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Reserve for Losses and Loss Adjustment Expenses
6 Months Ended
Jun. 30, 2020
Reserve for Losses and Loss Adjustment Expenses  
Reserve for Losses and Loss Adjustment Expenses

4. Reserve for Losses and Loss Adjustment Expenses

The following table represents a reconciliation of changes in the ending reserve balances for losses and loss adjustment expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 

 

Six Months Ended June 30, 

 

    

2020

    

2019

 

2020

    

2019

 

 

 

(in thousands)

 

 

(in thousands)

Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period

 

$

4,499

 

$

2,332

 

$

3,869

 

$

4,165

Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to:

 

 

 

 

 

  

 

 

 

 

 

 

Current year

 

 

3,885

 

 

735

 

 

6,064

 

 

1,013

Prior years

 

 

93

 

 

(92)

 

 

(223)

 

 

(54)

Total incurred

 

 

3,978

 

 

643

 

 

5,841

 

 

959

Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to:

 

 

  

 

 

  

 

 

  

 

 

  

Current year

 

 

1,171

 

 

298

 

 

1,522

 

 

404

Prior years

 

 

219

 

 

1,249

 

 

1,101

 

 

3,292

Total payments

 

 

1,390

 

 

1,547

 

 

2,623

 

 

3,696

Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period

 

 

7,087

 

 

1,428

 

 

7,087

 

 

1,428

Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period

 

 

17,129

 

 

13,202

 

 

17,129

 

 

13,202

Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period

 

$

24,216

 

$

14,630

 

$

24,216

 

$

14,630

 

Considerable variability is inherent in the estimate of the reserve for losses and LAE. Although management believes the liability recorded for losses and LAE is adequate, the variability inherent in this estimate could result in changes to the ultimate liability, which may be material to stockholders’ equity.

 

The Company experienced adverse development of $0.09 million in the three months ended June 30, 2020 and favorable development of $0.22 million in the six months ended June 30, 2020 and favorable development of $0.09 million and $0.05 million in the three and six months ended June 30, 2019.

 

Adverse development in the three months ended June 30, 2020 was primarily due to reported activity in the Assumed Reinsurance line of business. Favorable development in the six months ended June 30, 2020 was primarily due to lower than anticipated frequency and severity of claims in the specialty homeowners and residential flood lines of business.

 

Favorable development during for the three and six months ended June 30, 2019 was primarily due to lower than originally anticipated frequency and severity of claims in the Texas homeowners line of business.