Loss and Loss Adjustment Expense Reserves

3 Months Ended

Mar. 31, 2024

Loss and Loss Adjustment Expense Reserves

P&C Insurance and Reinsurance

The following table summarizes the loss and loss adjustment expense (“LAE”) reserve activity of the Ark/WM Outrigger segment for the three months ended March 31, 2024 and 2023:


	Three Months Ended March 31,
Millions		2024		2023
Gross beginning balance		$	1,605.1	$	1,296.5
Less: beginning reinsurance recoverable on unpaid losses (1)		(340.8)		(505.0)
Net loss and loss adjustment expense reserves		1,264.3		791.5

Loss and loss adjustment expenses incurred relating to:
Current year losses		180.3		139.2
Prior year losses		(.3)		8.6
Net incurred loss and loss adjustment expenses		180.0		147.8



Loss and loss adjustment expenses paid relating to:
Current year losses		(4.0)		(4.0)
Prior year losses		(96.7)		(87.7)
Net paid loss and loss adjustment expenses		(100.7)		(91.7)

Change in TPC Providers’ participation (2)		—		145.4
Foreign currency translation and other adjustments to loss and loss adjustment expense reserves		(3.6)		3.7

Net ending balance		1,340.0		996.7
Plus: ending reinsurance recoverable on unpaid losses		404.5		348.9
Gross ending balance		$	1,744.5	$	1,345.6

(1) The beginning reinsurance recoverable on unpaid losses includes amounts attributable to TPC Providers of $145.4 as of December 31, 2022.

(2) Amount represents the impact to net loss and loss adjustment expense reserves due to a change in the TPC Providers’ participation related to the annual RITC process.

For the three months ended March 31, 2024, the Ark/WM Outrigger segment recognized $0.3 million of net favorable prior year loss reserve development. For the three months ended March 31, 2023, the Ark/WM Outrigger segment recognized $8.6 million of net unfavorable prior year loss reserve development at Ark, driven primarily by Winter Storm Elliot.

Impact of Third-Party Capital

For the years of account prior to the Ark Transaction, a significant proportion of the Syndicates’ underwriting capital was provided by third-party insurance and reinsurance groups (“TPC Providers”) using whole account reinsurance contracts with Ark’s corporate member. For the years of account subsequent to the Ark Transaction, Ark is no longer using TPC Providers to provide underwriting capital for the Syndicates.

A reinsurance to close (“RITC”) agreement is generally put in place after the third year of operations for a year of account such that the outstanding loss and LAE reserves, including future development thereon, are reinsured into the next year of account. As a result, and in combination with the changing participation provided by TPC Providers, Ark’s participation on outstanding loss and LAE reserves reinsured into the next year of account may change, perhaps significantly. During the first quarter of 2023, an RITC agreement was executed such that the outstanding loss and LAE reserves for claims arising out of the 2020 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 42.8%, were reinsured into the 2021 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 0.0%.

Financial Guarantee

HG Re and BAM do not have any outstanding loss and LAE reserves related to BAM’s municipal bond guarantee insurance business.

P&C Insurance Distribution

As of March 31, 2024, Bamboo has recorded loss and LAE reserves of $12.3 million. For the three months ended March 31, 2024, Bamboo recognized incurred loss and LAE of $5.8 million.