Reserve for Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2022

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 (“LAE”):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
		(in thousands)				(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period	$	51,386	$	19,016	$	45,419	$	34,470
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year		14,350		7,612		27,799		5,916
Prior years		48		(377)		1,552		(3,103)
Total incurred		14,398		7,235		29,351		2,813
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year		4,399		(1,060)		5,889		620
Prior years		5,615		3,678		13,112		13,030
Total payments		10,014		2,618		19,001		13,650
Reserve for losses and LAE net of reinsurance recoverables at end of period		55,769		23,633		55,769		23,633
Add: Reinsurance recoverables on unpaid losses and LAE at end of period		107,898		145,459		107,898		145,459
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period	$	163,667	$	169,092	$	163,667	$	169,092

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 prior year development of $0.05 million during the three months ended June 30, 2022 and favorable prior year development of $0.4 million in the three months ended June 30, 2021.

Adverse prior year development during the three months ended June 30, 2022 was primarily due to higher than anticipated severity catastrophe losses from prior years offset by favorable development on attritional losses. Favorable prior year development during the three months ended June 30, 2021 was primarily due to lower than anticipated severity of catastrophe losses associated with certain hurricanes which occurred during the second half of 2020 primarily in the Company’s Specialty Homeowners line of business.

The Company experienced adverse prior year development of $1.6 million during the six months ended June 30, 2022 and favorable prior year development of $3.1 million in the six months ended June 30, 2021.

Adverse prior year development during the six months ended June 30, 2022 was primarily due to higher than anticipated severity of attritional and catastrophe losses from prior years. Favorable prior year development during the six months ended June 30, 2021 was primarily due to lower than anticipated severity of catastrophe losses associated with certain hurricanes which occurred during the second half of 2020 primarily in the Company’s Specialty Homeowners line of business