The following table provides a reconciliation of the beginning and ending reserve balances for losses and LAE, net of reinsurance recoverable, as of December 31, 2021, and 2020 (in thousands):


	For the years ended December 31,
	2021		2020
Balance at January 1	$	57,093	$	52,222
Less reinsurance recoverable	(33,941)		(28,837)
Net balance at January 1	23,152		23,385

Incurred related to:
Current year	88,640		16,140
Prior years	(350)		4,793
Total incurred	88,290		20,933

Paid related to:
Current year	45,640		6,425
Prior years	(7,636)		14,741
Total paid	38,004		21,166

Net balance at end of period	73,438		23,152
Plus reinsurance recoverable	—		33,941
Balance at end of period	$	73,438	$	57,093

These reserve estimates are generally the result of ongoing analysis of recent loss development trends and emerging historical experience. Original estimates are increased or decreased as additional information becomes known regarding individual claims. In setting reserves, the Company reviewed its loss data to estimate expected loss development. Management believes that the use of sound actuarial methodology applied to its analyses of historical experience provides a reasonable estimate of future losses. However, actual future losses may differ from the Company’s estimates, and future events beyond the control of management, such as changes in law, judicial interpretations of law and inflation, may favorably or unfavorably impact the ultimate settlement of the Company’s losses and LAE.

The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and LAE. While anticipated price increases due to inflation are considered in estimating the ultimate claim costs, the increase in average severities of claims is caused by a number of factors that vary with the individual type of policy written. Future average severities are projected based on historical trends adjusted for implemented changes in underwriting standards, policy provisions, and general economic trends.

Accordingly, future events may result in ultimate losses and LAE significantly varying from a reasonable provision as of the date of estimation. Unfavorable development of claims in future years could result in a significant negative impact on operations, stockholders’ surplus, and risk-based capital. Such development, if not offset by other increases in stockholders’ surplus, could result in the insurance departments of the state of domicile taking regulatory actions against the Company.

In 2021, the Company experienced unfavorable development on losses and LAE from prior accident years as a result of adverse loss development on injury coverages which may be influenced by the increased uncertainty in claim emergence from the pandemic. In 2020, the Company experienced unfavorable development on losses and LAE from prior accident years as a result of adverse LAE development. The Company has not had any unfavorable prior year claim experience on retrospectively rated policies.

The following is supplementary information about average historical claims duration as of December 31, 2021. Given the stage of the Insurance Company, historical data for claims is limited to five years.

The following is information about incurred and paid claims development as of December 31, 2021, net of reinsurance, as well as cumulative claim frequency and the total of incurred-but-not-reported (“IBNR”) liabilities plus expected development on reported claims included within the net incurred claims amounts.

The information about incurred and paid claims development for the years ended December 31, 2017 to December 31, 2021, including claim frequency, is presented below (dollars in thousands). The Company tracks claim frequency by individual claimant.


	Automobile										As of December 31, 2021
	Incurred loss and loss adjustment expenses, net of reinsurance For the Years Ended December 31,										IBNR Reserves		Cumulative Number of Reported Claims
Accident Year	2017*		2018*		2019*		2020*		2021




2017	$	34,309	$	36,244	$	36,326	$	37,529	$	38,619	$	1,090	29,064
2018			37,879		36,501		38,657		38,585		$	2,529	44,097
2019			—		31,705		32,954		31,097		$	3,804	51,101
2020			—		—		16,140		16,546		$	6,585	37,239
2021									88,640		$	23,136	41,483
							Total		$	213,487


			Automobile
			Cumulative paid loss and loss adjustment expenses, net of reinsurance For the Years Ended December 31,
Accident Year			2017*		2018*		2019*		2020*		2021





2017			$	21,246	$	29,988	$	33,987	$	36,121	$	36,898
2018					20,771		30,154		34,465		34,142
2019							17,032		25,235		21,630
2020									6,426		1,773
2021											45,640
Total	$	140,083
All outstanding liabilities before 2017, net of reinsurance	$	34
Liabilities for loss and LAE, net of reinsurance	$	73,438

The following table reconciles the incurred and paid claims development to the liability for losses and loss adjustment expenses for the year ended December 31, 2021 (in thousands):


Total incurred losses and loss adjustment expenses, net of reinsurance	$	216,785
Total paid losses and loss adjustment expenses, net of reinsurance	(143,347)
Liabilities for loss and LAE, net of reinsurance	73,438
Reinsurance recoverable on losses and LAE	—
Loss and loss adjustment expense reserves, gross of reinsurance	$	73,438

Dividend payments are restricted by the laws of the State of Delaware. The maximum amount that can be paid without prior notice or approval is the greater of 10% of surplus as regards policyholders as of the preceding December 31 or net income not including realized capital gains for the twelve-month period ending the preceding December 31. Because the Company has an unassigned deficit at December 31, 2021 and 2020, the Company’s dividend policy is governed by Section 5005(B) of the Delaware insurance code whereby a domestic insurer may not declare or pay a dividend or other distribution from any source other than earned surplus without the commissioner’s prior approval. The Insurance Company paid no dividends to the Company in 2021 or 2020.

The Insurance Company is subject to certain risk-based capital (“RBC”) requirements as specified by the National Association of Insurance Commissioners (“NAIC”). Under these requirements, the amount of capital and surplus maintained by an insurance company is to be determined based on the various risk factors related to it. As of December 31, 2021 and 2020, the Insurance Company’s capital and policyholders’ surplus exceeded the minimum RBC requirements.