Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2025

8. LOSSES AND LOSS ADJUSTMENT EXPENSES

The liability for losses and LAE, also referred to as loss reserves, represents both gross estimates before reinsurance for unpaid reported losses (Outstanding Loss Reserves, or "OLR") and losses that have been incurred but not yet reported ("IBNR") estimated using actuarial methods. We recognize an asset for the portion of the liability that we expect to recover from reinsurers. LAE reserves include allocated LAE ("ALAE") and unallocated LAE ("ULAE"). ALAE are linked to the settlement of an individual claim or loss, whereas ULAE are based on our estimates of future costs to administer the claims. IBNR includes amounts for unreported claims, development on known claims and reopened claims.

Our loss reserves cover multiple lines of business, including asbestos, environmental, general casualty, workers' compensation, marine, aviation and transit, construction defect, professional indemnity/directors and officers, motor, property and other non-life lines of business. We complete most of our annual loss reserve studies in the fourth quarter of each year and, as a result, tend to record the largest movements, both favorable and adverse, to net incurred losses and LAE in this period.

We have elected to apply the fair value option for certain reinsurance contracts including loss portfolio transfers ("LPTs") and reinsurance to close ("RITC") transactions. This is an irrevocable election that applies to all balances under the reinsurance contract, including reinsurance balances recoverable on paid and unpaid losses and the liability for losses and LAE. The primary reason for electing the fair value option was to reduce the earnings volatility created by carrying the liabilities for losses and LAE at cost and the assets supporting those liabilities at fair value. During 2017 and 2018, we elected the fair value option on select new business and classified the supporting portfolio investments as trading securities, whereby all changes in fair value were recorded in the statements of operations. Commencing in 2019, we discontinued electing the fair value option on new business in order to better align with our evolving investment objectives.

The table below provides a consolidated reconciliation of the beginning and ending liability for losses and LAE:


	Three Months Ended
	March 31,
		2025		2024
		(in millions of U.S. dollars)
Balance as of beginning of period		$	11,404	$	12,359



Reinsurance reserves recoverable on unpaid losses		(628)		(774)





Net balance as of beginning of period		10,776		11,585
Net incurred losses and LAE:
Current period:
Increase in estimates of net ultimate losses		3		5

Total current period		3		5
Prior periods:
Reduction in estimates of net ultimate losses		(8)		(6)
Reduction in provisions for ULAE		(21)		(17)

Amortization of fair value adjustments		5		3
Changes in fair value - fair value option (1)		5		(4)
Total prior periods		(19)		(24)
Total net incurred losses and LAE		(16)		(19)
Net paid losses:

Prior periods		(739)		(670)
Total net paid losses		(739)		(670)
Other changes:
Effect of exchange rate movement		66		(69)



Assumed business (2)		358		—


Total other changes		424		(69)
Net balance as of March 31		10,445		10,827
Reinsurance reserves recoverable on unpaid losses		636		723

Balance as of March 31		$	11,081	$	11,550

	As of
		March 31, 2025		December 31, 2024
	(in millions of U.S. dollars)
Reconciliation to Consolidated Balance Sheets:
Losses and loss adjustment expenses		$	10,085	$	10,407
Losses and loss adjustment expenses, at fair value		996		997
Total losses and loss adjustment expenses		$	11,081	$	11,404

Reinsurance balances recoverable on paid and unpaid losses		$	522	$	533
Reinsurance balances recoverable on paid and unpaid losses - fair value option		194		179
Total reinsurance balances recoverable on paid and unpaid losses		716		712
Less: Paid losses recoverable		(80)		(84)

Reinsurance reserves recoverable on unpaid losses		$	636	$	628

(1) Comprises discount rate and risk margin components.

(2) Amounts from 2025 correspond to the net loss reserves assumed from signed and closed reinsurance agreements described in Note 3, as well as other individually insignificant closed transactions.

Prior Period Development

Reduction in Estimates of Net Ultimate Losses

The following table summarizes the change in estimates of net ultimate losses related to prior years in our Run-off segment by line of business:


	Three Months Ended
	March 31, 2025		March 31, 2024
	(in millions of U.S. dollars)

Asbestos	$	—	$	(24)
Environmental	—		25
General casualty	17		18
Workers' compensation	(5)		(2)

Construction defect	1		2
Professional indemnity/ Directors and officers	(5)		(29)
Motor	(7)		4
Property	—		(1)
All other	(9)		1
Total	(8)		(6)

Three Months Ended March 31, 2025:

The reduction in estimates of net ultimate losses of $8 million was driven by favorable developments on our all other, motor, workers’ compensation, and professional indemnity / directors and officers of $9 million, $7 million, $5 million, and $5 million, respectively. This is a result of favorable claims experience, most notably in the 2024 acquisition year.

The results were partially offset by adverse development on our general casualty line of business of $17 million as a result of adverse claims experience.

Three Months Ended March 31, 2024:

The prior period reduction in estimates of net ultimate losses of $6 million was driven by favorable development across multiple lines of business. The primary drivers included favorable development on our professional indemnity / directors and officers line of business of $29 million, driven by favorable claims experience, and favorable development on our asbestos line of business of $24 million resulting from actuarial analysis. These were partially offset by adverse development on our general casualty line of business of $18 million, driven by adverse claims experience, and adverse development on our environmental line of business of $25 million due to results from actuarial reviews in the period.

Reduction in Provisions for ULAE

Three Months Ended March 31, 2025 and 2024:

The favorable reductions in provisions for ULAE for the three months ended March 31, 2025 and 2024 were driven by corresponding reductions in loss reserves and the associated estimated cost of managing such liabilities, and offsets corresponding expenses incurred within general and administrative expenses each period.

Changes in Fair Value - Fair Value Option

Three Months Ended March 31, 2025 and 2024:

PPD for the three months ended March 31, 2025 was adversely impacted by changes in the fair value of liabilities for which we have elected the fair value option by $5 million, which was primarily a result of a normal accretion of discount.

For the comparative period, PPD was favorably impacted by changes in the fair value of liabilities for which we have elected the fair value option of $4 million, which was primarily driven by an increase in U.K. corporate bond yields during the first quarter of 2024.