—
2012					96		94		73		49		39		813		813	$	813		—	5
2013							968		1,065		1,051		1,442		8,226		8,250		8,198		19	54
2014									13,037		15,884		16,448		25,915		27,126		30,172		1,326	614
2015											27,876		27,542		17,952		18,345		24,144		4,825	1,015
2016													34,010		30,379		34,883		44,758		8,295	1,190
2017															37,760		44,044		44,260		8,921	1,431
2018																	39,507		37,015		20,432	1,184
2019																			36,895		25,835	935
																		$	226,257	$	69,653

Commercial Multiple Peril – Paid
	Unaudited
	For the Years Ended
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018	2019
2010
2011		$	—	$	—	$	—	$	—	$	—	$	—	$	2	$	2	$	2
2012					—		—		1		1		2		813		813		813
2013							43		192		312		754		8,083		8,149		8,157
2014									1,795		4,271		7,358		20,545		22,880		26,366
2015											6,879		14,751		8,949		14,293		20,676
2016													4,974		7,028		16,715		27,870
2017															7,270		19,733		27,816
2018																	5,323		11,953
2019																			5,940
																			129,593
												Incurred less paid						$	96,664

The following table presents the historical average annual percentage payout of incurred claims, net of reinsurance, as of December 31, 2019:


Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
14	%	17	%	10	%	28	%	25	%	11	%	—	%	—	%	—	%	—	%

All Other

The following tables represent information on unpaid losses and loss adjustment expenses incurred and cumulative paid losses, since 2010 for the Company’s all other lines in thousands except claim counts:


All Other Lines – Incurred
	Unaudited																				IBNR as of		Cumulative
	For the Years Ended																				December 31,		Claim
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019		2019		Counts
Prior																					$	2,507
2010	$	37,233	$	37,501	$	25,750	$	29,735	$	29,377	$	29,727	$	32,631	$	31,647	$	31,335	$	31,218		1	1,292
2011				26,899		34,597		30,507		29,749		29,238		28,794		31,176		31,018		30,450		10	1,466
2012						26,995		32,022		30,266		30,551		30,678		29,250		29,803		29,051		32	1,618
2013								36,900		36,992		34,287		33,773		26,428		25,859		25,890		225	1,649
2014										40,562		42,938		39,473		28,192		27,749		30,011		876	1,716
2015												54,269		58,501		69,660		67,924		70,154		1,540	1,813
2016														48,824		57,296		55,607		53,398		2,353	1,991
2017																33,108		36,102		36,489		3,003	2,491
2018																		35,839		33,909		5,600	2,316
2019																				54,550		17,105	1,738
																			$	395,120	$	33,252

All Other Lines – Paid
	Unaudited
	For the Years Ended
Accident Year	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019
2010	$	7,115	$	15,776	$	24,288	$	25,038	$	29,484	$	28,429	$	33,410	$	33,485	$	33,536	$	33,656
2011				4,597		20,155		22,603		24,773		25,251		27,608		30,231		30,259		30,344
2012						6,634		18,554		22,619		26,821		28,639		28,319		28,542		28,577
2013								9,838		23,526		29,009		31,569		25,144		25,206		25,408
2014										11,150		26,667		32,126		24,846		26,388		27,770
2015												18,292		37,279		65,390		67,563		69,037
2016														19,279		41,618		44,104		46,119
2017																15,580		28,070		31,792
2018																		11,194		23,605
2019																				25,268
																				341,576
														Incurred less paid					$	53,544

The following table presents the historical average annual percentage payout of incurred claims, net of reinsurance, as of December 31, 2019:


Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
33	%	39	%	20	%	2	%	2	%	2	%	7	%	—	%	—	%	—	%

The Company participated in an insurance pool in both the issuance of umbrella casualty insurance and ocean marine liability insurance during the period from 1978 to 1996. Depending on the underwriting year, the insurance pools’ net retention per occurrence after applicable reinsurance ranged from $250,000 to $2,000,000. The Company’s effective pool participation on such risks varied from 11% in 1978 to 59% in 1985, which exposed the Company to asbestos and environmental losses. Subsequent to this period, the pools substantially reduced their umbrella writings and coverage was provided to smaller insureds.

The Company’s asbestos and environmental related losses were as follows:


	December 31, 2019
($ in thousands)	Gross		Ceded		Net
Balance at beginning of year	$	14,262	$	9,860	$	4,402
Incurred losses and loss adjustment expense		430		66		364
Payments for losses and loss adjustment expenses		1,882		1,564		318
Balance at end of year	$	12,810	$	8,362	$	4,448


	December 31, 2018
($ in thousands)	Gross		Ceded		Net
Balance at beginning of year	$	15,628	$	11,116	$	4,512
Incurred losses and loss adjustment expense		30		24		6
Payments for losses and loss adjustment expenses		1,396		1,280		116
Balance at end of year	$	14,262	$	9,860	$	4,402

Additionally, the Company has assumed asbestos and environmental reserves on a retroactive basis from prior members of the pool. The liability related to the same was $8.4 million and $8.7 million as of December 31, 2019 and 2018 respectively.

The Company believes that the uncertainty surrounding asbestos and environmental exposures, including issues as to insureds’ liabilities, ascertainment of loss date, definitions of occurrence, scope of coverage, policy limits and application and interpretation of policy terms, including exclusions, all affect the estimation of ultimate losses. Under such circumstances, it is difficult to determine the ultimate loss for asbestos and environmental-related claims. Given the uncertainty in this area, losses from asbestos and environmental-related claims may develop adversely and accordingly, management is unable to estimate the range of possible loss that could arise from asbestos and environmental-related claims. However, the Company’s net unpaid reserves for loss and loss adjustment expenses, in the aggregate, as of December 31, 2019, represent management’s best estimate.

Salvage and Subrogation

Estimates of salvage and subrogation recoverable on paid and unpaid losses have been recorded as a reduction of unpaid losses and amounted to $27.5 million and $27.4 million at December 31, 2019 and 2018, respectively.

Deferred Policy Acquisition Costs

The following table presents a roll forward of the deferred policy acquisition costs and are net of reinsurance:


($ in thousands)
December 31, 2017	$	60,759
Acquisition costs deferred		204,283
Acquisition costs expensed		(171,429)
December 31, 2018		93,613
Acquisition costs deferred		189,970
Acquisition costs expensed		(184,771)
December 31, 2019	$	98,812