Reserves for Unpaid Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2021

Reserves for Unpaid Losses and Loss Adjustment Expenses [Abstract]

Reserves for Unpaid Losses and Loss Adjustment Expenses

8. Reserves for Unpaid Losses and Loss Adjustment Expenses

Year to-date activity in the consolidated reserves for unpaid losses and LAE is summarized as follows (in thousands):

	September 30,		September 30,
	2021		2020
Balance at January 1	$	789,768	$	620,355
Less reinsurance recoverable		357,200		274,275
Net balance at January 1		432,568		346,080
Incurred related to:
Current year		207,121		253,319
Loss portfolio transfer		—		21,700
Prior years		2,553		33,259
Total incurred		209,674		308,278
Paid related to:
Current year		64,292		67,146
Loss portfolio transfer		—		21,700
Prior years		130,623		177,325
Total paid		194,915		266,171
Net balance at September 30		447,327		388,187
Plus reinsurance recoverable		368,054		367,704
Balance at September 30	$	815,381	$	755,891

The year to date impact from the unfavorable (favorable) net prior years’ loss development on each reporting segment is presented below:

	September 30,
	2021		2020
Specialty Commercial Segment	$	533	$	23,961
Standard Commercial Segment		(2,336)		2,350
Personal Segment		4,356		6,948
Corporate		—		—
Total unfavorable net prior year development	$	2,553	$	33,259

The following describes the primary factors behind each segment’s prior accident year reserve development for the nine months ended September 30, 2021 and 2020:

Nine months ended September 30, 2021:

● Specialty Commercial Segment. Our Commercial Auto business unit experienced net favorable development in the 2020 and 2019 accident years primarily in the excess and primary commercial automobile liability lines of business, partially offset by net unfavorable development in both the primary and excess commercial automobile lines of business in the 2018 and prior accident years. Our E&S Casualty business unit experienced net unfavorable development primarily in our primary and excess liability line of business in the 2019 and prior accident years, partially offset by net favorable development in the 2020 accident year. We experienced net unfavorable development in our E&S Property and Aerospace & Programs business units. We experienced net favorable development in our Professional Liability business unit.

● Standard Commercial Segment. Our Commercial Accounts business unit experienced net favorable development for all lines of business in total, primarily due to net favorable development in our commercial auto liability and property lines of business in accident years 2020, 2016 and 2015, partially offset by net unfavorable development in the general liability lines of business in accident years 2019, 2018, 2017 and 2014 and prior accident years. The run-off from our former Workers Compensation operating unit experienced net favorable development in the 2015 and prior accident years.

● Personal Segment. Net unfavorable development in our Specialty Personal Lines business unit was driven predominately by unfavorable development attributable to the 2020 and 2019 accident years.

Nine months ended September 30, 2020:

● Specialty Commercial Segment. Our Commercial Auto business unit experienced net unfavorable development in the 2018 and prior accident years both in the primary and excess commercial automobile liability lines of business, partially offset by net favorable development in the excess commercial automobile lines of business in the 2019 accident year. Our E&S Casualty business unit experienced net unfavorable development primarily in our primary liability line of business and our E&S package insurance products in the 2017, 2016, 2015 and 2013 and prior accident years, partially offset by net favorable development in the 2019, 2018 and 2014 accident years. We experienced net favorable development in our E&S Property and Professional Liability business units, partially offset by net unfavorable development in our Aerospace & Programs business unit.  

● Standard Commercial Segment. Our Commercial Accounts business unit experienced net unfavorable development primarily in the general liability line of business in the 2018, 2017, 2016, 2015 and 2013 and prior accident years, partially offset by net favorable development in the 2019 and 2014 accident years primarily in the general liability line of business. Our Commercial Accounts business unit experienced net favorable development in the 2016 and 2015 accident years, partially offset by net unfavorable development in the 2017 and 2014 accident years in the occupational accident line of business. The run-off from our former Workers Compensation operating unit experienced net favorable development in the 2014 and prior accident years, partially offset by net unfavorable development in the 2015 accident year.

● Personal Segment. Net unfavorable development in our Specialty Personal Lines business unit was mostly attributable to the 2019, 2018, 2017 and 2016 accident years, partially offset by favorable development in the 2015 and prior accident years. The net development during the nine months ended September 30, 2020 was driven predominately by unfavorable development attributable to more recent treaty years where we retain a greater portion of the claims.