Loss and Loss Adjustment Expense Reserves

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
Millions	2024		2023		2024		2023
Gross beginning balance	$	1,890.1	$	1,421.0	$	1,605.1	$	1,296.5
Less: beginning reinsurance recoverable on unpaid losses (1)	(458.5)		(362.7)		(340.8)		(505.0)
Net loss and loss adjustment expense reserves	1,431.6		1,058.3		1,264.3		791.5

Loss and loss adjustment expenses incurred relating to:
Current year losses	313.1		266.4		676.0		562.1
Prior year losses	(24.8)		(.6)		(32.0)		19.0
Net incurred loss and loss adjustment expenses	288.3		265.8		644.0		581.1



Loss and loss adjustment expenses paid relating to:
Current year losses	(19.1)		(8.8)		(27.4)		(18.4)
Prior year losses	(86.3)		(90.4)		(261.8)		(281.1)
Net paid loss and loss adjustment expenses	(105.4)		(99.2)		(289.2)		(299.5)

Change in TPC Providers’ participation (2)	—		—		—		145.4
Foreign currency translation and other adjustments to loss and loss adjustment expense reserves	11.3		(5.5)		6.7		.9
Net ending balance	1,625.8		1,219.4		1,625.8		1,219.4
Plus: ending reinsurance recoverable on unpaid losses	507.2		352.4		507.2		352.4
Gross ending balance	$	2,133.0	$	1,571.8	$	2,133.0	$	1,571.8

(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 and nine months ended September 30, 2024, the Ark/WM Outrigger segment recognized $24.8 million and $32.0 million of net favorable prior year loss reserve development, primarily due to property lines of business. For the three and nine months ended September 30, 2023, the Ark/WM Outrigger segment recognized $0.6 million of net favorable prior year loss reserve development and $19.0 million of net unfavorable prior year loss reserve development. The net unfavorable prior year loss reserve development for the nine months ended September 30, 2023 was driven primarily by Winter Storm Elliot and three large claims in the property and marine & energy lines of business.

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.

During the first quarter of 2023, a reinsurance to close (“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 does not have any outstanding loss and LAE reserves. For the three and nine months ended September 30, 2024, HG Re recognized gross incurred loss and LAE of $0.3 million related to a delinquent payment by a reinsured BAM policyholder. Net of estimated recoveries, HG Re recognized no incurred loss and LAE.

P&C Insurance Distribution

As of September 30, 2024, Bamboo Captive has recorded loss and LAE reserves of $17.7 million. For the three and nine months ended September 30, 2024, Bamboo Captive recognized incurred loss and LAE of $4.4 million and $14.5 million.

Other Operations

As of September 30, 2024, Bamboo CRV has recorded loss and LAE reserves of $8.1 million. For the three and nine months ended September 30, 2024, Bamboo CRV recognized incurred loss and LAE of $4.2 million and $8.1 million.