Loss And Loss Adjustment Expense Reserves

3 Months Ended

Mar. 31, 2022

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,
	2022		2021

	(Amounts in thousands)
Gross reserves, beginning of period	$	2,226,430	$	1,991,304
Reinsurance recoverables on unpaid losses, beginning of period	(41,377)		(54,460)
Net reserves, beginning of period	2,185,053		1,936,844
Incurred losses and loss adjustment expenses related to:
Current year	769,022		627,551
Prior years	52,911		(1,207)
Total incurred losses and loss adjustment expenses	821,933		626,344
Loss and loss adjustment expense payments related to:
Current year	261,115		242,103
Prior years	471,258		334,867
Total payments	732,373		576,970
Net reserves, end of period	2,274,613		1,986,218
Reinsurance recoverables on unpaid losses, end of period	33,213		54,882
Gross reserves, end of period	$	2,307,826	$	2,041,100

Inflationary trends have accelerated to their highest level in decades, which has had a significant impact on the cost of auto parts and labor as well as medical expenses for bodily injuries, and supply chain and labor shortage issues have lengthened the time to repair vehicles. Bodily injury costs are also under pressure from social inflation. These factors have increased losses and loss adjustment expenses for the insured events of the current accident year for the three months ended March 31, 2022 compared to the corresponding period in 2021. The increase in the provision for insured events of prior years during the three months ended March 31, 2022 of $52.9 million was primarily attributable to higher than estimated losses and loss adjustment expenses in the automobile and commercial property lines of insurance business, partially offset by favorable development in the homeowners line of insurance business. The inflationary pressures and the supply chain and labor shortage issues discussed above were major contributors to the adverse reserve development in the automobile line of insurance business for the first quarter of 2022. The decrease in the provision for insured events of prior years during the three months ended March 31, 2021 of $1.2 million was primarily attributable to lower than estimated losses and loss adjustment expenses in the commercial property and private passenger automobile lines of insurance business, mostly offset by unfavorable development in the commercial automobile line of insurance business.

For the three months ended March 31, 2022 and 2021, the Company recorded catastrophe losses net of reinsurance of approximately $22 million and $35 million, respectively. Catastrophe losses due to the events that occurred during the three months ended March 31, 2022 totaled approximately $21 million, with no reinsurance benefits used for these losses, resulting primarily from winter storms in Texas and California. Catastrophe losses due to the events that occurred during the three months ended March 31, 2021 totaled approximately $39 million, with no reinsurance benefits used for these losses, resulting primarily from the deep freeze in Texas and Oklahoma and winter storms in California. In addition, the Company experienced unfavorable development of approximately $1 million and favorable development of approximately $4 million on prior years' catastrophe losses for the three months ended March 31, 2022 and 2021, respectively.