The liability for losses and loss adjustment expenses (“LAE”) is determined on an individual case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claims development and losses incurred but not reported.

The Company primarily writes insurance in states which could be exposed to hurricanes or other natural catastrophes. The occurrence of a major catastrophe could have a significant effect on the Company’s quarterly results and cause a temporary disruption of the normal operations of the Company. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

Activity in the liability for losses and LAE is summarized as follows:


	Three Months Ended
	March 31,
	2025			2024
Net balance, beginning of period*	$	323,335		$	254,351
Incurred, net of reinsurance, related to:
Current period		59,291			79,922
Prior periods		—			—
Total incurred, net of reinsurance		59,291			79,922
Paid, net of reinsurance, related to:
Current period		(13,095	)		(17,789	)
Prior periods		(52,970	)		(43,059	)
Total paid, net of reinsurance		(66,065	)		(60,848	)
Net balance, end of period		316,561			273,425
Add: reinsurance recoverable before allowance for credit losses		481,585			305,287
Gross balance, end of period	$	798,146		$	578,712

* Net balance represents beginning-of-period liability for unpaid losses and LAE less beginning-of-period reinsurance recoverable for unpaid losses and LAE.

The establishment of loss and LAE reserves is an inherently uncertain process and changes in loss and LAE reserve estimates are expected as these estimates are subject to the outcome of future events. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such estimates are adjusted. Losses and LAE for the three months ended March 31, 2025 included net estimated losses of approximately $10,775 related to Citizens policies assumed. Excluding Citizens-related losses, lower losses and LAE for the three months ended March 31, 2025 resulted from a decrease in reported claims and litigation frequency.