Unpaid Losses and Loss Adjustment Expenses

12 Months Ended

Dec. 31, 2025

Unpaid Losses and Loss Adjustment Expenses

6. Unpaid Losses and Loss Adjustment Expenses

The Company establishes reserves for unpaid losses and LAE which represent the estimated ultimate cost of all losses incurred that were both reported and unreported (i.e., incurred but not yet reported losses, or “IBNR”) and LAE incurred as well as a provision for estimated future costs related to claim settlement for all claims that remain unpaid at the balance sheet date. The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions. In the normal course of business, the Company may also supplement its claims processes by utilizing third party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process.

Reserves are estimates of unpaid portions of losses that have occurred, including IBNR losses, therefore the establishment of appropriate reserves, is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates. The highest degree of uncertainty is associated with reserves for losses incurred in the current reporting period as it contains the greatest proportion of losses that have not been reported or settled. The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported in the results of operations in the period such changes are determined to be needed and recorded.

Management believes that the reserve for losses and LAE, any related estimates of reinsurance recoverables, is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the consolidated financial statements and amounts expected to be recovered from reinsurers based on all available facts and in accordance with applicable laws and regulations.

The table below provides the changes in the reserves for losses and LAE, net of recoverables from reinsurers, for the periods indicated (dollars in thousands):


	December 31,
	2025		2024
Gross reserves - beginning of period	$	189,285	$	174,612
Less: reinsurance recoverables on unpaid losses		84,490		70,807
Net reserves - beginning of period		104,795		103,805
Add: incurred losses and loss adjustment expenses, net of reinsurance
Current period		24,829		39,587
Prior period		13,712		33,715
Total net incurred losses and loss adjustment expenses		38,541		73,302
Deduct: loss and loss adjustment expense payments, net of reinsurance
Current period		15,874		24,536
Prior period		45,109		47,776
Total net loss and loss adjustment expense payments		60,983		72,312
Net reserves - end of period		82,353		104,795
Plus: reinsurance recoverables on unpaid losses		63,909		84,490
Gross reserves - end of period	$	146,262	$	189,285

There was $13.7 million and $33.7 million of adverse development on prior accident year reserves in 2025 and 2024, respectively. There were no significant changes in the key methods utilized in the analysis and calculations of the Company’s reserves during 2025 and 2024.

Of the $13.7 million in adverse development in 2025, $11.2 million was related to the Company's legacy commercial lines of business, while $2.5 million was related to the Company's personal lines of business. Of the $11.2 million of adverse development in the commercial lines of business, $8.2 million was experienced in the Company's hospitality programs and $4.0 million was experienced in the Company's small business programs, most notably the Security Guard program.

Of the $33.7 million of adverse development in 2024, $7.3 million was related to the 2023 accident year, $12.5 million was related to the 2022 accident year, $10.1 million was related to the 2021 accident year, and $3.8 million was related to 2020 and prior accident years. The Company's Security Program had $32.8 million of adverse development in 2024. The Security Program is no longer written by the Company. As a result of this loss emergence, the Company increased its expected loss ratio selections on both prior accident years as well as the current accident year, resulting in increases to our carried loss reserves.

Loss Development Tables

The following tables represent cumulative incurred loss and allocated loss adjustment expenses ("ALAE"), net of reinsurance, by accident year and cumulative paid loss and ALAE, net of reinsurance, by accident year, for the years ended December 31, 2016 to 2025, as well as total IBNR and the cumulative number of reported claims for the year ended December 31, 2025, by reportable segment and accident year (dollars in thousands). The tables do not include reinsurance recoverables from the LPT.

The 2025 and 2024 columns in the commercial lines incurred loss tables below do not include reinsurance recoverables on unpaid losses related to the LPT of $3.4 million and $10.6 million, respectively. The 2025 and 2024 columns in the

commercial lines incurred loss tables below do not include reinsurance recoverables on paid losses related to the LPT of $0 and $3.4 million, respectively.


Commercial Lines
Incurred loss and allocated loss adjustment expenses, net of reinsurance
																					Total IBNR			Cumulative number of reported claims
Accident
Year	2016*		2017*		2018*		2019*		2020*		2021*		2022*		2023*		2024*		2025		2025			2025
2016		32,396		34,935		40,440		44,355		46,089		46,993		48,677		49,162		49,349		49,726		1			1
2017				44,251		44,495		49,749		51,883		55,589		56,649		59,149		59,366		59,720		2			2
2018						42,624		42,432		49,741		55,261		60,102		61,881		64,349		66,413		3			2
2019								41,286		42,129		46,329		55,263		59,028		60,464		60,037		(108	)		95
2020										33,867		35,328		39,193		43,918		47,731		46,499		1,274			74
2021												40,388		42,266		48,650		58,682		63,268		3,509			203
2022														41,708		49,751		61,647		64,216		6,817			3,904
2023																39,456		45,921		47,081		11,725			4,294
2024																		16,949		18,583		4,029			9,891
2025																				4,137		1,808			20,829
																	Total		$	479,680	$	29,060


Commercial lines
Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident
Year	2016*		2017*		2018*		2019*		2020*		2021*		2022*		2023*		2024*		2025
2016		10,255		19,135		27,785		37,967		41,945		43,644		46,957		48,557		48,877		49,353
2017				12,448		23,020		34,205		42,308		47,148		52,800		57,304		58,523		58,634
2018						10,375		19,799		31,633		41,577		50,508		57,114		61,365		64,531
2019								10,078		20,462		28,958		39,893		50,369		55,117		58,455
2020										10,217		17,332		24,225		33,354		39,508		43,044
2021												12,870		21,313		30,478		42,714		51,618
2022														12,839		22,892		34,451		46,980
2023																8,486		14,869		23,835
2024																		6,776		10,093
2025																			$	1,332
																	Total		$	407,875

Net Unpaid losses and ALAE, years 2016 through 2025																			$	71,805
Unpaid losses and ALAE, prior to 2016*																				889
Unpaid Losses, LPT																				(3,432	)
Unpaid losses and ALAE, net of reinsurance																			$	69,262

* Presented as unaudited required supplementary information.


Personal Lines
Incurred loss and allocated loss adjustment expenses, net of reinsurance
																					Total IBNR		Cumulative number of reported claims
Accident	For the years ended December 31,
Year	2016*		2017*		2018*		2019*		2020*		2021*		2022*		2023*		2024*		2025		2025		2025
2016		11,619		13,418		14,949		15,550		15,655		15,634		15,679		15,681		15,681		15,681		—		2,156
2017				14,058		13,550		14,493		14,793		14,911		14,957		14,955		14,962		14,962		—		1,816
2018						5,893		6,378		6,283		6,382		6,298		6,336		6,333		6,333		—		2,914
2019								3,099		2,712		2,898		2,862		2,867		2,859		2,859		—		803
2020										2,339		2,590		2,636		2,619		2,617		2,617		—		341
2021												4,409		4,332		4,240		4,212		4,215		—		324
2022														9,404		8,122		8,109		8,202		22		50
2023																19,444		19,717		19,823		684		—
2024																		19,038		21,045		684		776
2025																				17,718		3,940		3,168
																	Total		$	113,455	$	5,330


Personal lines
Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident	For the years ended December 31,
Year	2016*		2017*		2018*		2019*		2020*		2021*		2022*		2023*		2024*		2025
2016		7,119		11,238		14,442		15,110		15,351		15,452		15,679		15,681		15,681		15,681
2017				8,320		12,944		14,004		14,526		14,866		14,957		14,955		14,962		14,962
2018						4,296		5,618		6,100		6,242		6,244		6,333		6,333		6,333
2019								2,119		2,604		2,692		2,850		2,859		2,859		2,859
2020										1,307		2,455		2,605		2,619		2,617		2,617
2021												3,022		3,980		4,081		4,195		4,198
2022														5,397		7,923		8,088		8,184
2023																16,170		18,760		19,666
2024																		15,521		19,761
2025																				12,136
																	Total		$	106,397

Net Unpaid losses and ALAE, years 2016 through 2025																			$	7,058
Unpaid losses and ALAE, prior to 2016*																				—
Unpaid losses and ALAE, net of reinsurance																			$	7,058

* Presented as unaudited required supplementary information.


Total Lines
Incurred loss and allocated loss adjustment expenses, net of reinsurance
																					Total IBNR			Cumulative number of reported claims
Accident
Year	2016*		2017*		2018*		2019*		2020*		2021*		2022*		2023*		2024*		2025					2025
2016		44,015		48,353		55,389		59,905		61,744		62,627		64,356		64,843		65,030		65,407		1			2,157
2017				58,309		58,045		64,242		66,676		70,500		71,606		74,104		74,328		74,682		2			1,818
2018						48,517		48,810		56,024		61,643		66,400		68,217		70,682		72,746		3			2,916
2019								44,385		44,841		49,227		58,125		61,895		63,323		62,896		(108	)		898
2020										36,206		37,918		41,829		46,537		50,348		49,116		1,274			415
2021												44,797		46,598		52,890		62,894		67,483		3,509			527
2022														51,112		57,873		69,756		72,418		6,839			3,954
2023																58,900		65,638		66,904		12,409			4,294
2024																		35,987		39,628		4,713			10,667
2025																				21,855		5,748			23,997
																	Total		$	593,135	$	34,390			51,643


Total lines
Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident
Year	2016*		2017*		2018*		2019*		2020*		2021*		2022*		2023*		2024*		2025
2016		17,374		30,373		42,227		53,077		57,296		59,096		62,636		64,238		64,558		65,034
2017				20,768		35,964		48,209		56,834		62,014		67,757		72,259		73,485		73,596
2018						14,671		25,417		37,733		47,819		56,752		63,447		67,698		70,864
2019								12,197		23,066		31,650		42,743		53,228		57,976		61,314
2020										11,524		19,787		26,830		35,973		42,125		45,661
2021												15,892		25,293		34,559		46,909		55,816
2022														18,236		30,815		42,539		55,164
2023																24,656		33,629		43,501
2024																		22,297		29,854
2025																				13,468
															Total				$	514,272

Net Unpaid losses and ALAE, years 2016 through 2025																			$	78,863
Unpaid losses and ALAE, prior to 2016*																				889
Unpaid losses, LPT																				(3,432	)
Unpaid losses and ALAE, net of reinsurance																			$	76,320

* Presented as unaudited required supplementary information.

The following table reconciles the loss development information to the consolidated balance sheet for the year ended December 31, 2025, by reportable segment (dollars in thousands).


	December 31, 2025
Net unpaid losses claims and ALAE
Commercial Lines	$	69,262
Personal Lines		7,058
Total unpaid losses and LAE, net of reinsurance		76,320
Reinsurance recoverable on losses and LAE
Commercial Lines		60,619
Personal Lines		3,290
Total reinsurance recoverable on unpaid losses and LAE		63,909
ULAE expense
Commercial lines		5,669
Personal Lines		364
Total ULAE expense		6,033
Total gross unpaid losses and LAE	$	146,262

Loss Duration Disclosure (unaudited)

The following table represents the average annual percentage payout of incurred losses by age, net of reinsurance, for each reportable segment.


	Average annual percentage payout of incurred losses by age, net of reinsurance
	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8	Year 9	Year 10+
Commercial Lines	35.8%	22.3%	17.6%	12.5%	9.1%	2.3%	0.3%	0.1%	0.0%	0.0%
Personal Lines	72.7%	17.5%	9.0%	0.7%	0.1%	0.0%	0.0%	0.0%	0.0%	0.0%
Total Lines	38.2%	22.0%	17.0%	11.7%	8.5%	2.2%	0.3%	0.1%	0.0%	0.0%