Claim, Claim Adjustment Expense and Future Policy Benefit Reserves

12 Months Ended

Dec. 31, 2021

Insurance [Abstract]

Claim, Claim Adjustment Expense and Future Policy Benefit Reserves

Medical Professional Liability

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																					December 31, 2021
December 31	2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019 (a)		2020 (a)		2021		IBNR		Cumulative Number of Claims
(In millions, except reported claims data)
Accident Year
2012	$	464	$	469	$	508	$	498	$	493	$	484	$	493	$	499	$	497	$	497	$	4	17,755
2013			462		479		500		513		525		535		545		531		530		11		19,565
2014					450		489		537		530		535		529		527		524		8		19,800
2015							433		499		510		494		488		510		501		28		18,170
2016									427		487		485		499		508		510		24		16,085
2017											412		449		458		460		455		41		15,197
2018													404		429		431		448		60		14,997
2019															430		445		458		156		13,804
2020																	477		476		347		9,935
2021																			377		337		6,761
																	Total		$	4,776	$	1,016
Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2012	$	14	$	117	$	221	$	323	$	388	$	427	$	457	$	479	$	482	$	487
2013			17		119		255		355		414		462		495		508		512
2014					23		136		258		359		417		472		489		497
2015							22		101		230		313		384		420		444
2016									18		121		246		339		401		436
2017											19		107		235		308		355
2018													21		115		211		290
2019															17		91		183
2020																	11		61
2021																			11
																	Total		$	3,276
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,500
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012																			28
Liability for unallocated claim adjustment expenses for accident years presented																			28
Total net liability for unpaid claim and claim adjustment expenses																			$	1,556
Net Strengthening (Releases) of Prior Accident Year Reserves
Years Ended December 31																					Total
Accident Year
2012			$	5	$	39	$	(10)	$	(5)	$	(9)	$	9	$	6	$	(2)	$	—	$	33
2013					17		21		13		12		10		10		(14)		(1)		68
2014							39		48		(7)		5		(6)		(2)		(3)		74
2015									66		11		(16)		(6)		22		(9)		68
2016											60		(2)		14		9		2		83
2017													37		9		2		(5)		43
2018															25		2		17		44
2019																	15		13		28
2020																			(1)		(1)
Total net development for the accident years presented above															52		32		13
Total net development for accident years prior to 2012															21		3		3
Total unallocated claim adjustment expense development															2		—		7
Total															$	75	$	35	$	23

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

Other Professional Liability and Management Liability

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																					December 31, 2021
December 31	2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019 (a)		2020 (a)		2021		IBNR		Cumulative Number of Claims
(In millions, except reported claims data)
Accident Year
2012	$	923	$	909	$	887	$	878	$	840	$	846	$	833	$	831	$	850	$	848	$	18	18,506
2013			884		894		926		885		866		863		850		846		833		30		17,950
2014					878		898		885		831		835		854		845		841		37		17,577
2015							888		892		877		832		807		813		836		41		17,436
2016									901		900		900		904		907		891		84		17,968
2017											847		845		813		791		775		152		18,159
2018													850		864		869		906		202		19,926
2019															837		845		856		283		19,357
2020																	930		944		568		19,095
2021																			1,037		911		15,487
																	Total		$	8,767	$	2,326
Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2012	$	56	$	248	$	400	$	573	$	651	$	711	$	755	$	792	$	812	$	816
2013			54		249		447		618		702		754		771		779		787
2014					51		223		392		515		647		707		743		787
2015							60		234		404		542		612		677		725
2016									64		248		466		625		701		736
2017											57		222		394		498		557
2018													54		282		473		599
2019															64		263		422
2020																	67		248
2021																			58
																	Total		$	5,735
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	3,032
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012																			74
Liability for unallocated claim adjustment expenses for accident years presented																			53
Total net liability for unpaid claim and claim adjustment expenses																			$	3,159
Net Strengthening (Releases) of Prior Accident Year Reserves
Years Ended December 31																					Total
Accident Year
2012			$	(14)	$	(22)	$	(9)	$	(38)	$	6	$	(13)	$	(2)	$	19	$	(2)	$	(75)
2013					10		32		(41)		(19)		(3)		(13)		(4)		(13)		(51)
2014							20		(13)		(54)		4		19		(9)		(4)		(37)
2015									4		(15)		(45)		(25)		6		23		(52)
2016											(1)		—		4		3		(16)		(10)
2017													(2)		(32)		(22)		(16)		(72)
2018															14		5		37		56
2019																	8		11		19
2020																			14		14
Total net development for the accident years presented above															(35)		6		34
Total net development for accident years prior to 2012															(20)		(21)		(12)
Total unallocated claim adjustment expense development															(14)		—		2
Total															$	(69)	$	(15)	$	24

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

Surety

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																					December 31, 2021
December 31	2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019 (a)		2020 (a)		2021		IBNR		Cumulative Number of Claims
(In millions, except reported claims data)
Accident Year
2012	$	120	$	122	$	98	$	70	$	52	$	45	$	39	$	38	$	37	$	36	$	1	5,586
2013			120		121		115		106		91		87		83		82		82		2		5,088
2014					123		124		94		69		60		45		45		43		1		5,118
2015							131		131		104		79		63		58		53		9		5,055
2016									124		124		109		84		67		64		10		5,521
2017											120		115		103		84		71		9		5,795
2018													114		108		91		62		19		6,097
2019															119		112		98		44		5,816
2020																	128		119		104		4,006
2021																			137		129		2,592
																	Total		$	765	$	328
Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2012	$	5	$	32	$	34	$	35	$	35	$	36	$	37	$	37	$	36	$	36
2013			16		40		69		78		78		78		77		78		79
2014					7		30		38		36		38		38		39		39
2015							7		26		38		40		42		44		42
2016									5		37		45		45		43		43
2017											23		37		41		46		49
2018													5		25		34		39
2019															12		34		44
2020																	4		20
2021																			5
																	Total		$	396
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	369
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012																			17
Liability for unallocated claim adjustment expenses for accident years presented																			20
Total net liability for unpaid claim and claim adjustment expenses																			$	406
Net Strengthening (Releases) of Prior Accident Year Reserves
Years Ended December 31																					Total
Accident Year
2012			$	2	$	(24)	$	(28)	$	(18)	$	(7)	$	(6)	$	(1)	$	(1)	$	(1)	$	(84)
2013					1		(6)		(9)		(15)		(4)		(4)		(1)		—		(38)
2014							1		(30)		(25)		(9)		(15)		—		(2)		(80)
2015									—		(27)		(25)		(16)		(5)		(5)		(78)
2016											—		(15)		(25)		(17)		(3)		(60)
2017													(5)		(12)		(19)		(13)		(49)
2018															(6)		(17)		(29)		(52)
2019																	(7)		(14)		(21)
2020																			(9)		(9)
Total net development for the accident years presented above															(79)		(67)		(76)
Total net development for accident years prior to 2012															(3)		(2)		3
Total unallocated claim adjustment expense development															(10)		—		—
Total															$	(92)	$	(69)	$	(73)

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

Commercial Auto

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																					December 31, 2021
December 31	2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019 (a)		2020 (a)		2021		IBNR		Cumulative Number of Claims
(In millions, except reported claims data)
Accident Year
2012	$	275	$	289	$	299	$	303	$	307	$	299	$	299	$	297	$	296	$	295	$	1	46,288
2013			246		265		265		249		245		245		241		241		241		2		39,430
2014					234		223		212		205		205		201		201		202		2		33,628
2015							201		199		190		190		183		181		183		3		30,427
2016									198		186		186		186		190		195		3		30,449
2017											199		198		200		221		232		5		30,940
2018													229		227		227		245		8		34,292
2019															257		266		289		31		37,142
2020																	310		303		107		28,837
2021																			397		271		27,182
																	Total		$	2,582	$	433
Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2012	$	78	$	160	$	220	$	259	$	282	$	285	$	290	$	291	$	291	$	292
2013			74		135		168		200		225		234		238		239		239
2014					64		102		137		166		187		196		198		199
2015							52		96		130		153		172		175		178
2016									52		93		126		154		175		185
2017											58		107		150		178		203
2018													66		128		175		212
2019															77		147		203
2020																	71		134
2021																			83
																	Total		$	1,928
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	654
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012																			5
Liability for unallocated claim adjustment expenses for accident years presented																			14
Total net liability for unpaid claim and claim adjustment expenses																			$	673
Net Strengthening (Releases) of Prior Accident Year Reserves
Years Ended December 31																					Total
Accident Year
2012			$	14	$	10	$	4	$	4	$	(8)	$	—	$	(2)	$	(1)	$	(1)	$	20
2013					19		—		(16)		(4)		—		(4)		—		—		(5)
2014							(11)		(11)		(7)		—		(4)		—		1		(32)
2015									(2)		(9)		—		(7)		(2)		2		(18)
2016											(12)		—		—		4		5		(3)
2017													(1)		2		21		11		33
2018															(2)		—		18		16
2019																	9		23		32
2020																			(7)		(7)
Total net development for the accident years presented above															(17)		31		52
Total net development for accident years prior to 2012															(7)		2		1
Total unallocated claim adjustment expense development															(1)		—		—
Total															$	(25)	$	33	$	53

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

General Liability

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																					December 31, 2021
December 31	2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019 (a)		2020 (a)		2021		IBNR		Cumulative Number of Claims
(In millions, except reported claims data)
Accident Year
2012	$	587	$	611	$	639	$	636	$	619	$	635	$	635	$	630	$	632	$	632	$	20	35,313
2013			650		655		650		655		613		623		620		623		624		24		33,706
2014					653		658		654		631		635		658		659		659		28		28,064
2015							581		576		574		589		600		602		617		42		24,118
2016									623		659		667		671		673		683		68		24,511
2017											632		632		632		634		630		67		22,195
2018													653		644		646		639		205		19,917
2019															680		682		682		330		18,602
2020																	723		722		516		13,028
2021																			782		706		9,759
																	Total		$	6,670	$	2,006
Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2012	$	28	$	132	$	247	$	374	$	454	$	510	$	559	$	579	$	597	$	602
2013			31		128		240		352		450		510		551		572		582
2014					31		119		247		376		481		547		569		607
2015							19		110		230		357		446		501		530
2016									32		163		279		407		481		524
2017											23		118		250		399		471
2018													33		107		228		307
2019															25		98		181
2020																	23		99
2021																			26
																	Total		$	3,929
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	2,741
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012																			119
Liability for unallocated claim adjustment expenses for accident years presented																			51
Total net liability for unpaid claim and claim adjustment expenses																			$	2,911

Net Strengthening (Releases) of Prior Accident Year Reserves

Years Ended December 31																			Total
Accident Year
2012	$	24	$	28	$	(3)	$	(17)	$	16	$	—	$	(5)	$	2	$	—	$	45
2013			5		(5)		5		(42)		10		(3)		3		1		(26)
2014					5		(4)		(23)		4		23		1		—		6
2015							(5)		(2)		15		11		2		15		36
2016									36		8		4		2		10		60
2017											—		—		2		(4)		(2)
2018													(9)		2		(7)		(14)
2019															2		—		2
2020																	(1)		(1)
Total net development for the accident years presented above													21		16		14
Total net development for accident years prior to 2012													(4)		(1)		(1)
Total unallocated claim adjustment expense development													(1)		—		2
Total													$	16	$	15	$	15

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

Workers’ Compensation

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																					December 31, 2021
December 31	2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019 (a)		2020 (a)		2021		IBNR		Cumulative Number of Claims
(In millions, except reported claims data)
Accident Year
2012	$	601	$	627	$	659	$	669	$	678	$	673	$	671	$	668	$	663	$	664	$	66	42,804
2013			537		572		592		618		593		582		561		552		548		91		38,867
2014					467		480		479		452		450		446		439		448		105		33,502
2015							422		431		406		408		394		382		372		101		31,894
2016									426		405		396		382		366		355		104		31,981
2017											440		432		421		400		402		92		33,121
2018													450		440		428		415		104		34,851
2019															452		449		437		134		34,248
2020																	477		466		228		29,188
2021																			468		300		25,711
																	Total		$	4,575	$	1,325

Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2012	$	87	$	232	$	342	$	416	$	470	$	509	$	524	$	536	$	538	$	541
2013			80		213		300		370		417		419		411		414		417
2014					61		159		215		258		282		290		297		306
2015							51		131		180		212		231		243		251
2016									53		129		169		198		219		227
2017											63		151		207		243		265
2018													68		163		229		259
2019															71		169		223
2020																	65		147
2021																			67
																	Total		$	2,703
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,872
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012																			1,941
Other (b)																			(14)
Liability for unallocated claim adjustment expenses for accident years presented																			51
Total net liability for unpaid claim and claim adjustment expenses																			$	3,850

Net Strengthening (Releases) of Prior Accident Year Reserves

Years Ended December 31																			Total
Accident Year
2012	$	26	$	32	$	10	$	9	$	(5)	$	(2)	$	(3)	$	(5)	$	1	$	63
2013			35		20		26		(25)		(11)		(21)		(9)		(4)		11
2014					13		(1)		(27)		(2)		(4)		(7)		9		(19)
2015							9		(25)		2		(14)		(12)		(10)		(50)
2016									(21)		(9)		(14)		(16)		(11)		(71)
2017											(8)		(11)		(21)		2		(38)
2018													(10)		(12)		(13)		(35)
2019															(3)		(12)		(15)
2020																	(11)		(11)
Total net development for the accident years presented above													(77)		(85)		(49)
Adjustment for development on a discounted basis													3		2		2
Total net development for accident years prior to 2012													38		(13)		(35)
Total unallocated claim adjustment expense development													23		—		—
Total													$	(13)	$	(96)	$	(82)

(a)	Data presented for these calendar years is required supplemental information, which is unaudited.
(b)	Other includes the effect of discounting lifetime claim reserves.

The table below presents information about average historical claims duration as of December 31, 2021 and is presented as required supplementary information, which is unaudited.

Average Annual Percentage Payout of Ultimate Net Incurred Claim and Allocated Claim Adjustment Expenses in Year:
	1		2		3		4		5		6		7		8		9		10
Medical professional liability	3.6	%	18.3	%	23.7	%	18.2	%	12.0	%	8.3	%	5.1	%	2.8	%	0.7	%	1.0	%
Other professional liability and management liability	6.7		21.9		21.1		16.7		9.9		6.4		4.3		3.5		1.7		0.5
Surety (a)	14.1		48.7		18.9		2.6		1.1		1.3		—		0.4		(0.8)		—
Commercial auto	26.7		23.2		18.0		13.6		10.1		3.2		1.5		0.4		—		0.3
General liability	4.1		14.1		18.0		19.0		13.5		8.7		5.6		4.1		2.2		0.8
Workers’ compensation	14.7		21.7		13.9		9.5		6.4		2.7		1.1		1.5		0.4		0.5

(a)Due to the nature of the Surety business, average annual percentage payout of ultimate net incurred claim and allocated claim adjustment expenses has been calculated using only the payouts of mature accident years presented in the loss reserve development tables.

A&EP Reserves

In 2010, Continental Casualty Company (“CCC”) together with several insurance subsidiaries completed a transaction with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., under which substantially all of their legacy A&EP liabilities were ceded to NICO through a loss portfolio transfer (“LPT”). At the effective date of the transaction, approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves were ceded to NICO under a retroactive reinsurance agreement with an aggregate limit of $4.0 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third party reinsurance related to these liabilities. NICO was paid a reinsurance premium of $2.0 billion and billed third party reinsurance receivables related to A&EP claims with a net book value of $215 million were transferred to NICO, resulting in total consideration of $2.2 billion.

In years subsequent to the effective date of the LPT, adverse prior year development on A&EP reserves was recognized resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which a change in the estimate of A&EP reserves is recognized that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders’ benefits on the Consolidated Statements of Operations.

The following table presents the impact of the Loss Portfolio Transfer on the Consolidated Statements of Operations.

Year Ended December 31	2021		2020		2019
(In millions)
Additional amounts ceded under LPT:
Net A&EP adverse development before consideration of LPT	$	143	$	125	$	150
Provision for uncollectible third-party reinsurance on A&EP	(5)		(25)		(25)
Total additional amounts ceded under LPT	138		100		125
Retroactive reinsurance benefit recognized	(107)		(94)		(107)
Pretax impact of deferred retroactive reinsurance	$	31	$	6	$	18

Net unfavorable prior year development of $143 million, $125 million and $150 million was recognized before consideration of cessions to the LPT for the years ended December 31, 2021, 2020 and 2019. The unfavorable development in 2021, 2020 and 2019 was primarily driven by higher than anticipated defense and indemnity costs on known direct asbestos and environmental accounts and a reduction in estimated reinsurance recoverable. Additionally, in 2021, 2020 and 2019, $5 million, $25 million and $25 million of the provision for uncollectible third-party reinsurance was released.

As of December 31, 2021 and 2020, the cumulative amounts ceded under the LPT were $3.4 billion and $3.3 billion. The unrecognized deferred retroactive reinsurance benefit was $429 million and $398 million as of December 31, 2021 and 2020 and is included within Other liabilities on the Consolidated Balance Sheets.

NICO established a collateral trust account as security for its obligations under the LPT. The fair value of the collateral trust account was $3.1 billion as of December 31, 2021. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to A&EP claims.

Excess Workers’ Compensation LPT

On February 5, 2021, CNA completed a transaction with Cavello Bay Reinsurance Limited (“Cavello”), a subsidiary of Enstar Group Limited, under which certain legacy excess workers’ compensation (“EWC”) liabilities were ceded to Cavello. Under the terms of the transaction, based on reserves in place as of January 1, 2020, approximately $690 million of net EWC claim and allocated claim adjustment expense reserves were ceded to Cavello under a loss portfolio transfer (“EWC LPT”) with an aggregate limit of $1.0 billion. Cavello was paid a reinsurance premium of $697 million, less claims paid between January 1, 2020 and the closing date of the agreement of $64 million. After transaction costs, a loss of approximately $11 million (after tax and noncontrolling interest) was recognized in Other Insurance Operations in the first quarter of 2021 related to the EWC LPT.

As of December 31, 2021, the cumulative amount ceded under the EWC LPT was $690 million.

Cavello established a collateral trust account as security for its obligations. The fair value of the collateral trust account was $634 million as of December 31, 2021.

Life & Group Policyholder Reserves

CNA’s Life & Group business includes its run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants. Long term care policies provide benefits for nursing homes, assisted living facilities and home health care subject to various daily and lifetime caps. Generally, policyholders must continue to make periodic premium payments to keep the policy in force and CNA has the ability to increase policy premiums, subject to state regulatory approval.

CNA maintains both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for its Life & Group business. Claim and claim adjustment expense reserves consist of estimated reserves for long term care policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported. In developing the claim and claim adjustment expense reserve estimates for long term care policies, CNA’s actuaries perform a detailed claim reserve review on an annual basis. The review analyzes the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration. In addition, claim and claim adjustment expense reserves are also maintained for the structured settlement obligations. In developing the claim and claim adjustment expense reserve estimates for structured settlement obligations, CNA’s actuaries review mortality experience on an annual basis. CNA’s recorded claim and claim adjustment expense reserves reflect management’s best estimate after incorporating the results of the most recent reviews.

CNA completed its annual claim reserve reviews in the third quarters of 2021, 2020 and 2019 resulting in $40 million, $37 million and $56 million pretax reductions in long term care reserves primarily due to lower claim severity than anticipated in the reserve estimates. The 2021 and 2020 annual claim reserve reviews also resulted in $2 million and $46 million pretax increases in the structured settlement claim reserves primarily due to lower discount rate assumptions and mortality assumption changes.

Future policy benefit reserves consist of active life reserves related to CNA’s long term care policies for policyholders that are not currently receiving benefits and represent the present value of expected future benefit payments and expenses less expected future premium. The determination of these reserves requires management to make estimates and

assumptions about expected investment and policyholder experience over the life of the contract. Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.

The actuarial assumptions that CNA believes are subject to the most variability are morbidity, persistency, discount rates and anticipated future premium rate increases. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted. Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death. Discount rates are influenced by the investment yield on assets supporting long term care reserves which is subject to interest rate and market volatility and may also be affected by changes to the Internal Revenue Code. Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown. As a result of this variability, CNA’s long term care reserves may be subject to material increases if actual experience develops adversely to CNA’s expectations.

Annually, in the third quarter, CNA assesses the adequacy of its long term care future policy benefit reserves by performing a gross premium valuation (“GPV”) to determine if there is a premium deficiency. Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation. The GPV required reserves are then compared to the existing recorded reserves. If the GPV required reserves are greater than the existing recorded reserves, the existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount. Any such increase is reflected in the Company’s results of operations in the period in which the need for such adjustment is determined. If the GPV required reserves are less than the existing recorded reserves, assumptions remain locked in and no adjustment is required.

The GPV for the long term care future policy benefit reserves, performed in the third quarter of 2021, indicated that recorded reserves included a pretax margin of approximately $72 million.

The GPV for the long term care future policy benefit reserves performed in the third quarter of 2020 and 2019 indicated a premium deficiency primarily driven by lower discount rate assumptions. Recognition of the premium deficiency resulted in a $74 million and a $216 million pretax increase in policyholders’ benefits reflected in the results of operations for the years ended December 31, 2020 and 2019.