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Reserve for Losses and Loss Adjustment Expenses
 6 Months Ended
Jun. 30, 2020
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:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Reserve for losses and loss adjustment expenses at beginning of period
$
14,309,580

 
$
12,010,041

 
$
13,891,842

 
$
11,853,297

Unpaid losses and loss adjustment expenses recoverable
4,070,114

 
2,970,159

 
4,082,650

 
2,814,291

Net reserve for losses and loss adjustment expenses at beginning of period
10,239,466

 
9,039,882

 
9,809,192

 
9,039,006

 
 
 
 
 
 
 
 
Net incurred losses and loss adjustment expenses relating to losses occurring in:
 
 
 
 
 
 
 
Current year
1,274,589

 
805,728

 
2,409,031

 
1,563,692

Prior years
(44,067
)
 
(38,185
)
 
(63,090
)
 
(77,617
)
Total net incurred losses and loss adjustment expenses
1,230,522

 
767,543

 
2,345,941

 
1,486,075

 
 
 
 
 
 
 
 
Retroactive reinsurance transactions (1)
—

 
—

 
60,635

 
(225,500
)
 
 
 
 
 
 
 
 
Net foreign exchange (gains) losses
51,157

 
(1,277
)
 
(91,416
)
 
(1,781
)
 
 
 
 
 
 
 
 
Net paid losses and loss adjustment expenses relating to losses occurring in:
 
 
 
 
 
 
 
Current year
(128,174
)
 
(61,148
)
 
(169,434
)
 
(125,488
)
Prior years
(504,254
)
 
(539,481
)
 
(1,066,201
)
 
(966,793
)
Total net paid losses and loss adjustment expenses
(632,428
)
 
(600,629
)
 
(1,235,635
)
 
(1,092,281
)
 
 
 
 
 
 
 
 
Net reserve for losses and loss adjustment expenses at end of period
10,888,717

 
9,205,519

 
10,888,717

 
9,205,519

Unpaid losses and loss adjustment expenses recoverable
4,156,157

 
3,024,797

 
4,156,157

 
3,024,797

Reserve for losses and loss adjustment expenses at end of period
$
15,044,874

 
$
12,230,316

 
$
15,044,874

 
$
12,230,316


(1)
During 2020 first quarter, a subsidiary of the Company entered into a reinsurance to close agreement of the 2017 and prior years of account previously covered by a third party arrangement, while in the 2019 first quarter, a subsidiary of the Company entered into a retroactive reinsurance transaction with third party reinsurer to reinsure run-off liabilities associated with certain U.S. insurance exposures.

Development on Prior Year Loss Reserves

2020 Second Quarter

During the 2020 second quarter, the Company recorded net favorable development on prior year loss reserves of $44.1 million, which consisted of $2.5 million from the insurance segment, $40.2 million from the reinsurance segment, $0.2 million from the mortgage segment and $1.1 million from the ‘other’ segment.
The insurance segment’s net favorable development of $2.5 million, or 0.4 loss ratio points, for the 2020 second quarter consisted of $19.7 million of net favorable development in short-tailed and long-tailed lines and $17.1 million of net adverse development in medium-tailed lines. Net favorable development of $11.5 million in short-tailed lines reflected $7.5 million of favorable development from property (excluding marine), primarily from the 2016 to 2019 accident years (i.e., the year in which a loss occurred) and $3.5 million of favorable development on travel and accident, primarily from the 2019 accident year. Net favorable development of $8.1 million in long-tailed lines reflected $2.4 million of favorable
development in executive assurance, primarily from the 2013 accident year, and $4.9 million of favorable development related to other business, including alternative markets and excess workers’ compensation, across most accident years. Net adverse development in medium-tailed lines included $6.3 million of adverse development in professional liability, primarily from the 2009, 2016 and 2019 accident years, $6.1 million of adverse development in contract binding, across all accident years, and $4.0 million of adverse development on program business, primarily from the 2014 and 2017 accident years.

The reinsurance segment’s net favorable development of $40.2 million, or 8.4 loss ratio points, for the 2020 second quarter consisted of $46.2 million of net favorable development from short-tailed lines and net adverse development of $6.0 million from and medium-tailed and long-tailed lines. Net favorable development in short-tailed lines reflected $27.5 million of favorable development from other specialty, across most underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period), and $18.3 million of favorable development related to property catastrophe and property other
than property catastrophe business, primarily from the 2016 to 2019 underwriting years. Adverse development of $5.8 million in long-tailed lines reflected an increase in reserves from casualty, primarily from the 2012 to 2015 underwriting years.

The mortgage segment’s net favorable development was $0.2 million, or 0.1 loss ratio points, for the 2020 second quarter.
2019 Second Quarter
During the 2019 second quarter, the Company recorded net favorable development on prior year loss reserves of $38.2 million, which consisted of $2.6 million from the insurance segment, $12.7 million from the reinsurance segment, $22.8 million from the mortgage segment and $0.1 million from the ‘other’ segment.
The insurance segment’s net favorable development of $2.6 million, or 0.4 loss ratio points, for the 2019 second quarter consisted of $8.0 million of net favorable development in short-tailed lines, $10.4 million of net adverse development in medium-tailed lines and $4.9 million of net favorable development in long-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (excluding marine) reserves across all accident years (i.e., the year in which a loss occurred). Net adverse development in medium-tailed lines primarily resulted from $15.5 million of adverse development on program business. Such amounts were partially offset by $5.1 million of net favorable development in other medium-tailed lines, including surety business and professional liability, across most accident years. Net favorable development in long-tailed lines primarily resulted from reductions in executive assurance reserves of $5.1 million, primarily from the 2008 to 2014 accident years.
The reinsurance segment’s net favorable development of $12.7 million, or 3.5 loss ratio points, for the 2019 second quarter consisted of $1.8 million of net favorable development from short-tailed lines and $10.9 million of net favorable development from long-tailed and medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from other specialty lines across most underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period) and in property other than property catastrophe reserves from earlier underwriting years, partially offset by a small amount of adverse development from property catastrophe and property other than property catastrophe reserves in the 2015 and 2018 underwriting years. Favorable development in long-tailed and medium-tailed lines reflected reductions in casualty and marine reserves from most underwriting years.
The mortgage segment’s net favorable development was $22.8 million, or 6.5 loss ratio points, for the 2019 second quarter. The 2019 second quarter development was primarily driven by continued favorable claim rates on first lien business and subrogation recoveries on second lien business.
Six Months Ended June 30, 2020
During the six months ended June 30, 2020, the Company recorded net favorable development on prior year loss reserves of $63.1 million, which consisted of $3.6 million from the insurance segment, $51.8 million from the reinsurance segment, $6.3 million from the mortgage segment and $1.3 million from the ‘other’ segment.
The insurance segment’s net favorable development of $3.6 million, or 0.3 loss ratio points, for the 2020 period consisted of $28.7 million of net favorable development in short-tailed and long-tailed lines, partially offset by $25.1 million of net adverse development in medium-tailed lines. Net favorable development of $15.4 million in short-tailed lines reflected $9.6 million of favorable development from property (excluding marine), primarily from the 2015 to 2018 accident years and $3.1 million of favorable development in lenders products, primarily from the 2017 to 2019 accident years. Net favorable development of $13.3 million in long-tailed lines included $7.6 million of favorable development related to other business, including alternative markets and excess workers’ compensation, primarily in the 2016 and 2017 accident years. Net adverse development in medium-tailed lines reflected $19.3 million of adverse development in contract binding business, primarily in the 2016 to 2019 accident years, and $6.3 million of adverse development in program business, primarily from the 2017 and 2018 accident years.
The reinsurance segment’s net favorable development of $51.8 million, or 5.1 loss ratio points, for the 2020 period consisted of $67.4 million of net favorable development from short-tailed and medium-tailed lines, offset by $15.6 million of net adverse development from long-tailed lines. Net favorable development of $65.7 million in short-tailed lines reflected $39.3 million from other specialty lines and $21.3 million from property catastrophe, primarily from the 2015 to 2019 underwriting years. Adverse development in long-tailed lines reflected an increase in reserves from casualty, primarily from the 2012 to 2015 underwriting years.
The mortgage segment’s net favorable development was $6.3 million, or 0.9 loss ratio points, for the 2020 period. The 2020 development was primarily driven by subrogation recoveries on second lien business and student loan business.
Six Months Ended June 30, 2019

During the six months ended June 30, 2019, the Company recorded net favorable development on prior year loss reserves of $77.6 million, which consisted of $7.0 million from the insurance segment, $11.0 million from the reinsurance segment, $59.4 million from the mortgage segment and $0.1 million from the ‘other’ segment.
The insurance segment’s net favorable development of $7.0 million, or 0.6 loss ratio points, for the 2019 period consisted
of $17.7 million of net favorable development in short-tailed lines and $6.6 million of net favorable development in long-tailed lines, partially offset by $17.3 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (excluding marine) reserves from the 2010 to 2018 accident years. Net favorable development in long-tailed lines reflected net reductions in executive assurance reserves of $5.7 million, primarily from the 2013 and 2015 accident years. Net adverse development in medium-tailed lines reflected $23.2 million of adverse development in program business, primarily from the 2018 accident year, and $9.7 million of adverse development on contract binding business, across most accident years. Such amounts were partially offset by $15.6 million of net favorable development in other medium-tailed lines, including professional liability, marine and surety business, across most accident years.
The reinsurance segment’s net favorable development of $11.0 million, or 1.5 loss ratio points, for the 2019 period consisted of $4.3 million of net adverse development from short-tailed lines, offset by $15.3 million of net favorable development from long-tailed and medium-tailed lines. Net adverse development in short-tailed lines reflected $17.9 million from property catastrophe and property other than property catastrophe reserves, reflecting an increase in reserves on Typhoon Jebi in the 2019 first quarter of $16.0 million following receipt of updated information from cedents and additional updated industry data. Such amounts were partially offset by $10.2 million of favorable development on other specialty lines, primarily from the 2016 to 2018 underwriting years. Favorable development in long-tailed and medium-tailed lines reflected reductions in casualty reserves of $9.1 million based on varying levels of reported and paid claims activity, primarily from the 2002 to 2007 underwriting years, and favorable development in marine reserves of $6.2 million, primarily from the 2015 to 2018 underwriting years.
The mortgage segment’s net favorable development was $59.4 million, or 8.8 loss ratio points, for the 2019 period. The 2019 development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.