Reserve for Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2022

Reserve for Losses and Loss Adjustment Expenses

Reserve for Losses and Loss Adjustment Expenses

4. Reserve for Losses and Loss Adjustment Expenses

The following table represents a reconciliation of changes in the ending reserve balances for losses and loss adjustment expenses (“LAE”):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

		(in thousands)				(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period	$	55,769	$	23,633	$	45,419	$	34,470
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year		30,904		28,286		58,703		34,202
Prior years		(4)		189		1,548		(2,914)
Total incurred		30,900		28,475		60,251		31,288
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year		7,873		2,787		13,762		3,407
Prior years		4,548		2,678		17,660		15,708
Total payments		12,421		5,465		31,422		19,115
Reserve for losses and LAE net of reinsurance recoverables at end of period		74,248		46,643		74,248		46,643
Add: Reinsurance recoverables on unpaid losses and LAE at end of period		131,575		129,044		131,575		129,044
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period	$	205,823	$	175,687	$	205,823	$	175,687

Considerable variability is inherent in the estimate of the reserve for losses and LAE. Although management believes the liability recorded for losses and LAE is adequate, the variability inherent in this estimate could result in changes to the ultimate liability, which may be material to stockholders’ equity.

The Company experienced insignificant prior year development during the three months ended September 30, 2022 and September 30, 2021.

The Company experienced adverse prior year development of $1.5 million during the nine months ended September 30, 2022 and favorable prior year development of $2.9 million in the nine months ended September 30, 2021.

Adverse prior year development during the nine months ended September 30, 2022 was primarily due to higher than anticipated severity of attritional and catastrophe losses. Favorable prior year development during the nine months ended September 30, 2021 was primarily due to lower than anticipated severity of catastrophe losses associated with certain hurricanes which occurred during the second half of 2020 in the Company’s Commercial All Risk and Specialty Homeowners line of business.