• Filing Date: 2018-03-07
  • Form Type: 10-K
  • Description: Annual report
v3.8.0.1
Losses and Loss Adjustment Expenses
12 Months Ended
Dec. 31, 2017
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.”

The Company currently 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 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:

 

     Years Ended December 31,  
     2017      2016      2015  

Gross balance, beginning of year

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

 

 

    

 

 

    

 

 

 

Incurred, net of reinsurance, related to:

        

Current year

     146,922        104,128        78,325  

Prior years

     18,707        20,539        8,899  
  

 

 

    

 

 

    

 

 

 

Total incurred, net of reinsurance

     165,629        124,667        87,224  
  

 

 

    

 

 

    

 

 

 

Paid, net of reinsurance, related to:

        

Current year

     (87,770      (64,812      (51,095

Prior years

     (50,533      (41,053      (33,347
  

 

 

    

 

 

    

 

 

 

Total paid, net of reinsurance

     (138,303      (105,865      (84,442
  

 

 

    

 

 

    

 

 

 

Net balance, end of year

     97,818        70,492        51,690  

Add: reinsurance recoverable

     100,760        —          —    
  

 

 

    

 

 

    

 

 

 

Gross balance, end of year

   $ 198,578      $ 70,492      $ 51,690  
  

 

 

    

 

 

    

 

 

 

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, 2017, the Company incurred $267,000 of estimated gross losses or approximately $54,000 of estimated net losses related to Hurricane Irma and experienced unfavorable development of $18,715, of which $17,869 pertains to claims in the 2015 and 2016 loss years. The 2017 prior year development was driven by approximately $16,200 of continued reserve strengthening in response to trends involving assignment of insurance benefits and litigation and a $2,500 increase in 2016 loss reserves related to Hurricane Matthew.

The following is information about incurred and paid claims development as of December 31, 2017, 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, 2017  
                                               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

Year

   For the Years Ended December 31,        
   2012      2013      2014      2015      2016      2017        

2012

   $ 66,425      $ 62,742      $ 64,083      $ 66,505      $ 67,058      $ 66,465      $ 155        6,617  

2013

     —          67,579        69,932        69,906        72,020        71,604        540        7,003  

2014

     —          —          75,810        81,773        84,917        88,054        2,350        7,649  

2015

     —          —          —          78,017        90,902        96,173        4,398        7,627  

2016

     —          —          —          —          81,446        90,878        12,840        6,863  

2017

     —          —          —          —          —          91,443        37,388        5,325  
                 

 

 

       
              Total         $ 504,617        
                 

 

 

       
    

Cumulative Paid Claims and Allocated Claim Adjustment Expenses,

Net of Reinsurance

               

Accident

Year

   For the Years Ended December 31,                
   2012      2013      2014      2015      2016      2017                

2012

   $ 36,914      $ 53,225      $ 59,041      $ 62,836      $ 64,667      $ 65,903        

2013

     —          40,240        57,374        64,257        68,106        70,224        

2014

     —          —          47,650        68,897        77,712        82,463        

2015

     —          —          —          50,939        76,042        87,784        

2016

     —          —          —          —          51,663        73,037        

2017

     —          —          —          —          —          43,039        
                 

 

 

       
              Total         $ 422,450        
                 

 

 

       
    
All outstanding liabilities before 2012, net of
reinsurance
 
 
     538        
     

 

 

       
    
Liabilities for losses and loss adjustment, net of
reinsurance
 
 
   $ 82,705        
     

 

 

       

 

(a) Excludes losses from Wind-only insurance (2012 through 2017), any hurricane event prior to 2017 and Hurricane Irma (2017).
(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, 2017  
                                               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

    Year    

   For the Years Ended December 31,        
   2012      2013      2014      2015      2016      2017        

2015

   $ —        $ —        $ —        $ 308      $ 401      $ 569      $ 2        100  

2016

     —          —          —          —          1,005        1,314        41        228  

2017

     —          —          —          —          —          1,528        866        144  
                 

 

 

       
              Total         $ 3,411        
                 

 

 

       
     Cumulative Paid Claims and Allocated Claim Adjustment Expenses,
Net of Reinsurance
               

Accident

    Year    

   For the Years Ended December 31,                
   2012      2013      2014      2015      2016      2017                

2015

   $ —        $ —        $ —        $ 156      $ 332      $ 464        

2016

     —          —          —          —          689        1,155        

2017

     —          —          —          —          —          484        
                 

 

 

       
              Total         $ 2,103        
                 

 

 

       
    
All outstanding liabilities before 2012,
net of reinsurance
 
 
     —          
     

 

 

       
    
Liabilities for losses and loss
adjustment, net of reinsurance
 
 
   $ 1,308        
     

 

 

       

 

* The Company began writing Homeowners Wind-only insurance in 2015.
(a) Excludes losses from multi-peril and dwelling fire insurance (2012 through 2017), any hurricane event prior to 2017 and Hurricane Irma (2017).
(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 Any Hurricane Event prior to 2017

 

                                               As of December 31, 2017  
                                               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

    Year    

   For the Years Ended December 31,        
   2012      2013      2014      2015      2016      2017        

2016

   $ —        $ —        $ —        $ —        $ 21,414      $ 24,126      $ 3,435        2,410  

2017

     —          —          —          —          —          171        —          113  
                 

 

 

       
              Total         $ 24,297        
                 

 

 

       
     Cumulative Paid Claims and Allocated Claim Adjustment Expenses,
Net of Reinsurance
               

Accident

    Year    

   For the Years Ended December 31,                
   2012      2013      2014      2015      2016      2017                

2016

   $ —        $ —        $ —        $ —        $ 12,227      $ 20,025        

2017

     —          —          —          —          —          163        
                 

 

 

       
              Total         $ 20,188        
                 

 

 

       
    
All outstanding liabilities before 2012,
net of reinsurance
 
 
     —          
     

 

 

       
    
Liabilities for losses and loss
adjustment, net of reinsurance
 
 
   $ 4,109        
     

 

 

       

 

(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 Irma (2017)

 

                                               As of December 31, 2017  
                                               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

    Year    

   For the Years Ended December 31,        
   2012      2013      2014      2015      2016      2017        

2017

   $ —        $ —        $ —        $ —        $ —        $ 53,430      $ 9,614        17,862  
                 

 

 

       
              Total         $ 53,430        
                 

 

 

       
    

Cumulative Paid Claims and Allocated Claim Adjustment Expenses,

Net of Reinsurance

               

Accident

    Year    

   For the Years Ended December 31,                
   2012      2013      2014      2015      2016      2017                

2017

   $ —        $ —        $ —        $ —        $ —        $ 43,742        
                 

 

 

       
              Total         $ 43,742        
                 

 

 

       
    
All outstanding liabilities before 2012,
net of reinsurance
 
 
     —          
     

 

 

       
    
Liabilities for losses and loss adjustment,
net of reinsurance
 
 
   $ 9,688        
     

 

 

       

 

(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,
2017
 

Net outstanding liabilities

  

Homeowners multi-peril and dwelling fire insurance

   $ 82,705  

Homeowners Wind-only insurance

     1,308  

Losses specific to any hurricane prior to 2017

     4,109  

Losses specific to Hurricane Irma (2017)

     9,688  

Other short-duration insurance lines

     8  
  

 

 

 

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

     97,818  
  

 

 

 

Reinsurance recoverables

     100,760  
  

 

 

 

Total gross liability for unpaid losses and loss adjustment expenses

   $ 198,578  
  

 

 

 

The following is supplementary and unaudited information about average historical claims duration as of December 31, 2017:

 

Average Annual Percentage Payout of Incurred Losses by Age,

Net of Reinsurance

 

Years

   1     2     3     4     5     6  

Homeowners multi-peril and dwelling fire insurance

     53.8     24.4     10.1     5.5     2.9     1.9

Homeowners Wind-only insurance

     37.2     33.2     8.7     *       *       *  

Losses specific to any hurricane prior to 2017

     51.0     32.3     —         —         —         —    

Losses specific to Hurricane Irma (2017)

     81.9     —         —         —         —         —    

 

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