• Filing Date: 2017-02-22
  • Form Type: 10-K
  • Description: Annual report
v3.6.0.2
Losses and Loss Adjustment Expenses
12 Months Ended
Dec. 31, 2016
Insurance [Abstract]  
Losses and Loss Adjustment Expenses

Note 15 — Losses and Loss Adjustment Expenses

The liability for losses and LAE is determined on an individual case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claim development and losses incurred, but not reported. See Loss and Loss Adjustment Expenses in Note 2 — “Summary of Significant Accounting Policies.”

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

 

     Years Ended December 31,  
     2016      2015      2014  

Balance, beginning of year

   $ 51,690       $ 48,908       $ 43,686   
  

 

 

    

 

 

    

 

 

 

Incurred related to:

        

Current year

     104,128         78,325         75,810   

Prior years

     20,539         8,899         3,658   
  

 

 

    

 

 

    

 

 

 

Total incurred

     124,667         87,224         79,468   
  

 

 

    

 

 

    

 

 

 

Paid related to:

        

Current year

     (64,812      (51,095      (47,650

Prior years

     (41,053      (33,347      (26,596
  

 

 

    

 

 

    

 

 

 

Total paid

     (105,865      (84,442      (74,246
  

 

 

    

 

 

    

 

 

 

Balance, end of year

   $ 70,492       $ 51,690       $ 48,908   
  

 

 

    

 

 

    

 

 

 

 

The establishment of loss reserves is an inherently uncertain process and changes in loss 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 adjustments are adjusted. During the year ended December 31, 2016, the Company experienced development related to all prior years of $20,539. This increase is primarily attributable to the settlement and further development of older claims. The Company also experienced an increase in late reported claims, primarily claims related to the 2015 loss year. Trends involving assignment of insurance benefits and related litigation was a major driver that lead the Company to strengthen its loss reserves during the year.

The Company writes insurance in the state of Florida, 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 yearly 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.

The following is information about incurred and paid claims development as of December 31, 2016, net of reinsurance, as well as cumulative claim frequency and the total of incurred-but-not-reported liabilities plus expected development on reported claims included within the net incurred claims amounts. The information about incurred and paid claims development for the years ended December 31, 2015 to 2012 is presented as supplementary information and is unaudited.

 

Homeowners Multi-peril and Dwelling Fire Insurance (a)

 

                                  As of December 31, 2016  
                                  Total of IBNR
Plus Expected
Development
on Reported
Claims
    Cumulative
Number of
Reported
Claims
(Not in Dollar
Amounts(b)
 
   

Incurred Claims and Allocated Claim Adjustment

Expenses, Net of Reinsurance

     
Accident   For the Years Ended December 31,      

Year

  2012     2013     2014     2015     2016      

2012

  $ 66,391      $ 60,507      $ 64,061      $ 66,484      $ 67,036      $ 1,500        6,594   

2013

    —          57,533        69,932        69,906        72,020        2,504        6,991   

2014

    —          —          75,810        81,773        84,917        3,549        7,634   

2015

    —          —          —          78,017        90,902        9,920        7,561   

2016

    —          —          —          —          81,446        21,830        6,455   
         

 

 

   

 

 

   
          Total      $ 396,321      $ 39,303     
         

 

 

   

 

 

   
   

Cumulative Paid Claims and Allocated Claim Adjustment

Expenses, Net of Reinsurance

       
Accident   For the Years Ended December 31,    

Year

  2012     2013     2014     2015     2016    

2012

  $ 36,890      $ 53,203      $ 59,019      $ 62,814      $ 64,645     

2013

    —          40,240        57,374        64,257        68,106     

2014

    —          —          47,650        68,897        77,712     

2015

    —          —          —          50,939        76,042     

2016

    —          —          —          —          51,663     
         

 

 

   
          Total      $ 338,168     
         

 

 

   
    All outstanding liabilities before 2012, net of reinsurance        2,735     
         

 

 

   
    Liabilities for losses and loss adjustment, net of reinsurance      $ 60,888     
         

 

 

   

 

(a) Excludes losses from Wind-only insurance (2012 through 2016) and Hurricane Matthew (2016).
(b) The cumulative number of reported claims is measured as the number of per-policyholder, per-event claims for all coverages regardless of whether the claim results in loss or expense to the Company.

Homeowners Wind-only Insurance (a)*

 

                                  As of December 31, 2016  
   

Incurred Claims and Allocated Claim Adjustment

Expenses, Net of Reinsurance

   

Total of IBNR

Plus Expected

Development

   

Cumulative

Number of

Reported

Claims

 
Accident   For the Years Ended December 31,     on Reported     (Not in Dollar  

Year

  2012     2013     2014     2015     2016     Claims     Amounts)(b)  

2015

  $ —        $ —        $ —        $ 308      $ 401      $ 25        100   

2016

    —          —          —          —          1,005        228        219   
         

 

 

   

 

 

   
          Total      $ 1,406      $ 253     
         

 

 

   

 

 

   
   

Cumulative Paid Claims and Allocated Claim Adjustment

Expenses, Net of Reinsurance

       
Accident   For the Years Ended December 31,    

Year

  2012     2013     2014     2015     2016    

2015

  $ —        $ —        $ —        $ 156      $ 332     

2016

    —          —          —          —          689     
         

 

 

   
          Total      $ 1,021     
         

 

 

   
    All outstanding liabilities before 2012, net of reinsurance        —       
   

 

 

   
    Liabilities for losses and loss adjustment, net of reinsurance      $ 385     
   

 

 

   

 

* The Company began writing Homeowners Wind-only insurance in 2015.
(a) Excludes losses from multi-peril and dwelling fire insurance (2012 through 2016) and Hurricane Matthew (2016).
(b) The cumulative number of reported claims is measured as the number of per-policyholder, per-event claims for all coverages regardless of whether the claim results in loss or expense to the Company.

 

Losses Specific to Hurricane Matthew (2016)

 

                                  As of December 31, 2016  
   

Incurred Claims and Allocated Claim Adjustment

Expenses, Net of Reinsurance

   

Total of IBNR

Plus Expected

Development

   

Cumulative

Number of

Reported

Claims

 
Accident   For the Years Ended December 31,     on Reported     (Not in Dollar  

Year

  2012     2013     2014     2015     2016     Claims     Amounts)(b)  

2016

  $ —        $ —        $ —        $ —        $ 21,414      $ 7,750        2,226   
         

 

 

     
          Total      $ 21,414       
         

 

 

     
   

Cumulative Paid Claims and Allocated Claim Adjustment

Expenses, Net of Reinsurance

       
Accident   For the Years Ended December 31,    

Year

  2012     2013     2014     2015     2016    

2016

  $ —        $ —        $ —        $ —        $ 12,227     
         

 

 

   
          Total      $ 12,227     
         

 

 

   
    All outstanding liabilities before 2012, net of reinsurance        —       
   

 

 

   
    Liabilities for losses and loss adjustment, net of reinsurance      $ 9,187     
   

 

 

     

 

(b) The cumulative number of reported claims is measured as the number of per-policyholder, per-event claims for all coverages regardless of whether the claim results in loss or expense to the Company.

The reconciliation of the net incurred and paid loss development tables to the liability for losses and loss adjustment expenses is as follows:

 

     December 31,
2016
 
    

Net outstanding liabilities

  

Homeowners multi-peril and dwelling fire insurance

   $ 60,888   

Homeowners Wind-only insurance

     385   

Losses specific to Hurricane Matthew (2016)

     9,187   

Other short-duration insurance lines

     32   
  

 

 

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

     70,492   
  

 

 

 

Reinsurance recoverables

     —     
  

 

 

 

Total gross liability for unpaid losses and loss adjustment expenses

   $ 70,492   
  

 

 

 

The following is supplementary and unaudited information about average historical claims duration as of December 31, 2016:

 

Average Annual Percentage Payout of Incurred Losses by Age,

Net of Reinsurance

Years

   1     2     3     4     5  

Homeowners multi-peril and dwelling fire insurance

     57.3     25.2     9.5     5.5     2.7

Homeowners Wind-only insurance

     53.7     43.8                  

Losses specific to Hurricane Matthew (2016)

     57.0     —          —          —          —     

 

* The Company began writing Homeowners Wind-only insurance in 2015.