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Non-life and Life and Health Reserves
 12 Months Ended
Dec. 31, 2021
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]  
Non-life and Life and Health Reserves Non-life and Life and Health Reserves
(a) Non-life reserves
Non-life reserves are categorized into three types of reserves: case reserves, ACRs and IBNR reserves. Case reserves represent unpaid losses reported by the Company’s cedants and recorded by the Company. ACRs are established for particular circumstances where, on the basis of individual loss reports, the Company estimates that the particular loss or collection of losses covered by a treaty may be greater than those advised by the cedant. IBNR reserves represent a provision for claims that have been incurred but not yet reported to the Company, as well as future loss development on losses already reported, in excess of the case reserves and ACRs. See also Note 2(b). The Company’s gross liability for non-life reserves at December 31, 2021 and 2020 was as follows (in thousands of U.S. dollars):
December 31, 2021December 31, 2020
Case reserves$4,881,892 $4,646,633 
ACRs140,464 171,381 
IBNR reserves7,025,436 6,577,307 
Non-life reserves$12,047,792 $11,395,321 
The reconciliation of the beginning and ending gross and net liability for non-life reserves for the years ended December 31, 2021, 2020 and 2019 was as follows (in thousands of U.S. dollars): 
202120202019
Gross liability at beginning of year$11,395,321 $10,363,383 $9,895,376 
Reinsurance recoverable at beginning of year782,330 754,795 850,946 
Net liability at beginning of year10,612,991 9,608,588 9,044,430 
Net incurred losses related to: (1)
Current year3,637,671 3,945,248 3,716,988 
Prior years(194,426)71,456 (56,848)
3,443,245 4,016,704 3,660,140 
Net paid losses related to:
Current year(437,938)(459,718)(439,285)
Prior years(2,535,057)(2,772,886)(2,651,385)
(2,972,995)(3,232,604)(3,090,670)
Retroactive reinsurance recoverable(357,864)— (81,013)
Effects of foreign exchange rate changes and other(210,251)220,303 75,701 
Net liability at end of year$10,515,126 $10,612,991 $9,608,588 
Reinsurance recoverable at end of year1,532,666 782,330 754,795 
Gross liability at end of year$12,047,792 $11,395,321 $10,363,383 
(1) Net incurred losses include favorable loss development of $3 million during the year ended December 31, 2019, which are allocated to Corporate and Other as disclosed in Note 18. Non-life reserves allocated to Corporate and Other totaled $6 million at December 31, 2019. There were no incurred losses or non-life reserves allocated to Corporate and Other during 2021 or 2020.
Prior Years' Reserve Development
For the year ended December 31, 2021, the Company reported net favorable loss development for prior accident years resulting from favorable loss emergence in both the P&C and Specialty segments. The favorable loss emergence within the Specialty segment was across multiple accident years, predominantly from financial risks lines. The favorable loss emergence within the P&C segment was primarily from a refinement of loss estimates for certain large catastrophic events from accident years 2017 - 2019.
For the year ended December 31, 2020, the Company reported net unfavorable loss development for prior accident years resulting from adverse loss emergence in the Specialty segment, which was partially offset by favorable loss emergence in the P&C segment. The adverse loss emergence within the Specialty segment was across multiple accident years, predominantly from property, engineering, multiline and aviation business. The favorable loss emergence within the P&C segment was primarily from accident years 2015 and prior, mainly driven by the European casualty, motor and property business, which was partially offset by adverse loss emergence in the U.S. and Asia property business.
For the year ended December 31, 2019, the Company reported net favorable loss development for prior accident years resulting from favorable loss emergence in the P&C segment, which was partially offset by adverse loss emergence for the Specialty segment. The favorable loss emergence within the P&C segment was primarily from accident years 2014 and prior, mainly driven by the European casualty and motor business, which was partially offset by adverse loss emergence in the U.S. casualty business. The adverse loss emergence within the Specialty segment was across multiple accident years, predominantly from the engineering, aviation and multiline business.
Retroactive Reinsurance Recoverable
During the second quarter of 2021, the Company entered into a loss portfolio transfer and adverse development cover agreement related to prior underwriting years on the Company's U.S. casualty and auto business within the P&C segment. Premium paid for the loss portfolio transfer and adverse development cover agreement, resulted in a cash transfer for the premium at inception of the agreement, and a reinsurance recoverable of $358 million at December 31, 2021. At December 31, 2021 and as a result of adverse prior years reserve development ceded under this agreement, a deferred gain of $20 million was recorded in Accounts payable, accrued expense and other in the Consolidated Balance Sheet. This transaction is presented retrospectively in the net loss and loss expenses incurred development table for the Casualty business in Section (c) below. Reinsurance recoveries under this transaction are attributed to calendar year and accident year based on the underlying distribution of losses subject to the agreement.
In the fourth quarter of 2019, the Company entered into a loss portfolio transfer agreement transferring 100% of liabilities, including profit commissions, related to its wholesale managing general agent portfolio. As a result of the transaction, the Company recorded a reinsurance recoverable of $81 million and a related deferred gain of $14 million. In the fourth quarter of 2020, the Company completed a business transfer to extinguish the remaining $70 million of non-life reserves and derecognized the $70 million of related reinsurance recoverables. As a result, during 2020, the $14 million deferred gain was recognized within Losses and loss expenses in the Consolidated Statement of Operations. At settlement, $64 million of invested assets were transferred, and there was a corresponding decrease in Other reinsurance balances payable.
Asbestos and Environmental Claims
The Company’s net non-life reserves at December 31, 2021 and 2020 included $44 million and $43 million, respectively, related to asbestos and environmental claims. The gross liability for such claims at December 31, 2021 and 2020 was $52 million and $50 million, respectively.
Ultimate loss estimates for such claims cannot be estimated using traditional reserving techniques and there are significant uncertainties in estimating the Company’s potential losses for these claims. In view of the legal and tort environment that affect the development of such claims, the uncertainties inherent in estimating asbestos and environmental claims are not likely to be resolved in the near future. There can be no assurance that the reserves established by the Company will not be adversely affected by development of other latent exposures, and further, there can be no assurance that the reserves established by the Company will be adequate. The Company does, however, actively evaluate potential exposure to asbestos and environmental claims and establishes additional reserves as appropriate. The Company believes that it has made a reasonable provision for these exposures and is unaware of any specific issues that would materially affect its unpaid losses and loss expense reserves related to this exposure.
Non-life reserving methods
The reserving methods commonly employed by the Company are summarized as follows:
Chain Ladder (CL) Development Methods (Reported or Paid)
These methods use the underlying assumption that losses reported (paid) for each underwriting year at a particular development stage follow a stable pattern. The CL development method assumes that on average, every underwriting year will display the same percentage of ultimate liabilities reported by the Company’s cedants at 24 months after the inception of the underwriting year. The percentages reported (paid) are established for each development stage after examining historical averages from the loss development data. These are sometimes supplemented by external benchmark information. Ultimate liabilities are estimated by multiplying the actual reported (paid) losses by the reciprocal of the assumed reported (paid) percentage. Reserves are then calculated by subtracting paid claims from the estimated ultimate liabilities.
Expected Loss Ratio (ELR) Method
This method estimates ultimate losses for an underwriting year by applying an estimated loss ratio to the earned premium for that underwriting year. Although the method is insensitive to actual reported or paid losses, it can often be useful at the early stages of development when very few losses have been reported or paid, and the principal sources of information available to the Company consist of information obtained during pricing and qualitative information supplied by the cedant. However, the lack of sensitivity to reported or paid losses means that the method is usually inappropriate at later stages of development.
Bornhuetter-Ferguson (B-F) Methods (Reported or Paid)
These methods aim to address the variability at early stages of development and incorporates external information such as pricing. The B-F methods are more sensitive to reported and paid losses than the ELR method, and can be seen as a blend of the ELR and CL development methods. Unreported (unpaid) claims are calculated using an expected reporting (payment) pattern and an externally determined estimate of ultimate liabilities (usually determined by multiplying an a priori loss ratio with estimates of premium volume). The accuracy of the a priori loss ratio is a critical assumption in this method. Usually a priori loss ratios are initially determined on the basis of pricing information, but may also be adjusted to reflect other information that subsequently emerges about underlying loss experience.
Loss Event Specific Method
The ultimate losses estimated under this method are derived from estimates of specific events based on reported claims, client and broker discussions, review of potential exposures, market loss estimates, modeled analysis and other event specific criteria.
Method Weights
In determining the loss reserves, the Company often relies on a blend of the results from two or more methods (e.g., weighted averages). The judgment as to which of the above method(s) is most appropriate for a particular underwriting year and reserving cell could change over time as new information emerges regarding underlying loss activity and other data issues. Furthermore, as each line is typically composed of several reserving cells, it is likely that the reserves for the line will be dependent on several reserving methods. This is because reserves for a line are the result of aggregating the reserves for each constituent reserving cell and that a different method could be selected for each reserving cell.
The principal reserving methods used for each of the Specialty segment and P&C segment were ELR, Reported/Paid B-F, and Reported/Paid CL, with the exception of catastrophe risks within the P&C segment where the principal reserving methods used were ELR based on exposure analysis and loss event specific methods.
(b) Life and Health Reserves
The reconciliation of the beginning and ending gross and net liability for life and health reserves for the years ended December 31, 2021, 2020 and 2019 was as follows (in thousands of U.S. dollars):
 202120202019
Gross liability at beginning of period$2,704,229 $2,417,044 $2,198,080 
Reinsurance recoverable at beginning of period35,662 16,183 11,829 
Net liability at beginning of period$2,668,567 $2,400,861 $2,186,251 
Net incurred losses (1)
1,440,739 1,318,196 1,263,016 
Net losses paid(1,413,316)(1,230,383)(1,071,487)
Effects of foreign exchange rate changes and other(78,904)179,893 23,081 
Net liability at end of period$2,617,086 $2,668,567 $2,400,861 
Reinsurance recoverable at end of period21,000 35,662 16,183 
Gross liability at end of period$2,638,086 $2,704,229 $2,417,044 
(1)During 2021 and 2020, certain life and health treaties were recaptured, resulting in total gains upon recapture of $15 million and $28 million respectively, recorded as a reduction to net incurred losses.
Net incurred losses includes favorable prior years' reserve development of $5 million for the year ended December 31, 2021 and unfavorable prior years' reserve development of $52 million during the year ended December 31, 2020, which was driven by the Company's disability business.
The Company used interest rate assumptions to estimate its liabilities for policy benefits for life and annuity contracts which ranged from 0% to 11% at December 31, 2021, 2020 and 2019.
Life and health reserving methods
The reserving methods commonly employed by the Company are summarized as follows:
Mortality
The reserves for the short-term mortality/morbidity business consist of case reserves calculated at the treaty level based upon cedant information. IBNR is calculated at the reserving segment level using either the ELR method or CL development method described above for Non-life business.
The reserves for the traditional and limited payment long-duration contracts are established based upon accepted actuarial valuation methods which require us to make certain assumptions regarding future claims and policy benefits and includes a provision for adverse deviation. The provision for adverse deviation contemplates reasonable deviations from the best estimate assumptions for the key risk elements relevant to the product being evaluated, including mortality, disability, critical illness, expenses, and discount rates. The assumptions are locked in at contract inception and are subject to annual loss recognition testing (LRT). LRT occurs at the product group level, based on the manner of acquiring, servicing and measuring profitability of the reinsurance contracts. The LRT framework incorporates deferred acquisition cost (DAC) recoverability testing and involves determining an LRT reserve by re-measuring the policy benefit liabilities using current best estimate actuarial assumptions and current discount rates without any provisions for adverse deviation. If the aggregate LRT reserve is higher than the carrying amount of future policy benefit liabilities, net of DAC and VOBA, for a particular product grouping then a loss recognition event occurs. The DAC and VOBA asset balances for the given product grouping are first reduced, and if the balances are fully written off, the reserves will be increased, such that the current best estimate assumptions become the new locked-in basis.
The reserves for the guaranteed minimum death benefit (GMDB) reinsurance business are established similar to provisions for universal life contracts. Key actuarial assumptions for this business are mortality, lapses, interest rates, expected returns on cash and bonds and stock market performance. For the latter parameter, a stochastic option pricing approach is used and the benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. The assumptions of investment performance and volatility are consistent with expected future experience of the respective underlying funds available for policyholder investment options. Recorded reserves for GMDB reflect management’s best estimate based upon actuarial indications.
Longevity
Reserves for the annuity portfolio of reinsurance contracts within the longevity book are established using the reserving methodology discussed above for long-term traditional mortality.
(c) Losses and Loss Expenses
Losses and loss expenses in the Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019 were comprised as follows (in thousands of U.S. dollars): 
202120202019
Non-life (1)
$3,443,245 $4,016,704 $3,660,140 
Life and Health1,440,739 1,318,196 1,263,016 
Losses and loss expenses$4,883,984 $5,334,900 $4,923,156 
(1) Net incurred losses include favorable loss development of $3 million during the year ended December 31, 2019, which are allocated to Corporate and Other as disclosed in Note 18.    
Non-life net incurred and paid losses and loss expense development
The net incurred and paid losses and loss expenses development by accident year for each of the years ended December 31, 2012 through 2021, and the total of IBNR plus expected development on reported claims included within the net incurred claims amounts, as at each of the years ended December 31, 2012 through 2021, are presented in the tables below (in thousands of U.S. dollars).
The information presented below for incurred and paid claims development for each of the years ended December 31, 2012 through 2020 and the average annual percentage payout of incurred claims by age, net of reinsurance, is presented as supplementary information and is unaudited. The tables below reflect losses incurred and paid losses translated to U.S. dollars at the exchange rate as of the balance sheet date whereas the Losses and loss expenses in the Consolidated Statement of Operations reflect losses incurred at the average exchange rate for the period.
NET INCURRED LOSSES AND LOSS EXPENSES DEVELOPMENT TABLE - NON-LIFE
For the year ended December 31,December 31, 2021
Accident year2012201320142015201620172018201920202021Total of IBNR plus expected development on reported claims
2012$2,342,553 $2,627,452 $2,371,984 $2,248,510 $2,495,148 $2,394,396 $2,243,436 $2,209,950 $2,197,815 $2,181,218 $10,086 
20132,506,489 2,700,371 2,487,494 2,183,344 2,302,089 2,393,344 2,387,407 2,361,827 2,345,255 46,041 
20142,416,677 2,596,191 2,478,039 2,467,234 2,477,572 2,434,886 2,400,662 2,385,988 65,254 
20152,355,703 2,557,213 2,494,735 2,522,169 2,495,354 2,449,975 2,429,432 83,536 
20162,398,444 2,597,779 2,570,484 2,544,389 2,522,270 2,537,312 167,323 
20172,499,161 2,871,000 2,811,676 2,772,119 2,788,118 235,938 
20182,548,563 3,093,669 3,120,388 3,130,397 333,906 
20192,848,949 3,637,558 3,707,336 773,002 
20204,051,824 3,867,443 1,728,949 
20212,838,039 2,520,673 
Total$28,210,538 $5,964,708 
NET PAID LOSSES AND LOSS EXPENSES DEVELOPMENT TABLE - NON-LIFE
For the year ended December 31,
Accident year2012201320142015201620172018201920202021
2012$294,313 $973,857 $1,338,878 $1,497,677 $1,593,864 $1,705,320 $1,754,704 $1,805,081 $1,825,434 $1,840,284 
2013287,566 1,275,211 1,623,541 1,825,345 1,961,269 2,055,408 2,123,294 2,161,355 2,188,318 
2014338,712 1,286,854 1,596,445 1,817,505 1,957,235 2,060,333 2,140,845 2,189,661 
2015335,368 1,191,883 1,603,381 1,842,842 2,004,838 2,114,625 2,191,493 
2016338,124 1,312,013 1,687,477 1,972,139 2,112,088 2,206,804 
2017406,218 1,447,213 1,853,527 2,148,343 2,276,982 
2018278,953 1,350,321 1,933,461 2,253,397 
2019445,090 1,574,942 2,154,188 
2020455,948 1,446,282 
2021412,023 
Total$19,159,432 
Net reserves for accident years and exposures included in the triangles$9,051,106 
All outstanding liabilities before accident year 2012, net of reinsurance1,102,911 
Total outstanding liabilities for unpaid claims$10,154,017 
AVERAGE ANNUAL PERCENTAGE PAYOUT OF INCURRED CLAIMS BY AGE, NET OF REINSURANCE - NON-LIFE
Years12345678910
Non-life13%34%16%10%5%4%3%2%1%1%
NET INCURRED LOSSES AND LOSS EXPENSES DEVELOPMENT TABLE - PROPERTY
For the year ended December 31,December 31, 2021
Accident year2012201320142015201620172018201920202021Total of IBNR plus expected development on reported claims
2012$691,488 $658,283 $551,817 $533,256 $517,687 $518,564 $513,621 $502,869 $502,369 $494,145 $1,959 
2013639,026 586,694 546,588 531,833 525,745 517,468 515,376 514,873 512,546 842 
2014465,513 489,871 465,774 461,842 456,086 454,046 451,662 451,833 552 
2015550,216 581,923 557,092 548,666 545,180 541,160 546,732 3,810 
2016684,976 706,630 671,835 651,823 648,266 650,208 13,249 
2017973,654 1,039,936 973,452 945,066 937,829 20,219 
2018826,216 861,674 844,596 820,472 28,467 
2019741,448 849,547 831,461 47,475 
20201,212,387 1,163,924 272,042 
2021809,517 572,794 
Total$7,218,667 $961,409 
NET PAID LOSSES AND LOSS EXPENSES DEVELOPMENT TABLE - PROPERTY
For the year ended December 31,
Accident year2012201320142015201620172018201920202021
2012$99,084 $345,731 $438,322 $472,761 $484,780 $494,267 $498,829 $505,649 $505,895 $508,477 
201390,889 331,515 436,234 471,381 489,287 492,774 497,604 499,794 499,576 
201497,352 319,121 393,013 421,164 431,055 436,472 441,065 443,167 
2015101,501 346,869 450,016 483,907 496,634 503,895 513,203 
2016148,109 469,162 567,654 609,863 626,616 637,028 
2017224,987 714,541 829,490 880,073 889,729 
201880,881 530,024 669,153 710,866 
201980,621 458,182 589,100 
2020111,470 537,865 
2021110,592 
Total$5,439,603 
Net reserves for accident years and exposures included in the triangles$1,779,064 
All outstanding liabilities before accident year 2012, net of reinsurance146,308 
Total outstanding liabilities for unpaid claims$1,925,372 
AVERAGE ANNUAL PERCENTAGE PAYOUT OF INCURRED CLAIMS BY AGE, NET OF REINSURANCE - PROPERTY
Years12345678910
Property 16%47%16%6%2%1%1%1%—%1%
NET INCURRED LOSSES AND LOSS EXPENSES DEVELOPMENT TABLE - CASUALTY
For the year ended December 31,December 31, 2021
Accident year2012201320142015201620172018201920202021Total of IBNR plus expected development on reported claims
2012$706,442 $856,769 $769,092 $710,862 $698,668 $702,358 $696,110 $682,054 $677,161 $670,767 $— 
2013748,691 880,676 784,615 763,208 761,477 757,032 747,422 728,645 724,170 39,469 
2014794,186 879,144 850,550 851,144 869,438 832,104 807,750 793,629 46,003 
2015684,702 808,679 788,933 830,644 794,732 775,384 752,036 64,297 
2016646,045 769,492 785,448 766,754 755,605 769,283 118,811 
2017594,988 748,588 738,743 729,083 736,701 154,030 
2018750,120 951,393 955,784 965,966 203,571 
2019949,925 1,245,536 1,301,249 458,841 
20201,301,042 1,230,847 896,066 
2021926,608 1,304,107 
Total$8,871,256 $3,285,195 
NET PAID LOSSES AND LOSS EXPENSES DEVELOPMENT TABLE - CASUALTY
For the year ended December 31,
Accident year2012201320142015201620172018201920202021
2012$58,130 $136,891 $205,359 $280,428 $333,456 $385,934 $416,086 $440,686 $455,860 $469,540 
201356,952 159,112 263,808 345,291 419,488 481,381 524,709 550,444 576,650 
201474,189 196,301 300,377 398,606 486,503 556,159 619,160 657,810 
201578,386 185,508 299,396 393,997 497,220 570,219 620,841 
201629,216 144,840 252,780 383,788 471,880 539,688 
201760,390 165,196 259,310 354,594 435,692 
201860,039 206,791 335,624 446,609 
201997,723 270,727 423,814 
202099,909 269,206 
202174,019 
Total$4,513,869 
Net reserves for accident years and exposures included in the triangles$4,357,387 
All outstanding liabilities before accident year 2012, net of reinsurance908,806 
Total outstanding liabilities for unpaid claims$5,266,193 
AVERAGE ANNUAL PERCENTAGE PAYOUT OF INCURRED CLAIMS BY AGE, NET OF REINSURANCE - CASUALTY
Years12345678910
Casualty8%14%13%13%11%9%6%4%3%2%
NET INCURRED LOSSES AND LOSS EXPENSES DEVELOPMENT TABLE - SPECIALTY
For the year ended December 31,December 31, 2021
Accident year2012201320142015201620172018201920202021Total of IBNR plus expected development on reported claims
2012$944,623 $1,112,400 $1,051,075 $1,004,392 $1,278,793 $1,173,474 $1,033,705 $1,025,027 $1,018,285 $1,016,306 $8,127 
20131,118,772 1,233,001 1,156,291 888,303 1,014,867 1,118,844 1,124,609 1,118,309 1,108,5395,730 
20141,156,978 1,227,176 1,161,715 1,154,248 1,152,048 1,148,736 1,141,250 1,140,52618,699 
20151,120,785 1,166,611 1,148,710 1,142,859 1,155,442 1,133,431 1,130,66415,429 
20161,067,423 1,121,657 1,113,201 1,125,812 1,118,399 1,117,82135,263 
2017930,519 1,082,476 1,099,481 1,097,970 1,113,58861,689 
2018972,227 1,280,602 1,320,008 1,343,959101,868 
20191,157,576 1,542,475 1,574,626266,686 
20201,538,395 1,472,672560,841 
20211,101,914643,772 
Total$12,120,615 $1,718,104 
NET PAID LOSSES AND LOSS EXPENSES DEVELOPMENT TABLE - SPECIALTY
For the year ended December 31,
Accident year2012201320142015201620172018201920202021
2012$137,099 $491,235 $695,197 $744,488 $775,628 $825,119 $839,789 $858,746 $863,679 $862,267 
2013139,725 784,584 923,499 1,008,673 1,052,494 1,081,253 1,100,981 1,111,117 1,112,092 
2014167,171 771,432 903,055 997,735 1,039,677 1,067,702 1,080,620 1,088,684 
2015155,481 659,506 853,969 964,938 1,010,984 1,040,511 1,057,449 
2016160,799 698,011 867,043 978,488 1,013,592 1,030,088 
2017120,841 567,476 764,727 913,676 951,561 
2018138,033 613,506 928,684 1,095,922 
2019266,746 846,033 1,141,274 
2020244,569 639,211 
2021227,412 
Total$9,205,960 
Net reserves for accident years and exposures included in the triangles$2,914,655 
All outstanding liabilities before accident year 2012, net of reinsurance47,797 
Total outstanding liabilities for unpaid claims$2,962,452 
AVERAGE ANNUAL PERCENTAGE PAYOUT OF INCURRED CLAIMS BY AGE, NET OF REINSURANCE - SPECIALTY
Years12345678910
Specialty15%41%17%10%4%3%1%1%—%—%
The Company is predominantly a reinsurer of primary insurers and does not have access to claim frequency information held by our cedants due to the majority of the Company’s business being written on a proportional basis. As such, the Company considers it impracticable to disclose information on the frequency of claims.
The reconciliation of the net incurred and paid claims development information above to the Non-life reserves in the Consolidated Balance Sheet at December 31, 2021 was as follows (in thousands of U.S. dollars):
December 31, 2021
Total outstanding liability for unpaid claims
Property$1,925,372 
Casualty5,266,193 
Specialty2,962,452 
Total outstanding liabilities for unpaid claims$10,154,017 
Unallocated loss expenses$187,139 
U.S. health net reserves (1)
170,617 
Other3,353 
Total other liabilities$361,109 
Net liability at end of year$10,515,126 
Reinsurance recoverable on unpaid claims
Property$708,008 
Casualty519,597 
Specialty305,061 
Reinsurance recoverable at end of year$1,532,666 
Gross liability at end of year$12,047,792 
(1) U.S. health business is not meaningful to include in the development tables as the estimated average duration of the health reserves is less than one year and substantially all claims are expected to be paid within two years, based on historical payout patterns.