Loss And Loss Adjustment Expense Reserves

3 Months Ended

Mar. 31, 2020

Loss And Loss Adjustment Expense Reserves

Loss and Loss Adjustment Expense Reserves

The following table presents the activity in loss and loss adjustment expense reserves:



	Three Months Ended March 31,
	2020			2019

	(Amounts in thousands)
Gross reserves, beginning of period	$	1,921,096		$	1,829,412
Reinsurance recoverables on unpaid losses, beginning of period	(76,100		)	(180,859		)
Cumulative effect of adopting ASU 2016-13 for reinsurance recoverables on unpaid losses⁽¹⁾	159			—
Reinsurance recoverables on unpaid losses, beginning of period, as adjusted	(75,941		)	(180,859		)
Net reserves, beginning of period	1,845,155			1,648,553
Incurred losses and loss adjustment expenses related to:
Current year	636,566			629,054
Prior years	15,104			1,362
Total incurred losses and loss adjustment expenses	651,670			630,416
Loss and loss adjustment expense payments related to:
Current year	264,658			274,273
Prior years	403,436			344,718
Total payments	668,094			618,991
Net reserves, end of period	1,828,731			1,659,978
Reinsurance recoverables on unpaid losses, end of period	69,214			127,634
Gross reserves, end of period	$	1,897,945		$	1,787,612

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⁽¹⁾ See Note 1 for additional information on adoption of ASU 2016-13.

The increase in the provision for insured events of prior years during the three months ended March 31, 2020 of $15.1 million was primarily attributable to higher than estimated losses and loss adjustment expenses in the homeowners and commercial automobile lines of insurance business. The increase in the provision for insured events of prior years during the three months ended March 31, 2019 of $1.4 million was primarily attributable to higher than estimated automobile losses, partially offset by lower than estimated California homeowners losses largely due to reductions in the Company's retained losses on the Camp and Woolsey Fires under the Treaty after accounting for the assignment of subrogation rights and re-estimation of reserves as part of normal reserving procedures, as described further below.

For the three months ended March 31, 2020 and 2019, the Company recorded catastrophe losses net of reinsurance of approximately $2 million and $5 million, respectively. Catastrophe losses due to the events that occurred during the three months ended March 31, 2020 totaled approximately $4 million, with no reinsurance benefits used for these losses, resulting primarily from windstorms in California and Oklahoma. These losses were partially offset by favorable development of approximately $2 million on prior years' catastrophe losses. Catastrophe losses due to the events that occurred during the three months ended March 31, 2019 totaled approximately $11 million resulting primarily from winter storms in California, with no reinsurance benefits used for these losses. These losses were partially offset by favorable development of approximately $6 million on prior years' catastrophe losses, primarily due to reductions in the Company’s retained portion of losses on the Camp and Woolsey Fires, as described below.

During the first quarter of 2019, the Company completed the sale of its subrogation rights related to the 2018 Camp and Woolsey Fires and the 2017 Thomas Fire (which was a component of the "2017 Southern California fires") to a third party. The Company’s reinsurers were the primary beneficiaries of this transaction, as they had absorbed most of the losses under the terms of the Treaty. The Company re-estimated its gross and net losses from the 2018 Camp and Woolsey Fires and the 2017 Southern California fires in conjunction with this sale, and its total gross losses from these catastrophes, after accounting for the assignment of subrogation rights and adjustments made to claims reserves as part of normal reserving procedures, were approximately $208 million, and its total net losses, after reinsurance benefits, were approximately $40 million at March 31, 2019. The Company benefited by approximately $10 million, before taxes, in the first quarter of 2019 from the sale of the subrogation rights, including adjustments made to the associated claims as a result of normal reserving procedures, reductions in the Company's retained portion of losses on the Camp and Woolsey Fires, and reduced reinstatement premiums recognized.