The reserve for losses is established based on estimates of individual claims and actuarially determined estimates of future losses based on ProAssurance’s past loss experience, available industry data and projections as to future claims frequency, severity, inflationary trends and settlement patterns. Estimating the reserve, particularly the reserve appropriate for liability exposures, is a complex process. For a high proportion of the risks insured or reinsured by ProAssurance, claims may be resolved over an extended period of time, often five years or more, and may be subject to litigation. Estimating losses requires ProAssurance to make and revise judgments and assessments regarding multiple uncertainties over an extended period of time. As a result, the reserve estimate may vary considerably from the eventual outcome. The assumptions used in establishing ProAssurance’s reserve are regularly reviewed and updated by management as new data becomes available. Changes to estimates of previously established reserves are included in earnings in the period in which the estimate is changed. For additional information regarding ProAssurance's reserve for losses, see Note 1 and Note 6 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2025 report on Form 10-K.


(In thousands)	Three Months Ended March 31, 2026		Three Months Ended March 31, 2025		Year Ended December 31, 2025
Balance, beginning of year	$	3,018,396	$	3,257,696	$	3,257,696
Less reinsurance recoverables on unpaid losses and loss adjustment expenses	334,612		409,069		409,069
Net balance, beginning of year	2,683,784		2,848,627		2,848,627

Net losses:
Current year	179,100		190,852		755,732
(Favorable) unfavorable development of reserves established in prior years, net(1)	(4,906)		(892)		(90,314)
Total	174,194		189,960		665,418
Paid related to:
Current year	(9,601)		(10,051)		(102,589)
Prior years	(200,500)		(221,980)		(743,592)
Total paid	(210,101)		(232,031)		(846,181)
Foreign currency exchange rate (gains) losses(2)	(2,499)		4,798		15,920
Net balance, end of period	2,645,378		2,811,354		2,683,784
Plus reinsurance recoverables on unpaid losses and loss adjustment expenses	334,900		369,413		334,612
Balance, end of period	$	2,980,278	$	3,180,767	$	3,018,396

amortization of the purchase accounting fair value adjustment on NORCAL's assumed net reserve and amortization of the negative VOBA associated with NORCAL's DDR reserve which is recorded as a reduction to prior accident year net losses and loss adjustment expenses.

(2) Foreign currency exchange rate (gains) losses are related to foreign currency denominated loss reserves associated with international insurance exposures in the Specialty P&C segment, primarily related to a strategic partnership with an international medical professional liability insured. Foreign currency exchange rate (gains) losses on foreign currency denominated loss reserves are reflected through net income (loss) as a component of other income (expense) in the Condensed Consolidated Statements of Income and Comprehensive Income and reported in the Corporate segment.

Estimating liability reserves is complex and requires the use of many assumptions. As time passes and ultimate losses for prior years are either known or become subject to a more precise estimation, ProAssurance increases or decreases the reserve estimates established in prior periods.

•Net favorable development of $3.6 million recognized in the Specialty P&C segment driven by $3.0 million of net favorable development in the segment's MPL line of business, related to a decrease in the reserve for potential ECO/XPL and $0.7 million related to purchase accounting amortization (see previous discussion in footnote 1 in the table above), partially offset by a nominal amount of net unfavorable development attributable to the Company's Lloyd’s Syndicates operations.

•Consolidated net favorable loss development recognized during the three months ended March 31, 2026 also included net favorable development of $1.3 million in the Segregated Portfolio Cell Reinsurance segment entirely related to workers' compensation business, reflecting favorable trends in claim closing patterns primarily in accident years 2022 through 2024.

For additional information regarding ProAssurance's prior year reserve development recognized for the three months ended March 31, 2025 and the year ended December 31, 2025, see Note 5 of the Notes to Condensed Consolidated Financial Statements included in ProAssurance's March 31, 2025 report on Form 10-Q and Note 6 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2025 report on Form 10-K.