Liability for Loss and LAE

3 Months Ended

Mar. 31, 2020

Insurance [Abstract]

Liability for Loss and LAE

5. Liability for Loss and LAE

(a) Liability Rollforward

The following table presents the activity in the liability for loss and LAE for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020			2019
	($ in millions)
Reserves as of January 1	$	11,928.4		$	12,250.3
Less: reinsurance recoverables(1)		1,583.9			1,857.4
Net reserves as of January 1		10,344.5			10,392.9
Other adjustments		—			(0.2	)
Incurred loss and LAE, net of reinsurance, related to:
Current year		1,086.4			829.9
Prior years		(59.0	)		(37.4	)
Total incurred loss and LAE, net of reinsurance		1,027.4			792.5
Paid loss and LAE, net of reinsurance, related to:(2)
Current year		87.3			75.3
Prior years		770.2			914.8
Total paid loss and LAE, net of reinsurance		857.5			990.1
Foreign currency exchange rate effect		(7.5	)		17.2
Net reserves as of March 31		10,506.9			10,212.3
Reinsurance recoverables as of March 31(1)		1,559.5			1,642.8
Reserves as of March 31	$	12,066.4		$	11,855.1

(1) Reinsurance recoverables in this table include only ceded loss and LAE reserves.

(2) Includes paid losses, net of reinsurance, related to commutations.

Gross loss and LAE reserves as of March 31, 2020 increased from December 31, 2019, primarily reflecting the impact of growing net premiums earned and catastrophe losses incurred in the first three months of 2020, partially offset by payments on catastrophe losses incurred in 2017, 2018 and 2019 and favorable prior accident year loss reserve development.  

(b) Liability Development

The following table presents the (favorable) unfavorable prior accident year loss reserve development for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020				2019
	($ in millions)
Reinsurance Segment
Property:
Catastrophe events	$	(32.3	)	(1)	$	8.4		(2)
Non-catastrophe		(14.4	)	(3)		(19.1	)	(4)
Total		(46.7	)			(10.7	)
Casualty & other:
Malpractice Treaties(5)		—				—
Other		(11.0	)	(6)		(25.7	)	(7)
Total		(11.0	)			(25.7	)
Total Reinsurance Segment		(57.7	)			(36.4	)
Insurance Segment
RSUI:
Casualty		(1.0	)	(8)		(5.6	)	(9)
Property and other		(0.5	)	(10)		1.9		(11)
Total		(1.5	)			(3.7	)
CapSpecialty		0.2		(12)		2.7		(12)
Total incurred related to prior years	$	(59.0	)		$	(37.4	)

(1) Primarily reflects favorable prior accident year loss reserve development related to Typhoon Hagibis in the 2019 accident year and catastrophes in the 2018 accident year.

(2) Primarily reflects unfavorable prior accident year loss reserve development related to Typhoon Jebi in the 2018 accident year, partially offset by favorable prior accident year loss reserve development related to the wildfires in California in the 2018 accident year.

(3) Primarily reflects favorable prior accident year loss reserve development in the 2017 and 2019 accident years.

(4) Primarily reflects favorable prior accident year loss reserve development in the 2016 through 2018 accident years.

(5) Represents certain malpractice treaties pursuant to which the increased underwriting profits created by the favorable prior accident year loss reserve development are largely retained by the cedants. As a result, the favorable prior accident year loss reserve development is largely offset by an increase in profit commission expense incurred when such favorable prior accident year loss reserve development occurs.

(6) Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and earlier accident years, partially offset by unfavorable prior accident year development in the shorter-tailed lines of business in the 2014 through 2019 accident years.

(7) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed lines of business in the 2012 through 2017 prior accident years and in the professional liability lines of business in the 2007 and prior accident years.

(8) Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in recent accident years.

(9) Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in the 2017 accident year.

(10) Primarily reflects favorable prior accident year loss reserve development related to catastrophes in the 2018 accident year, partially offset by unfavorable prior accident year loss reserve development related to catastrophes in the 2017 accident year.

(11) Primarily reflects unfavorable prior accident year loss reserve development related to Hurricanes Harvey in the 2017 accident year and Florence in the 2018 accident year.

(12) Primarily reflects unfavorable prior accident year loss reserve development in certain specialty lines of business written through a program administrator in connection with a terminated program in the 2009 and 2010 accident years.