Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2019

8.	Losses and Loss Adjustment Expenses

The following tables provide a reconciliation of our beginning and ending unpaid losses and loss adjustment expense reserve balances for the six months ended June 30, 2019 and 2018.

	2019		2018
Balance at January 1	$	68,392,333	$	68,374,554
Less: Reinsurance recoverable on liability for losses and loss adjustment expenses		7,956,043		8,585,851
Add: Reinsurance recoverable on claims paid		5,791		1,196,573
Net liability at January 1		60,442,081		60,985,276
Losses and loss adjustment expenses incurred, net:
Current period		7,405,688		6,252,532
Prior periods		183,428		1,735,552
Total incurred losses and loss adjustment expenses		7,589,116		7,988,084
Less losses and loss adjustment expenses paid, net:
Current period		203,366		133,579
Prior periods		9,246,084		7,849,105
Total losses and loss adjustment expenses paid		9,449,450		7,982,684
Net liability for losses and loss adjustment expenses, at end of period		58,581,747		60,990,676
Add: Reinsurance recoverable on liability for losses and loss adjustment expenses		9,640,117		7,974,890
Less: Reinsurance recoverable on claims paid		730,104		(450,355	)
Liability for losses and loss adjustment expenses, June 30	$	67,491,760	$	69,415,921

The liability for losses and loss adjustment expenses at June 30, 2019 and 2018 were $67,491,760 and $69,415,921, respectively. For the six months ended June 30, 2019 and 2018, $9,246,084 and $7,849,105, respectively, has been paid for incurred claims attributable to insured events of prior years. Original estimates are increased or decreased, as additional information becomes known regarding individual claims. During the six months ended June 30, 2018, we experienced an unfavorable development of $1,735,552 primarily related to significant reserve strengthening in the 2014 and 2015 years for both claims-made and occurrence policies. These increases are due to greater amount of incurred expenses than was originally estimated. During the six months ended June 30, 2019, we experienced an unfavorable development of $183,428 in reserve strengthening from prior years while leaving most of the incurred related to the 2019 year based upon year to date actuarial estimates.

Positive Insurance Company uses a combination of the Actual versus Expected Method, Bornhuetter-Ferguson Method, Expected Loss Ratio Method, Frequency/Severity Method, and the Loss Development Method in order to estimate its liability for losses and loss adjustment expenses. There were no significant changes in the methodologies and assumptions used to develop the liabilities for losses and loss adjustment expenses for the six months ended June 30, 2019 and 2018.