XML 156 R12.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Reserve for Losses and Loss Adjustment Expenses
 12 Months Ended
Dec. 31, 2019
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]  
Reserve for losses and loss adjustment expenses Reserve for Losses and Loss Adjustment Expenses

The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Reserve for losses and loss adjustment expenses at beginning of year
$
11,853,297

 
$
11,383,792

 
$
10,200,960

Unpaid losses and loss adjustment expenses recoverable
2,814,291

 
2,464,910

 
2,083,575

Net reserve for losses and loss adjustment expenses at beginning of year
9,039,006

 
8,918,882

 
8,117,385

 
 
 
 
 
 
Net incurred losses and loss adjustment expenses relating to losses occurring in:
 
 
 
 
 
Current year
3,297,037

 
3,162,818

 
3,205,428

Prior years
(163,585
)
 
(272,712
)
 
(237,982
)
Total net incurred losses and loss adjustment expenses
3,133,452

 
2,890,106

 
2,967,446

 
 
 
 
 
 
Net losses and loss adjustment expense reserves of acquired business (1)
209,486

 
—

 
—

 
 
 
 
 
 
Retroactive reinsurance transactions (2)
(225,500
)
 
(420,404
)
 
—

 
 
 
 
 
 
Foreign exchange (gains) losses
36,003

 
(143,414
)
 
186,963

 
 
 
 
 
 
Net paid losses and loss adjustment expenses relating to losses occurring in:
 
 
 
 
 
Current year
(621,202
)
 
(524,048
)
 
(505,424
)
Prior years
(1,762,053
)
 
(1,682,116
)
 
(1,847,488
)
Total net paid losses and loss adjustment expenses
(2,383,255
)
 
(2,206,164
)
 
(2,352,912
)
 
 
 
 
 
 
Net reserve for losses and loss adjustment expenses at end of year
9,809,192

 
9,039,006

 
8,918,882

Unpaid losses and loss adjustment expenses recoverable
4,082,650

 
2,814,291

 
2,464,910

Reserve for losses and loss adjustment expenses at end of year
$
13,891,842

 
$
11,853,297

 
$
11,383,792


(1)
The 2019 amount primarily related to the acquisition of Barbican.
(2)
During the 2019 first quarter and 2018 second quarter, a subsidiary of the Company entered into two separate retroactive reinsurance transactions with third party reinsurers to reinsure run-off liabilities associated with certain U.S. insurance exposures.

2019 Prior Year Reserve Development
During 2019, the Company recorded estimated net favorable development on prior year loss reserves of $163.6 million, which consisted of net favorable development of $15.8 million from the insurance segment, $46.4 million from the reinsurance segment and $125.2 million from the mortgage segment, partially offset by $23.8 million of net adverse development from the ‘other’ segment.
The insurance segment’s net favorable development of $15.8 million, or 7.0 points of net earned premium, consisted of $54.9 million of net favorable development from short-tailed lines and $39.1 million of net adverse development from medium-tailed and long-tailed lines. Net favorable development in short-tailed lines primarily resulted from lenders products and property (including special risk other than marine) reserves across all accident years, (i.e., the year in which a loss occurred) partially offset by net adverse development in travel business, primarily from the 2018 accident year. Net adverse development in medium-tailed and long-tailed lines of $39.1
million was primarily due to net adverse development of $33.6 million in contract binding business, primarily from the 2013 to 2017 accident years, and $30.1 million in programs, primarily from the 2014 and 2018 accident years. Such amounts were partially offset by net favorable development of $19.3 million in professional liability business, primarily from the 2013 to 2016 accident years, and $15.8 million in surety business, primarily from the 2014 to 2016 accident years.
The reinsurance segment’s net favorable development of $46.4 million, or 3.2 points of net earned premium, consisted of $70.5 million of net favorable development from short-tailed lines and $16.0 million of net favorable development from medium-tailed lines, partially offset by $40.1 million of net adverse development from long-tailed lines. Favorable development in short-tailed lines included $33.7 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2017 and 2018 underwriting years (i.e., losses attributable to contracts having an inception or renewal date within the given twelve-month period) and $40.8 million in other specialty, primarily from 2016 to 2018
underwriting years.The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during 2019. Net favorable development of $16.0 million in medium-tailed lines included reductions in marine and aviation reserves, primarily from the 2011 to 2017 underwriting years. Net adverse development in long-tailed lines of $40.1 million was primarily due to net adverse development of $44.5 million in casualty business, primarily from the 2013 to 2018 underwriting years.
The mortgage segment’s net favorable development of $125.2 million, or 9.2 points of net earned premium, included $117.1 million of favorable development on U.S. primary mortgage business. Such development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.
2018 Prior Year Reserve Development
During 2018, the Company recorded estimated net favorable development on prior year loss reserves of $272.7 million, which consisted of $24.4 million from the insurance segment, $138.5 million from the reinsurance segment, $107.6 million from the mortgage segment and $2.2 million from the ‘other’ segment.
The insurance segment’s net favorable development of $24.4 million, or 1.1 points of net earned premium, consisted of $48.4 million of net favorable development from short-tailed lines and $26.3 million of net favorable development from long-tailed lines, partially offset by $50.3 million of net adverse development from medium-tailed lines. Favorable development in short-tailed lines predominantly consisted of $50.1 million of net favorable development in property lines, primarily from the 2010 to 2017 accident years, partially offset by $5.0 million of adverse development on travel, accident and health business from the 2013 to 2017 accident years. Net favorable development in long-tailed lines of $26.3 million included $19.7 million of net favorable development on executive assurance business, primarily from the 2015 accident year, and $1.4 million of net favorable development in casualty business, primarily from the 2009 to 2015 accident years. Net adverse development in medium tailed lines of $50.3 million was primarily due to net adverse development in contract binding business for accident years 2013 to 2017.
The reinsurance segment’s net favorable development of $138.5 million, or 11.0 points of net earned premium, consisted of $110.4 million from short-tailed lines and $28.1 million from medium-tailed and long-tailed lines. Favorable development in short-tailed lines included $80.8 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2008 to 2017 underwriting years. The net reduction of loss estimates for the reinsurance
segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during 2018. Net favorable development of $28.1 million in medium-tailed and long-tailed lines included reductions in casualty reserves of $12.5 million, primarily from the 2002 to 2010 underwriting years, and in marine and aviation reserves of $15.6 million, spread across most underwriting years.
The mortgage segment’s net favorable development of $107.6 million, or 9.1 points of net earned premium, included $103.4 million of favorable development on U.S. primary mortgage business. Such development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.
2017 Prior Year Reserve Development
During 2017, the Company recorded estimated net favorable development on prior year loss reserves of $238.0 million, which consisted of $8.6 million from the insurance segment,$165.4 million from the reinsurance segment, and $95.0 million from the mortgage segment, less adverse development of $31.0 million from the ‘other’ segment.
The insurance segment’s net favorable development of $8.6 million, or 4.0 points of net earned premium, consisted of $14.9 million of net favorable development from short-tailed lines and $11.8 million of net favorable development from long-tailed lines, partially offset by $18.1 million of net adverse development from medium-tailed lines. Favorable development in short-tailed lines predominantly consisted of $22.8 million of net favorable development in property lines, primarily from the 2011 to 2016 accident years, partially offset by $11.8 million of adverse development on travel, accident and health business from the 2014 to 2016 accident years. Net favorable development in long-tailed lines of $11.8 million included $10.0 million of net favorable development on executive assurance business, primarily from the 2013 accident year, and $8.3 million of net favorable development in casualty business, primarily from the 2007 to 2013 accident years. Net adverse development in medium-tailed lines of $18.1 million included $56.3 million of net adverse development in program business, primarily from the 2013 to 2015 accident years and primarily driven by a few inactive programs that were non-renewed in 2015 and early in 2016, partially offset by $36.2 million of net favorable development in professional liability business, primarily from the 2010 to 2016 accident years.
The reinsurance segment’s net favorable development of $165.4 million, or 14.5 points of net earned premium, consisted of $101.0 million from short-tailed lines and $64.4 million from medium-tailed and long-tailed lines. Favorable development in short-tailed lines included $82.6 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2009 to 2016 underwriting years.
The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during 2017. Net favorable development of $64.4 million in medium-tailed and long-tailed lines included reductions in casualty reserves of $43.7 million, primarily from the 2002 to 2013 underwriting years, and in marine and aviation reserves of $19.6 million, spread across most underwriting years.
The mortgage segment’s net favorable development of $95.0 million, or 9.0 points of net earned premium, for 2017, included $89.3 million of favorable development on U.S. primary mortgage business. Such development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.