6. HISTORICAL LOSS AND LAE DEVELOPMENT

The following table is a reconciliation of our unpaid losses and settlement expenses (LAE) for the years 2017, 2016 and 2015:


(in thousands)	2017		2016		2015
Unpaid losses and LAE at beginning of year:
Gross	$	1,139,337	$	1,103,785	$	1,121,040
Ceded		(288,224)		(297,844)		(335,106)
Net	$	851,113	$	805,941	$	785,934

Increase (decrease) in incurred losses and LAE:
Current accident year	$	440,452	$	391,772	$	364,472
Prior accident years		(38,868)		(41,994)		(65,427)
Total incurred	$	401,584	$	349,778	$	299,045

Loss and LAE payments for claims incurred:
Current accident year	$	(73,392)	$	(70,540)	$	(71,853)
Prior accident year		(209,793)		(234,066)		(207,185)
Total paid	$	(283,185)	$	(304,606)	$	(279,038)

Net unpaid losses and LAE at end of year	$	969,512	$	851,113	$	805,941

Unpaid losses and LAE at end of year:
Gross	$	1,271,503	$	1,139,337	$	1,103,785
Ceded		(301,991)		(288,224)		(297,844)
Net	$	969,512	$	851,113	$	805,941

The differences from our initial reserve estimates emerged as changes in our ultimate loss expectations as we performed our reserve analysis process. The recognition of the changes in initial reserve estimates occurred over time as claims were reported, initial case reserves were established, initial reserves were reviewed in light of additional information and ultimate payments were made on the collective set of claims incurred as of that evaluation date. The new information on the ultimate settlement value of claims is continually updated until all claims in a defined set are settled. As a small specialty insurer with a diversified product portfolio, our experience will ordinarily exhibit fluctuations from period to period. While we attempt to identify and react to systematic changes in the loss environment, we also must consider the volume of experience directly available to us and interpret any particular period’s indications with a realistic technical understanding of the reliability of those observations.

The following is information about incurred and paid loss development as of December 31, 2017, net of reinsurance, as well as cumulative claim frequency, the total of IBNR liabilities included within the net incurred loss amounts and average historical claims duration as of December 31, 2017. The loss information has been disaggregated so that only losses that are expected to develop in a similar manner are grouped together. This has resulted in the presentation of loss information for our property and surety segments at the segment level, while information for our casualty segment has been separated in four groupings: primary occurrence, excess occurrence, claims made and transportation. Primary occurrence includes select lines within the professional services product along with general liability, small commercial and other casualty products. Excess occurrence encompasses commercial and personal umbrella, while claims made includes select lines within the professional services product and medical professional liability and executive products. Reported claim counts represent claim events on a specified policy rather than individual claimants and includes claims that did not or are not expected to result in an incurred loss. The information about incurred and paid claims development for the years ended December 31, 2008 to 2016 is presented as unaudited required supplementary information.


Casualty - Primary Occurrence
(in thousands, except number of claims)
	Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance																						As of December 31, 2017
	For the Years Ended December 31,																							Cumulative
																								Number of
																								Reported
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017			Total IBNR	Claims
2008	$	96,829	$	100,454	$	91,734	$	83,367	$	78,218	$	74,174	$	73,859	$	73,696	$	74,837	$	74,672		$	1,505	5,423
2009				85,476		119,957		99,765		91,441		86,888		82,651		81,138		80,518		80,350			2,068	5,705
2010						87,875		96,582		93,589		88,820		85,034		80,289		78,685		78,991			2,216	6,107
2011								91,139		98,428		94,145		89,622		86,342		83,181		82,193			3,413	5,839
2012										91,807		78,406		65,893		61,072		59,028		59,488			4,100	5,148
2013												80,823		67,297		62,882		60,329		60,162			9,631	4,267
2014														88,092		79,497		71,592		67,237			17,335	4,190
2015																94,835		84,975		83,579			33,109	4,201
2016																		101,950		96,753			54,413	3,920
2017																				119,741			93,852	3,496
																		Total	$	803,166

	Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance
								For the Years Ended December 31,
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017
2008	$	3,022	$	9,399	$	20,539	$	33,605	$	48,108	$	56,288	$	62,511	$	64,814	$	67,572	$	69,605
2009				1,972		9,233		24,115		43,702		58,460		65,913		70,220		74,920		75,948
2010						2,587		13,025		29,312		44,051		55,992		61,929		66,399		69,514
2011								5,924		17,124		32,978		48,822		60,769		67,358		71,413
2012										5,897		14,539		23,889		33,822		43,276		47,970
2013												6,334		13,021		22,366		34,786		40,609
2014														11,436		18,771		29,545		40,270
2015																10,157		19,902		33,020
2016																		10,142		24,186
2017																				13,154
	* Presented as unaudited required supplementary information.																	Total	$	485,689
										All outstanding liabilities before 2008, net of reinsurance										7,705
								Liabilities for losses and loss adjustment expenses, net of reinsurance											$	325,182

	Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
Years		1		2		3		4		5		6		7		8		9		10
		8.8	%	11.9	%	17.0	%	19.0	%	15.5	%	8.7	%	6.1	%	4.3	%	2.5	%	2.7	%


Casualty - Excess Occurrence
(in thousands, except number of claims)
	Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance																						As of December 31, 2017
	For the Years Ended December 31,																							Cumulative
																								Number of
																								Reported
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017			Total IBNR	Claims
2008	$	35,209	$	22,666	$	17,347	$	14,472	$	13,869	$	13,862	$	13,816	$	13,695	$	13,487	$	13,671		$	308	638
2009				30,267		19,719		14,981		12,893		12,966		12,459		12,601		11,982		12,055			268	566
2010						29,314		24,244		22,111		18,932		20,044		22,044		21,018		20,530			381	499
2011								26,272		17,148		17,443		18,641		19,160		20,959		21,295			964	578
2012										29,042		21,558		21,021		21,885		21,231		22,433			1,417	837
2013												39,984		34,824		26,857		25,425		25,599			4,654	925
2014														50,889		39,095		35,119		32,274			9,801	844
2015																53,672		50,857		47,392			22,168	608
2016																		56,341		49,385			39,381	486
2017																				62,863			58,246	287
																		Total	$	307,497

	Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance
								For the Years Ended December 31,
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017
2008	$	115	$	3,224	$	8,212	$	11,231	$	11,755	$	11,938	$	12,163	$	13,166	$	13,183	$	13,281
2009				956		3,947		6,585		9,460		11,001		10,808		11,776		11,780		11,786
2010						7		6,002		10,705		13,282		15,512		17,302		19,175		19,256
2011								2,169		5,145		6,981		8,793		10,772		16,494		17,769
2012										1,315		3,573		8,843		15,380		16,879		17,747
2013												1,060		5,701		10,967		14,545		16,967
2014														1,899		4,006		11,002		18,852
2015																2,048		10,127		19,571
2016																		1,068		3,396
2017																				17
	* Presented as unaudited required supplementary information.																	Total	$	138,642
										All outstanding liabilities before 2008, net of reinsurance										20,108
								Liabilities for losses and loss adjustment expenses, net of reinsurance											$	188,963

	Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
Years		1		2		3		4		5		6		7		8		9		10
		4.1	%	16.4	%	21.9	%	19.2	%	8.8	%	7.8	%	6.2	%	2.6	%	0.1	%	0.7	%


Casualty - Claims Made
(in thousands, except number of claims)
	Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance																						As of December 31, 2017
	For the Years Ended December 31,																							Cumulative
																								Number of
																								Reported
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017			Total IBNR	Claims
2008	$	11,083	$	12,754	$	3,915	$	3,043	$	7,811	$	6,878	$	5,568	$	4,848	$	4,584	$	4,528		$	103	300
2009				12,918		13,703		9,687		13,562		11,710		13,117		12,810		12,053		11,827			302	383
2010						13,690		15,556		9,776		10,429		11,689		10,581		9,175		9,024			490	502
2011								17,416		17,454		12,260		10,619		8,510		7,720		7,852			693	682
2012										27,576		26,144		20,727		19,590		18,022		17,612			2,156	803
2013												40,095		41,488		44,054		40,288		38,473			5,773	1,042
2014														53,929		55,386		58,152		55,350			13,240	1,302
2015																55,006		47,831		42,206			19,844	1,332
2016																		59,992		67,760			30,727	1,481
2017																				60,572			46,522	1,534
																		Total	$	315,204

	Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance
								For the Years Ended December 31,
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017
2008	$	9	$	227	$	703	$	705	$	707	$	712	$	4,380	$	4,385	$	4,424	$	4,424
2009				113		442		773		3,413		5,176		10,678		11,217		11,398		11,475
2010						259		1,548		2,308		3,626		5,733		5,749		6,956		8,485
2011								330		1,949		4,508		5,947		5,637		6,209		6,835
2012										433		4,086		6,898		9,218		10,968		14,378
2013												792		7,073		18,425		26,121		29,678
2014														1,705		9,775		27,923		35,755
2015																2,215		10,738		16,774
2016																		2,060		14,558
2017																				2,455
	* Presented as unaudited required supplementary information.																	Total	$	144,817
										All outstanding liabilities before 2008, net of reinsurance										854
								Liabilities for losses and loss adjustment expenses, net of reinsurance											$	171,241

	Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
Years		1		2		3		4		5		6		7		8		9		10
		2.8	%	14.8	%	18.4	%	14.7	%	8.9	%	14.7	%	26.7	%	6.2	%	0.8	%	0.0	%


Casualty - Transportation
(in thousands, except number of claims)
	Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance																						As of December 31, 2017
	For the Years Ended December 31,																							Cumulative
																								Number of
																								Reported
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017			Total IBNR	Claims
2008	$	32,071	$	27,752	$	25,520	$	23,497	$	24,255	$	24,110	$	23,764	$	23,673	$	23,690	$	23,672		$	23	2,834
2009				26,349		23,366		23,174		22,929		22,613		22,340		21,958		21,969		21,926			36	2,644
2010						27,239		23,390		24,912		25,593		23,981		23,625		23,701		23,786			52	2,842
2011								22,957		23,479		25,747		25,272		25,431		25,376		25,167			71	2,469
2012										21,452		22,203		22,924		23,511		23,689		23,620			129	2,282
2013												32,742		32,853		32,989		37,673		38,811			702	2,849
2014														38,361		33,015		36,452		38,590			1,698	3,093
2015																38,561		46,258		47,021			6,051	3,167
2016																		50,430		53,519			11,987	3,879
2017																				55,640			17,396	3,361
																		Total	$	351,752

	Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance
								For the Years Ended December 31,
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017
2008	$	6,153	$	10,821	$	14,489	$	18,359	$	21,110	$	23,293	$	23,387	$	23,614	$	23,616	$	23,628
2009				5,035		8,698		14,613		19,933		21,100		21,325		21,640		21,650		21,650
2010						6,296		10,116		15,475		20,045		21,792		23,063		23,488		23,533
2011								5,295		9,485		14,477		19,443		22,375		23,537		23,941
2012										4,466		8,533		12,394		17,318		20,931		22,566
2013												5,306		11,978		19,761		28,220		33,480
2014														7,125		13,933		19,676		27,457
2015																6,984		20,709		29,554
2016																		8,923		18,354
2017																				7,979
	* Presented as unaudited required supplementary information.																	Total	$	232,142
										All outstanding liabilities before 2008, net of reinsurance										94
								Liabilities for losses and loss adjustment expenses, net of reinsurance											$	119,704

	Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
Years		1		2		3		4		5		6		7		8		9		10
		19.3	%	18.7	%	19.4	%	20.3	%	10.8	%	5.4	%	1.3	%	0.4	%	0.0	%	0.1	%


Property
(in thousands, except number of claims)
	Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance																						As of December 31, 2017
	For the Years Ended December 31,																							Cumulative
																								Number of
																								Reported
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017			Total IBNR	Claims
2008	$	75,951	$	79,774	$	78,378	$	78,946	$	75,974	$	76,089	$	75,281	$	75,313	$	75,288	$	75,217		$	20	2,718
2009				59,975		55,821		52,286		49,534		48,969		48,857		48,707		49,267		49,323			58	2,631
2010						63,194		59,145		55,427		53,937		54,153		52,927		52,964		52,952			85	2,850
2011								70,246		66,924		64,976		63,724		62,770		62,570		62,456			300	3,027
2012										85,485		80,155		79,181		77,569		79,175		78,125			335	2,639
2013												63,864		62,090		62,173		62,114		61,914			698	2,995
2014														56,587		49,441		48,801		48,761			534	4,558
2015																59,863		56,103		53,958			1,727	4,070
2016																		62,900		55,594			3,759	3,352
2017																				90,803			24,892	2,609
																		Total	$	629,103

	Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance
								For the Years Ended December 31,
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017
2008	$	31,573	$	59,695	$	66,028	$	69,811	$	71,938	$	73,619	$	74,692	$	74,766	$	74,827	$	74,896
2009				25,464		40,775		43,758		46,004		48,031		48,297		48,329		49,051		49,173
2010						25,274		43,091		47,743		50,055		52,729		52,426		52,719		52,851
2011								27,676		48,756		55,778		59,099		60,272		61,428		61,834
2012										39,074		66,509		72,057		73,705		75,640		76,152
2013												32,208		50,840		57,407		59,259		60,520
2014														30,550		43,380		46,148		46,528
2015																32,184		49,348		50,197
2016																		33,134		46,921
2017																				41,314
	* Presented as unaudited required supplementary information.																	Total	$	560,386
										All outstanding liabilities before 2008, net of reinsurance										150
								Liabilities for losses and loss adjustment expenses, net of reinsurance											$	68,867

	Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
Years		1		2		3		4		5		6		7		8		9		10
		51.5	%	31.6	%	7.4	%	3.6	%	3.1	%	0.9	%	0.7	%	0.6	%	0.2	%	0.1	%


Surety
(in thousands, except number of claims)
	Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance																						As of December 31, 2017
	For the Years Ended December 31,																							Cumulative
																								Number of
																								Reported
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017			Total IBNR	Claims
2008	$	8,055	$	4,045	$	3,469	$	3,267	$	2,832	$	2,850	$	2,877	$	2,856	$	2,939	$	2,818		$	3	2,084
2009				15,474		4,896		4,708		4,246		4,146		4,551		4,288		4,923		5,990			7	1,660
2010						13,961		8,205		6,630		7,076		6,810		7,136		7,645		6,850			32	1,533
2011								13,842		17,832		17,792		17,321		16,766		16,695		16,480			31	1,669
2012										17,114		11,452		8,667		8,180		7,867		7,471			104	1,459
2013												16,080		7,516		6,170		5,399		5,271			108	1,398
2014														16,450		8,106		5,225		4,427			349	1,318
2015																16,958		12,957		11,113			1,724	1,149
2016																		18,928		11,062			3,018	1,167
2017																				16,127			14,938	793
																		Total	$	87,609

	Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance
								For the Years Ended December 31,
AY		2008*		2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016*		2017
2008	$	643	$	2,110	$	2,722	$	2,665	$	2,731	$	2,745	$	2,816	$	2,803	$	2,919	$	2,931
2009				892		1,914		2,382		2,493		3,490		4,336		3,919		3,908		5,978
2010						1,724		3,205		5,702		7,092		7,151		7,285		7,822		7,269
2011								8,160		16,932		17,151		17,403		17,212		17,086		17,086
2012										1,883		6,680		6,726		7,416		7,536		7,406
2013												1,116		2,856		4,701		4,911		5,098
2014														722		4,283		4,166		4,059
2015																3,192		6,719		7,695
2016																		3,087		5,817
2017																				979
	* Presented as unaudited required supplementary information.																	Total	$	64,318
										All outstanding liabilities before 2008, net of reinsurance										84
								Liabilities for losses and loss adjustment expenses, net of reinsurance											$	23,375

	Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
Years		1		2		3		4		5		6		7		8		9		10
		23.8	%	42.0	%	13.6	%	4.6	%	4.0	%	2.8	%	0.8	%	-2.9	%	19.3	%	0.4	%

The following is a reconciliation of the net incurred and paid loss development tables to the liability for unpaid losses and settlement expenses in the consolidated balance sheet:


Reconciliation of the Disclosure of Incurred and Paid Loss Development to the Liability for Unpaid Losses and Settlement Expenses
(in thousands)	December 31, 2017		December 31, 2016
Net outstanding liabilities:
Casualty - Primary Occurrence	$	325,182	$	293,256
Casualty - Excess Occurrence		188,963		163,801
Casualty - Claims Made		171,241		152,031
Casualty - Transportation		119,704		98,604
Property		68,867		47,769
Surety		23,375		24,388
Unallocated loss adjustment expenses		48,844		46,286
Allowance for uncollectible reinsurance balances recoverable on unpaid losses and settlement expenses		10,014		10,699
Other		13,322		14,279
Liabilities for unpaid loss and settlement expenses, net of reinsurance	$	969,512	$	851,113

Reinsurance recoverable on unpaid claims:
Casualty - Primary Occurrence	$	36,158	$	43,662
Casualty - Excess Occurrence		74,400		69,858
Casualty - Claims Made		117,436		113,891
Casualty - Transportation		46,590		41,173
Property		28,613		17,548
Surety		7,079		10,606
Allowance for uncollectible reinsurance balances recoverable on unpaid losses and settlement expenses		(10,014)		(10,699)
Other		1,729		2,185
Total reinsurance balances recoverable on unpaid losses and settlement expenses	$	301,991	$	288,224

Total gross liability for unpaid loss and settlement expenses	$	1,271,503	$	1,139,337

DETERMINATION OF IBNR

Initial carried IBNR reserves are determined through a reserve estimation process. For most casualty and surety products, this process involves the use of an initial loss and allocated loss adjustment expense (ALAE) ratio that is applied to the earned premium for a given period. Payments and case reserves are subtracted from this initial estimate of ultimate loss and ALAE to determine a carried IBNR reserve. For most property products, the IBNR reserves are determined by IBNR percentages applied to premium earned. The percentages are determined based on historical reporting patterns and are updated periodically. No deductions for paid or case reserves are made. Shortly after natural or man-made catastrophes, we review insured locations exposed to the event and model losses based on our own exposures and industry loss estimates of the event. We also consider our knowledge of frequency and severity from early claim reports to determine an appropriate reserve for the catastrophe. Adjustments to the initial loss ratio by product and segment are made where necessary and reflect updated assumptions regarding loss experience, loss trends, price changes and prevailing risk factors.

Actuaries perform a ground-up reserve study of the expected value of the unpaid loss and LAE derived using multiple standard actuarial methodologies on a quarterly basis. Each method produces an estimate of ultimate loss by accident year. We review all of these various estimates and assign weights to each based on the characteristics of the product being reviewed. These estimates are then compared to the carried loss reserves to determine the appropriateness of the current reserve balance. In addition, an emergence analysis is completed quarterly to determine if further adjustments are necessary.

Upon completion of our loss and LAE estimation analysis, a review of the resulting variance between the indicated reserves and the carried reserves takes place. Our actuaries make a recommendation to management in regards to booked reserves that reflect their analytical assessment and view of estimation risk. After discussion of these analyses and all relevant risk factors, the Loss Reserve Committee, a panel of management including the lead reserving actuary, chief executive officer, chief operating officer, chief financial officer and other executives, confirms the appropriateness of the reserve balances.

DEVELOPMENT OF IBNR RESERVES

The following table summarizes our prior accident years’ loss reserve development by segment for 2017, 2016 and 2015:


(FAVORABLE)/UNFAVORABLE RESERVE DEVELOPMENT BY SEGMENT
(in thousands)	2017		2016		2015
Casualty	$	(17,462)	$	(32,401)	$	(45,654)
Property		(12,134)		(4,793)		(11,848)
Surety		(9,272)		(4,800)		(7,925)
Total	$	(38,868)	$	(41,994)	$	(65,427)

A discussion of significant components of reserve development for the three most recent calendar years follows:

2017. We experienced favorable emergence relative to prior years’ reserve estimates in all of our segments during 2017. The casualty segment contributed $17.5 million in favorable development, inclusive of unallocated loss and adjustment expenses (ULAE). Accident years 2014, 2015 and 2016 contributed significantly to the favorable development. This was predominantly caused by favorable frequency and severity trends that continued to be better than our long-term expectations. In addition, we believe this to be the result of our underwriters’ risk selection, which has mostly offset price declines and loss cost inflation. Nearly all of our casualty products contributed to the favorable development. Within the primary occurrence grouping, the general liability product contributed $4.6 million to our favorable development with all coverages contributing to the favorable development in 2017. Small commercial products were the second largest contributor with $3.2 million in favorable development. Within the excess occurrence grouping, personal and commercial umbrella were favorable by $1.1 million and $9.9 million, respectively. Within the claims made grouping, our executive products had favorable contributions of $4.4 million, while medical professional liability was adverse $3.7 million. Transportation was adverse $7.4 million for the year, but posted favorable experience during the last three quarters of the year.

The marine product was the primary driver of the favorable development in the property segment. Marine contributed $6.8 million of the $12.1 million total favorable property development, inclusive of ULAE. Accident years 2015 and 2016 contributed to the marine products’ favorable development. Commercial property was favorable $3.2 million.

The surety segment experienced favorable development of $9.3 million, inclusive of ULAE. The majority of the favorable development was from accident year 2016. Contract and commercial surety products were the main contributors with favorable development of $4.4 million and $3.5 million, respectively. Energy surety had favorable development of $1.5 million and miscellaneous surety had unfavorable development of $0.1 million.

2016. We experienced favorable emergence relative to prior years’ reserve estimates in all of our segments during 2016. The casualty segment contributed $32.4 million in favorable development, inclusive of ULAE, which is excluded from the incurred loss and loss adjustment expense tables above. Accident year 2015 contributed significantly to the favorable development, with accident years 2010 to 2014 also continuing to develop favorably. The favorable development in 2016 was smaller than 2015 but continued to reflect favorable frequency and severity trends. In addition, the risk selection by our underwriters continued to provide better results than estimated in our reserving process. Within the primary occurrence grouping, the general liability product contributed $17.6 million to our favorable development. Small commercial products were favorable by $6.2 million. Within the excess occurrence grouping, commercial umbrella was favorable by $13.8 million which was offset by adverse development in our personal umbrella product of $4.9 million. Within the claims made grouping, executive products contributed $14.7 million in favorable development and miscellaneous professional liability had $0.8 million of favorable development. Transportation experienced unfavorable development of $15.4 million as adverse commercial loss trends resulted in an increase in case reserves for accident years 2013 through 2015.

Marine contributed $2.1 million of the $4.8 million total favorable property development, inclusive of ULAE. Accident years 2013 through 2015 contributed to the marine products’ favorable development. Assumed property contributed $2.5 million of favorable development offsetting the unfavorable development of $0.2 million in other direct property products.

The surety segment experienced favorable development of $4.8 million, inclusive of ULAE. The majority of the favorable development was from accident year 2015, which offset the unfavorable development from accident years 2008 through 2011 and 2014. Commercial and energy surety products were the main contributors with favorable development of $1.7 million and $1.9 million, respectively. Miscellaneous surety had favorable development of $1.1 million and contract surety had favorable development of $0.1 million.

2015. We experienced favorable emergence relative to prior years’ reserve estimates in all of our segments during 2015. Development from the casualty segment totaled $45.7 million, inclusive of ULAE. The largest amounts of favorable development came from accident years 2010 through 2014. We continued to experience emergence that was generally better than previously estimated, but to a lesser degree in 2015 than in the previous year. Frequency and severity trends have been favorable relative to initial estimates and we believe this is largely due to risk selection by our underwriters, which has been effective in offsetting loss cost trends and a competitive pricing environment. Within the primary occurrence grouping, our general liability and small commercial products experienced favorable development of $15.4 million and $6.6 million, respectively. Although the habitational classes within general liability produced adverse development, it was more than offset by favorable development from the construction classes. However, the professional services product, experienced adverse development totaling $3.2 million in 2015. Within the excess occurrence grouping, our commercial umbrella product experienced $10.7 million of favorable development while the casualty runoff business experienced $5.4 million of adverse development, primarily on the 1983 accident year. The claims made and transportation groupings had favorable contributions of $3.9 million and $5.4 million, respectively.

Our marine product was the predominant driver of the favorable development in the property segment, accounting for $9.2 million of the $11.8 million total favorable development for the segment, inclusive of ULAE. The accident years making the largest contributions were 2010 through 2014. The inland marine and cargo coverages were responsible for the majority of the favorable loss experience. Our assumed property products contributed $4.9 million of favorable development with the majority of that coming from loss reductions on previous hurricanes and storms. Development on direct property products business was also favorable overall. Our recreational vehicle product experienced $1.3 million of adverse development, mostly due to auto physical damage coverages.

The surety segment experienced $7.9 million of favorable development, inclusive of ULAE. The majority of the favorable development came from the 2014 accident year, which served to offset the unfavorable development from accident years 2010 and 2013. Commercial, contract and energy surety contributed favorable development of $4.0 million, $2.2 million and $2.0 million, respectively. Miscellaneous surety experienced adverse development totaling $0.3 million.

ENVIRONMENTAL, ASBESTOS AND MASS TORT EXPOSURES

We are subject to environmental site cleanup, asbestos removal and mass tort claims and exposures through our commercial umbrella, general liability and discontinued assumed casualty reinsurance lines of business. The majority of the exposure is in the excess layers of our commercial umbrella and assumed reinsurance books of business.

The following table represents paid and unpaid environmental, asbestos and mass tort claims data (including incurred but not reported losses) as of December 31, 2017, 2016 and 2015:


(in thousands)	2017		2016		2015
Loss and LAE Payments (Cumulative):
Gross	$	132,883	$	130,358	$	119,632
Ceded		(67,507)		(66,644)		(62,463)
Net	$	65,376	$	63,714	$	57,169

Unpaid Losses and LAE at End of Year:
Gross	$	28,042	$	28,815	$	41,062
Ceded		(5,715)		(4,987)		(12,559)
Net	$	22,327	$	23,828	$	28,503

Our environmental, asbestos and mass tort exposure is limited, relative to other insurers, as a result of entering the affected liability lines after the insurance industry had already recognized environmental and asbestos exposure as a problem and adopted appropriate coverage exclusions. The majority of our reserves are associated with products that went into runoff at least two decades ago. Some are for assumed reinsurance, some are for excess liability business and some followed from the acquisition of Underwriters Indemnity Company in 1999.

Calendar year 2017 included an increase in inception-to-date paid losses, offsetting a decrease in unpaid losses. The activity was related to payments on previously reserved claims. In aggregate, inception-to-date incurred losses increased on a gross and net.

While our environmental exposure is limited, the ultimate liability for this exposure is difficult to assess because of the extensive and complicated litigation involved in the settlement of claims and evolving legislation on issues such as joint and several liability, retroactive liability and standards of cleanup. Additionally, we participate primarily in the excess layers of coverage, where accurate estimates of ultimate loss are more difficult to derive than for primary coverage.