Activity in the consolidated reserves for unpaid losses and LAE is summarized as follows (in thousands):

The $112.3 million and $6.0 million of unfavorable net development for both continuing and discontinued operations in prior accident years recognized in 2022 and 2021, respectively, represent changes in our loss reserve estimates. In 2022 and 2021, the aggregate loss reserve estimates for prior years were increased to reflect unfavorable loss development when the available information indicated a reasonable likelihood that the ultimate losses would be more than the previous estimates. The unfavorable prior year reserve development during the twelve months ended December 31, 2022 was primarily driven by our binding commercial automobile liability line of business reported in our continuing operations as

part of our Runoff Segment, our E&S Casualty business unit now reported in our discontinued operations and our personal automobile liability line in our Specialty Personal Lines business unit reported in our continuing operations as part of our Personal Lines Segment. The unfavorable prior year reserve development during the twelve months ended December 31, 2021 was primarily driven by our general liability lines within our E&S Casualty business unit now reported in our discontinued operations and our Commercial Lines Segment reported as part of our continuing operations, as well as our personal automobile liability line in our Specialty Personal Lines business unit reported in our continuing operations. Generally, changes in reserves are caused by variations between actual experience and previous expectations and by reduced emphasis on the Bornhuetter-Ferguson method due to the aging of the accident years.

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

The following describes the primary factors behind each segment’s prior accident year loss reserve development for the years ended December 31, 2022 and 2021:

Year ended December 31, 2021:

●

Commercial Lines 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. We experienced net unfavorable development in our Aviation business unit. The run-off from our former Workers Compensation operating unit experienced net favorable development in the 2015 and prior accident years.

●

Personal Lines 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.

●

Runoff Segment. We experienced net favorable development in our binding commercial automobile line of business in the 2018 and prior accident years, as well as in our senior care facilities line of business. We experienced net unfavorable development in our satellite launch business and specialty programs.

Reserves for unpaid losses and LAE represent management’s best estimate of our ultimate liabilities, based on currently known facts, current law, current technology and assumptions considered reasonable where facts are not known. Due to the significant uncertainties and related management judgments, there can be no assurance that future favorable or unfavorable loss development, which may be material, will not occur.

Short-Duration Contract Disclosures

ASU 2015-09, “Disclosures about Short-Duration Contracts (Topic 944)", requires insurers to make disclosures about their liability for unpaid claims and claim adjustment expenses for short-duration insurance contracts. These disclosures include tables showing incurred and paid claims development information (net of reinsurance and excluding unallocated loss adjustment expenses) which are disaggregated based on the characteristics of the insurance contracts that the insurer writes and other factors specific to the reporting entity. The information should be disclosed by accident year for the number of years claims typically remain outstanding, but need not be more than 10 years, including a reconciliation of the disaggregated information to the consolidated statement of financial position. We have evaluated the disaggregation criteria and concluded that the basis for our disaggregation of this information is the similar claim duration period of our primary lines of business (certain lines of business have short settlement periods versus long settlement periods).

Reserves for Incurred But Not Reported (“IBNR”) Claims

Reserves for IBNR claims are based on the estimated ultimate cost of settling claims, including the effects of inflation and other social and economic factors, using past experience adjusted for current trends and any other factors that would modify past experience. We use a variety of statistical and actuarial techniques to analyze current claims costs, including frequency and severity data and prevailing economic, social and legal factors. Each such method has its own set of assumptions and outputs, and each has strengths and weaknesses in different areas. Since no single estimation method is superior to another method in all situations, the methods and assumptions used to project loss reserves will vary by coverage and product. We use what we believe to be the most appropriate set of actuarial methods and assumptions for each product line grouping and coverage. While the loss projection methods may vary by product line and coverage, the general approach for calculating IBNR remains the same: ultimate losses are forecasted first, and that amount is reduced by the amount of cumulative paid claims and case reserves. Reserves established in prior years are adjusted as loss experience develops and new information becomes available. Adjustments to previously estimated reserves are reflected in the results of operations in the year in which they are made.

As described above, various actuarial methods are utilized to determine the reserves for losses and LAE recorded in our consolidated balance sheets. Weightings of methods at a detailed level may change from evaluation to evaluation based on a number of observations, measures, and time elements.

Methodology for Determining Cumulative Number of Reported Claims

A claim file is created when the Company is notified of an actual demand for payment, notified of an event that may lead to a demand for payment or it is determined that a demand for payment could possibly lead to a future demand for payment on another coverage on the same policy or on another policy. The cumulative number of reported claims is predominately measured at the claim level for our Commercial Accounts, Aviation, Personal, Primary Commercial Auto Liability, and certain Programs lines of business and at a coverage level by occurrence for our other lines of business. The Company does not generate claim counts for ceded business.

Incurred & Paid Claims Development Disclosures

The following tables provide information about incurred and cumulative paid losses and allocated loss adjustment expenses (“ALAE”), net of reinsurance for our primary lines of business with similar claims duration periods. The incurred and paid losses by accident year information is presented for all lines of business with similar claim duration periods in the below tables. The following tables also include IBNR reserves plus expected development on reported claims and the cumulative number of reported claims as of December 31, 2022 ($ in thousands):

Commercial Accounts


Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																					As of December 31,
																							Cumulative
																							Number of
	For the Years Ended December 31,																					Audited	Reported
Accident	Unaudited																			Audited	IBNR		Claims
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022		2022		2022
2013	$	47,194	$	48,085	$	44,625	$	42,632	$	41,451	$	40,350	$	40,211	$	40,141	$	40,562	$	40,795	$	307	2,812
2014				46,413		47,385		46,990		43,917		42,822		42,463		42,503		42,645		42,870		474	2,744
2015						46,280		46,470		43,806		43,806		39,287		39,206		38,677		39,417		962	2,582
2016								40,966		42,580		41,429		43,111		45,267		43,883		44,566		1,224	2,550
2017										43,327		43,449		43,579		44,732		45,815		46,617		2,147	2,751
2018												40,943		41,290		44,590		47,007		46,256		3,143	2,619
2019														37,984		34,616		36,044		39,298		2,517	2,778
2020																40,356		35,879		34,197		2,943	2,836
2021																		46,529		43,347		9,266	2,862
2022																				45,883		18,674	2,149
																		Total	$	423,246


Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
Accident	Unaudited																			Audited
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022
2013	$	22,264	$	30,096	$	32,378	$	34,597	$	35,943	$	37,808	$	39,329	$	39,560	$	40,210	$	40,278
2014				19,386		29,586		33,927		36,225		37,947		41,162		41,658		41,863		42,030
2015						21,322		31,150		33,544		36,775		35,611		37,135		37,886		38,303
2016								16,557		28,501		30,974		39,417		40,828		42,819		43,101
2017										19,776		29,456		36,650		41,631		42,707		44,381
2018												16,664		29,381		33,546		40,163		42,794
2019														17,490		26,233		30,407		33,914
2020																13,942		23,914		26,881
2021																		18,695		29,230
2022																				17,072
																		Total	$	357,984
								All outstanding liabilities before 2013, net of reinsurance												1,446
				Liabilities for claims and claim adjustment expenses, net of reinsurance															$	66,708

Aviation


Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																					As of December 31,
																							Cumulative
																							Number of
	For the Years Ended December 31,																					Audited	Reported
Accident	Unaudited																			Audited	IBNR		Claims
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022		2022		2022
2013	$	10,236	$	11,304	$	10,295	$	9,563	$	10,057	$	10,649	$	10,252	$	10,507	$	10,293	$	10,278	$	—	231
2014				3,179		3,654		3,627		3,558		3,566		3,567		3,567		3,567		3,568		—	201
2015						1,870		1,709		1,643		1,631		1,630		1,635		1,639		1,638		—	200
2016								2,330		2,241		2,119		2,219		2,183		2,216		2,215		—	292
2017										2,325		2,082		2,079		2,117		2,183		2,182		—	320
2018												2,382		1,990		2,296		2,577		2,611		14	338
2019														5,246		2,206		4,592		4,806		29	312
2020																1,104		3,318		3,365		108	294
2021																		3,562		2,690		302	211
2022																				3,617		1,728	155
																		Total	$	36,970


Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
Accident	Unaudited																			Audited
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022
2013	$	6,537	$	9,493	$	9,584	$	9,356	$	9,944	$	10,456	$	10,242	$	10,281	$	10,278	$	10,278
2014				2,779		3,105		3,259		3,327		3,565		3,567		3,567		3,567		3,568
2015						958		1,405		1,520		1,601		1,630		1,634		1,636		1,636
2016								1,469		1,907		1,918		2,082		2,216		2,216		2,215
2017										1,260		1,837		2,021		2,054		2,182		2,180
2018												1,716		2,237		2,368		2,412		2,548
2019														2,774		3,787		4,151		4,416
2020																2,120		2,813		2,943
2021																		1,414		1,968
2022																				1,302
																		Total	$	33,054
								All outstanding liabilities before 2013, net of reinsurance												—
				Liabilities for claims and claim adjustment expenses, net of reinsurance															$	3,916

Personal


Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																					As of December 31,
																							Cumulative
																							Number of
	For the Years Ended December 31,																					Audited	Reported
Accident	Unaudited																			Audited	IBNR		Claims
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022		2022		2022
2013	$	55,706	$	59,132	$	60,100	$	60,211	$	60,379	$	60,328	$	60,310	$	60,286	$	60,299	$	60,305	$	—	23,472
2014				5,452		5,340		6,243		6,699		6,504		6,518		6,578		6,580		6,582		—	19,293
2015						23,104		25,682		25,307		25,136		25,102		25,185		25,194		25,210		—	23,376
2016								32,260		32,893		32,728		32,803		33,042		33,193		33,271		—	23,759
2017										23,342		21,968		21,926		22,547		22,768		22,770		—	16,820
2018												18,334		18,353		19,972		20,139		20,220		13	15,337
2019														56,009		63,722		64,677		65,494		(288)	25,751
2020																47,938		50,820		51,750		530	18,535
2021																		45,295		49,851		540	15,795
2022																				45,552		10,299	14,651
																		Total	$	381,005


Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
Accident	Unaudited																			Audited
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022
2013	$	45,901	$	54,514	$	58,047	$	59,775	$	60,277	$	60,297	$	60,279	$	60,279	$	60,291	$	60,302
2014				2,515		4,418		5,631		6,428		6,566		6,580		6,583		6,585		6,585
2015						11,570		22,281		24,262		25,243		25,098		25,169		25,191		25,211
2016								21,669		30,646		32,260		32,777		32,991		33,141		33,231
2017										15,776		21,061		21,972		22,488		22,762		22,776
2018												11,137		18,009		19,628		19,983		20,133
2019														41,524		60,870		64,885		65,628
2020																32,746		48,281		50,841
2021																		30,435		46,707
2022																				27,743
																		Total	$	359,157
								All outstanding liabilities before 2013, net of reinsurance												—
				Liabilities for claims and claim adjustment expenses, net of reinsurance															$	21,848

Runoff and Discontinued


Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																					As of December 31,
																							Cumulative
																							Number of
	For the Years Ended December 31,																					Audited	Reported
Accident	Unaudited																			Audited	IBNR		Claims
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022		2022		2022
2013	$	133,308	$	131,174	$	133,845	$	142,174	$	144,604	$	145,545	$	150,927	$	153,426	$	153,479	$	155,365	$	337	10,457
2014				145,566		137,889		143,821		153,753		160,720		163,523		167,409		167,224		169,142		45	11,108
2015						151,185		145,913		164,093		173,980		181,088		187,498		188,674		191,804		1,359	11,752
2016								154,909		161,614		166,798		184,115		186,805		185,696		186,239		20	12,066
2017										179,495		159,000		178,850		199,567		228,885		245,127		1,031	12,091
2018												170,636		163,446		157,776		212,651		232,979		1,209	11,593
2019														176,760		178,072		189,509		226,125		12,028	12,204
2020																207,793		199,806		226,275		27,008	16,186
2021																		130,322		132,133		28,476	13,686
2022																				84,493		57,852	4,728
																		Total	$	1,849,682


Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
Accident	Unaudited																			Audited
Year	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022
2013	$	36,791	$	72,326	$	98,497	$	123,429	$	133,999	$	143,294	$	149,477	$	151,959	$	152,471	$	153,384
2014				42,031		76,202		103,962		131,463		154,686		165,114		166,772		167,298		167,691
2015						40,656		74,733		124,963		161,942		171,226		175,438		180,441		182,952
2016								42,653		86,836		138,231		167,310		179,266		180,605		181,150
2017										45,288		111,296		160,742		188,053		201,100		203,169
2018												95,327		132,424		174,348		189,161		214,460
2019														75,698		115,879		140,058		188,010
2020																39,844		91,963		144,064
2021																		22,729		52,082
2022																				10,582
																		Total	$	1,497,543
								All outstanding liabilities before 2013, net of reinsurance												5,240
				Liabilities for claims and claim adjustment expenses, net of reinsurance															$	357,379

The reconciliation of the net incurred and paid development tables to the liability for unpaid losses and LAE in our consolidated balance sheets is as follows (in thousands):


	2022		2021
Net outstanding liabilities for losses and LAE

Commercial Accounts	$	66,708	$	60,511
Aviation		3,916		3,276
Personal		21,848		17,393
Runoff and Discontinued		357,379		336,877
Liabilities for unpaid losses and allocated loss adjustment expenses, net of reinsurance		449,851		418,057

Reinsurance recoverable on unpaid losses and LAE
Commercial Accounts		35,585		27,464
Aviation		14,346		13,385
Personal		624		1,707
Runoff and Discontinued		370,139		345,359
Total reinsurance recoverable on unpaid losses and LAE		420,694		387,915

Unallocated loss adjustment expenses
Commercial Accounts		1,955		2,448
Aviation		27		99
Personal		1,885		1,625
Runoff and Discontinued		6,457		6,537
Total unallocated loss adjustment expenses		10,324		10,709
Total reserves for unpaid losses and loss adjustment expenses	$	880,869	$	816,681

Claims Duration

The following table provides supplementary unaudited information about the annual percentage payout of incurred losses and ALAE, net of reinsurance, as of December 31, 2022:


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (1)
	Unaudited
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
Commercial Accounts	43.6	%	25.5	%	10.5	%	9.1	%	4.9	%	2.6	%	1.9	%	1.0	%	0.7	%	0.2	%
Aviation	64.2	%	21.6	%	5.2	%	4.7	%	3.0	%	1.0	%	0.2	%	0.1	%	—	%	—	%
Personal	60.6	%	27.2	%	7.5	%	3.6	%	0.8	%	0.2	%	0.1	%	—	%	—	%	—	%
Runoff and Discontinued	26.9	%	22.3	%	20.9	%	14.2	%	8.5	%	3.4	%	1.7	%	1.1	%	0.6	%	0.4	%

(1)

The average annual percentage payout is calculated from a paid losses and ALAE development pattern based on an actuarial analysis of the paid losses and ALAE movements by accident year for each disaggregation category. The paid losses and ALAE development pattern provides the expected percentage of ultimate losses and ALAE to be paid in each year. The pattern considers all accident years included in the claims development tables.