Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2020

Insurance [Abstract]

Losses and Loss Adjustment Expenses

8. Losses and Loss Adjustment Expenses

At June 30, 2020, the Company estimated that its liability for unpaid losses and loss adjustment expenses (“LAE”) for all insurance policies and reinsurance contracts issued by its insurance business was $63,510,324.  This amount included estimated losses from claims plus estimated expenses to settle claims.  This estimate also included estimated amounts for losses occurring on or prior to June 30, 2020 that had not yet been reported to the Company.  At June 30, 2020, the Company also estimated that its reinsurance recoverable on unpaid claims was $7,424,458.

Management believes that its unpaid losses and LAE are fairly stated at June 30, 2020.  However, estimating the ultimate claims liability is necessarily a complex and judgmental process inasmuch as the amounts are based on management’s informed estimates, assumptions and judgments using data currently available.  As additional experience and data become available regarding claims payment and reporting patterns, legal and legislative developments, judicial theories of liability, changes in social attitudes and economic conditions, the estimates are revised accordingly.  Original estimates are also increased or decreased, as additional information becomes known regarding individual claims.  If the Company’s ultimate losses, net of reinsurance, prove to differ substantially from the amounts recorded at June 30, 2020, then the related adjustments could have a material adverse impact on the Company’s financial condition, results of operations and liquidity.

Positive Insurance Company uses a combination of the Actual versus Expected Method, Bornhuetter-Ferguson Method, Expected Loss Ratio Method, Frequency/Severity Method, and the Incurred Loss Development Method in order to estimate its liability for losses and LAE.  There were no significant changes in the methodologies and assumptions used to develop the liabilities for losses and LAE during the six months ended June 30, 2020.