The following table presents a reconciliation of the beginning and ending provision for unpaid losses and loss adjustment expenses related to Hagerty Re, net of amounts recoverable from various reinsurers:


	Six months ended June 30,
		2025		2024

		in thousands
Gross reserves for unpaid losses and loss adjustment expenses, beginning		$	168,492	$	136,507
Less: Reinsurance recoverable on unpaid losses and loss adjustment expenses		5,769		2,235
Net reserves for unpaid losses and loss adjustment expenses, beginning		162,723		134,272
Incurred losses and loss adjustment expenses:
Current accident year		146,343		127,085

Total incurred losses and loss adjustment expenses		146,343		127,085
Payments:
Current accident year		21,250		11,409
Prior accident years		47,244		40,376
Total payments		68,494		51,785
Effect of foreign currency rate changes		233		(113)
Net reserves for unpaid losses and loss adjustment expenses, ending		240,805		209,459
Reinsurance recoverable on unpaid losses and loss adjustment expenses		18,138		7,624
Gross reserves for unpaid losses and loss adjustment expenses, ending		$	258,943	$	217,083

The Company records an estimate of quarterly losses and loss adjustment expenses in the Condensed Consolidated Statements of Operations using an annual loss ratio, which is based on statistical analysis performed by the Company's internal and external actuarial teams that consider several factors, including projected levels of catastrophe events. Management believes this approach provides a more consistent view of loss experience over the year given the seasonality of Hagerty Re's business. The annual loss ratio is reviewed throughout the year and adjusted, as necessary.

The provision for unpaid losses and loss adjustment expenses recorded on the Condensed Consolidated Balance Sheets represents (i) the difference between management's estimate of the ultimate cost of losses and loss adjustment expenses incurred by Hagerty Re and (ii) the amount of paid losses as of the reporting date. These reserves reflect management's best estimate of unpaid losses related to reported claims and IBNR claims and also include management's best estimate of all expenses associated with processing and settling reported and unreported claims.

Reserves are reviewed by management quarterly and periodically throughout the year by combining historical results and current actual results to calculate new development factors. Claims are analyzed and reported based on the year in which the loss occurred (i.e., on an accident year basis). Accident year data is classified and utilized within actuarial models to prepare estimates of required reserves for payments to be made in the future.

When estimating reserves, the Company utilizes several actuarial reserving methods which consider historical claim reporting patterns, claim cycle time, claim frequency and severity, claims settlement practices, adequacy of case reserves over time, seasonality, and current economic conditions. Reserve estimates produced by various actuarial reserving methods are further analyzed to determine the actuarial central estimate which represents the expected value over the range of reasonably possible outcomes.