| Reserves For Losses And Loss Expenses | Reserves for Losses and Loss Expenses The Company's reserves for losses and loss expenses are comprised of case reserves and incurred but not reported liabilities (IBNR). When a claim is reported, a case reserve is established for the estimated ultimate payment based upon known information about the claim. As more information about the claim becomes available over time, case reserves are adjusted up or down as appropriate. Reserves are also established on an aggregate basis to provide for IBNR liabilities and expected loss reserve development on reported claims. Loss reserves included in the Company’s financial statements represent management’s best estimates based upon an actuarially derived point estimate and other considerations. The Company uses a variety of actuarial techniques and methods to derive an actuarial point estimate for each business. These methods may include paid loss development, incurred loss development, paid and incurred Bornhuetter-Ferguson methods and frequency and severity methods. In circumstances where one actuarial method is considered more credible than the others, that method is used to set the point estimate. The actuarial point estimate may also be based on a judgmental weighting of estimates produced from each of the methods considered. Industry loss experience is used to supplement the Company’s own data in selecting “tail factors” in areas where the Company’s own data is limited. The actuarial data is analyzed by line of business, coverage and accident or policy year, as appropriate, for each business. The establishment of the actuarially derived loss reserve point estimate also includes consideration of qualitative factors that may affect the ultimate losses. These qualitative considerations include, among others, the impact of re-underwriting initiatives, changes in claims handling procedures, changes in the mix of business, changes in distribution sources and changes in policy terms and conditions. The key assumptions used to arrive at the best estimate of loss reserves are the expected loss ratios, rate of loss cost inflation, and reported and paid loss emergence patterns. Expected loss ratios represent management’s expectation of losses at the time the business is priced and written, before any actual claims experience has emerged. This expectation is a significant determinant of the estimate of loss reserves for recently written business where there is little paid or incurred loss data to consider. Expected loss ratios are generally derived from historical loss ratios adjusted for the impact of rate changes, loss cost trends and known changes in the type of risks underwritten. Expected loss ratios are estimated for each key line of business within each business. Expected loss cost inflation is particularly important for the long-tail lines, such as excess casualty, and claims with a high medical component, such as workers’ compensation. Reported and paid loss emergence patterns are used to project current reported or paid loss amounts to their ultimate settlement value. Loss development factors are based on the historical emergence patterns of paid and incurred losses, and are derived from the Company’s own experience and industry data. The paid loss emergence pattern is also significant to excess and assumed workers’ compensation reserves because those reserves are discounted to their estimated present value based upon such estimated payout patterns. Loss frequency and severity are measures of loss activity that are considered in determining the key assumptions described in our discussion of loss and loss expense reserves, including expected loss ratios, rate of loss cost inflation and reported and paid loss emergence patterns. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations. Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects our ability to accurately predict loss frequency (loss frequencies are more predictable for lines with short reporting lags) as well as the amount of reserves needed for incurred but not reported losses (less IBNR is required for lines with short reporting lags). As a result, loss reserves for lines with short reporting lags are likely to have less variation from initial loss estimates. For lines with short reporting lags, which include commercial automobile, primary workers’ compensation, other liability (claims-made) and property business, the key assumption is the loss emergence pattern used to project ultimate loss estimates from known losses paid or reported to date. For lines of business with long reporting lags, which include other liability (occurrence), products liability, excess workers’ compensation and liability reinsurance, the key assumption is the expected loss ratio since there is often little paid or incurred loss data to consider. Historically, the Company has experienced less variation from its initial loss estimates for lines of businesses with short reporting lags than for lines of business with long reporting lags. The key assumptions used in calculating the most recent estimate of the loss reserves are reviewed each quarter and adjusted, to the extent necessary, to reflect the latest reported loss data, current trends and other factors observed. A claim may be defined as an event, as a claimant (number of parties claiming damages from an event) or by exposure type (e.g., an event may give rise to two parties, each claiming loss for bodily injury and property damage). The most commonly used claim count method is by event. Most of the Company's businesses use the number of events to define and quantify the number of claims. However, in certain lines of business, where it is common for multiple parties to claim damages arising from a single event, a business may quantify claims on the basis of the number of separate parties involved in an event. This may be the case with businesses writing substantial automobile or transportation exposure. Claim counts for assumed reinsurance will vary based on whether the business is written on a facultative or treaty basis. Further variability as respects treaty claim counts may be reflective of the nature of the treaty, line of business coverage, and type of participation such as quota share or excess of loss contracts. Accordingly, the claim counts have been excluded from the below Reinsurance & Monoline Excess segment tables due to this variability. The claim count information set forth in the tables presented below may not provide an accurate reflection of ultimate loss payouts by product line. The following tables present undiscounted incurred and paid claims development as of December 31, 2022, net of reinsurance, as well as cumulative claim frequency and the total of incurred but not reported liabilities (IBNR). The information about incurred and paid claims development for the years ended December 31, 2013 to 2021 is presented as supplementary information. To enhance the comparability of the loss development data, the Company has removed the impact of foreign exchange rate movements by using the December 31, 2022 exchange rate for all periods. Insurance Other Liability (In thousands) Loss and Loss Expenses Incurred, Net of Reinsurance As of December 31, 2022 For the Year Ended December 31, Unaudited IBNR Cumulative Number of Reported Claims Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 749,261 $ 788,581 $ 779,908 $ 779,706 $ 800,593 $ 806,914 $ 801,689 $ 805,915 $ 807,998 $ 809,358 $ 21,362 26 2014 844,832 845,564 843,501 848,138 861,313 867,400 862,749 861,382 862,630 35,808 28 2015 948,389 984,262 958,734 961,761 964,301 974,345 981,071 1,010,796 55,430 27 2016 1,016,106 1,009,051 1,018,253 1,029,821 1,043,948 1,059,897 1,091,569 96,310 28 2017 1,065,550 1,099,396 1,121,833 1,138,785 1,178,604 1,249,129 142,974 28 2018 1,103,900 1,131,549 1,121,317 1,156,157 1,232,803 181,880 27 2019 1,240,560 1,237,336 1,237,824 1,294,681 292,625 28 2020 1,339,565 1,212,790 1,158,880 489,718 22 2021 1,534,580 1,390,790 841,854 23 2022 1,823,680 1,507,284 20 Total $ 11,924,316 Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 63,243 $ 188,023 $ 330,127 $ 470,566 $ 585,608 $ 646,257 $ 691,495 $ 717,908 $ 738,858 $ 761,461 2014 78,705 190,419 337,426 478,924 592,828 678,490 728,718 758,098 781,533 2015 82,638 210,151 381,328 536,855 674,665 755,641 814,191 872,657 2016 69,407 208,828 389,862 557,998 676,735 766,515 870,981 2017 79,887 255,603 453,097 638,934 774,738 930,630 2018 86,798 264,299 435,729 615,753 806,869 2019 88,195 275,343 471,239 704,928 2020 72,232 225,068 423,283 2021 76,612 267,685 2022 93,519 Total $ 6,513,546 Reserves for loss and loss adjustment expenses before 2013, net of reinsurance 125,357 Reserves for loss and loss adjustment expenses, net of reinsurance $ 5,536,127 Workers' Compensation (In thousands) Loss and Loss Expenses Incurred, Net of Reinsurance As of December 31, 2022 For the Year Ended December 31, Unaudited IBNR Cumulative Number of Reported Claims Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 552,570 $ 547,295 $ 546,995 $ 543,238 $ 547,000 $ 542,274 $ 541,926 $ 540,322 $ 538,503 $ 534,948 $ 11,473 53 2014 639,436 637,307 627,767 617,242 615,435 604,030 600,194 602,000 598,977 21,528 57 2015 712,800 690,525 650,997 641,169 626,432 620,741 617,478 612,687 29,213 58 2016 702,716 696,339 684,700 660,520 651,278 657,972 654,385 36,834 58 2017 762,093 733,505 689,622 673,216 683,880 682,153 41,944 58 2018 778,964 724,697 715,055 724,056 721,170 43,766 56 2019 784,281 721,018 732,762 734,034 67,254 54 2020 725,245 716,430 704,008 96,322 42 2021 742,687 701,703 149,447 45 2022 772,620 348,348 41 Total $ 6,716,685 Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 117,900 $ 277,538 $ 363,028 $ 414,160 $ 447,894 $ 466,580 $ 479,104 $ 489,075 $ 496,809 $ 502,181 2014 148,405 319,743 412,611 471,235 503,915 521,141 531,475 538,914 547,894 2015 139,320 323,744 421,734 477,541 512,933 531,512 544,849 557,215 2016 142,998 338,835 446,072 504,850 537,861 558,934 572,669 2017 153,456 362,299 468,817 525,753 559,198 583,258 2018 171,006 397,464 508,546 574,889 613,675 2019 184,715 397,376 515,914 581,003 2020 172,478 380,454 485,203 2021 172,729 384,867 2022 180,982 Total $ 5,008,947 Reserves for loss and loss adjustment expenses before 2013, net of reinsurance 214,233 Reserves for loss and loss adjustment expenses, net of reinsurance $ 1,921,971 Professional Liability (In thousands) Loss and Loss Expenses Incurred, Net of Reinsurance As of December 31, 2022 For the Year Ended December 31, Unaudited IBNR Cumulative Number of Reported Claims Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 265,061 $ 244,556 $ 241,046 $ 246,943 $ 267,978 $ 276,566 $ 281,888 $ 279,824 $ 279,870 $ 283,216 $ 4,681 7 2014 250,740 244,574 257,309 241,376 236,961 255,850 254,868 254,243 253,244 12,284 7 2015 257,946 256,595 272,899 274,546 290,141 281,718 282,065 286,271 19,949 8 2016 309,417 323,222 360,110 400,799 438,065 467,545 463,102 33,241 9 2017 333,267 332,400 338,723 377,410 384,416 393,409 53,786 10 2018 334,848 322,176 333,408 359,566 382,409 73,828 10 2019 336,129 332,385 345,614 354,283 93,387 11 2020 394,107 375,577 337,961 159,767 11 2021 524,879 471,266 315,877 11 2022 648,941 543,483 10 Total $ 3,874,102 Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 23,295 $ 63,503 $ 118,767 $ 176,079 $ 204,955 $ 246,616 $ 255,863 $ 261,106 $ 267,776 $ 273,094 2014 19,225 83,063 137,341 174,524 197,272 213,888 225,236 234,459 237,145 2015 20,331 85,047 139,205 186,688 215,408 232,143 239,150 246,031 2016 28,517 102,173 201,019 254,872 296,863 356,812 404,742 2017 36,503 96,312 162,829 243,088 261,225 306,713 2018 28,101 99,598 155,212 198,697 244,284 2019 31,674 97,466 147,985 200,521 2020 28,106 80,408 129,168 2021 28,586 86,056 2022 33,446 Total $ 2,161,200 Reserves for loss and loss adjustment expenses before 2013, net of reinsurance 36,484 Reserves for loss and loss adjustment expenses, net of reinsurance $ 1,749,386 Commercial Automobile (In thousands) Loss and Loss Expenses Incurred, Net of Reinsurance As of December 31, 2022 For the Year Ended December 31, Unaudited IBNR Cumulative Number of Reported Claims Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 327,514 $ 349,136 $ 368,894 $ 376,243 $ 366,646 $ 366,166 $ 365,275 $ 364,207 $ 364,439 $ 364,607 $ 103 44 2014 363,891 385,241 416,802 414,732 412,120 411,920 407,470 406,589 407,970 403 47 2015 389,577 415,446 421,522 429,608 430,557 428,981 426,107 427,923 1,362 53 2016 429,329 429,074 440,334 441,408 438,192 437,884 439,682 2,244 52 2017 430,440 428,419 430,198 434,170 439,991 444,472 4,800 47 2018 442,610 462,544 478,966 494,315 521,667 10,720 46 2019 483,019 488,291 504,813 530,876 22,483 45 2020 523,736 428,759 442,163 31,172 30 2021 614,422 596,810 111,412 38 2022 792,553 342,905 40 Total $ 4,968,723 Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 142,929 $ 218,596 $ 267,253 $ 321,855 $ 342,961 $ 352,792 $ 361,499 $ 362,252 $ 362,624 $ 364,147 2014 155,564 237,648 326,854 364,054 392,658 400,577 403,273 404,259 405,004 2015 159,987 263,663 323,429 368,448 396,018 409,426 415,170 418,993 2016 183,160 277,665 339,657 388,554 407,989 418,499 426,955 2017 180,545 267,326 326,861 371,761 401,844 419,545 2018 180,056 281,475 350,110 412,874 463,117 2019 185,236 290,124 374,479 440,378 2020 142,815 228,357 308,451 2021 180,860 319,941 2022 253,206 Total $ 3,819,737 Reserves for loss and loss adjustment expenses before 2013, net of reinsurance 3,731 Reserves for loss and loss adjustment expenses, net of reinsurance $ 1,152,717 Short-tail lines (In thousands) Loss and Loss Expenses Incurred, Net of Reinsurance As of December 31, 2022 For the Year Ended December 31, Unaudited IBNR Cumulative Number of Reported Claims Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 565,391 $ 573,905 $ 565,810 $ 549,518 $ 548,169 $ 544,681 $ 542,863 $ 542,148 $ 541,857 $ 541,728 $ 1,125 25 2014 691,971 697,845 659,563 658,252 659,230 659,568 662,012 660,250 658,557 1,549 30 2015 736,523 726,287 723,206 721,789 713,899 712,361 710,663 710,978 3,842 32 2016 771,390 775,308 762,460 757,009 751,530 753,952 752,604 3,363 34 2017 752,727 753,326 747,630 747,003 746,603 747,869 8,195 42 2018 759,634 748,931 746,265 744,544 742,289 11,491 48 2019 721,073 701,241 691,015 684,708 18,311 43 2020 900,683 904,580 922,333 24,934 38 2021 828,187 832,183 57,246 36 2022 944,842 235,121 32 Total $ 7,538,091 Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 310,750 $ 480,140 $ 526,031 $ 527,789 $ 534,569 $ 535,756 $ 536,416 $ 537,582 $ 538,985 $ 539,081 2014 368,865 587,607 609,948 628,440 643,619 650,816 653,272 653,784 654,089 2015 392,921 608,748 664,084 686,029 695,563 701,341 708,065 708,214 2016 416,611 669,891 711,385 726,549 731,651 738,390 739,244 2017 445,285 689,662 718,538 730,688 734,509 741,685 2018 414,910 661,741 708,214 725,138 725,228 2019 404,975 615,869 645,374 657,819 2020 460,434 784,670 845,714 2021 405,512 698,092 2022 472,024 Total $ 6,781,190 Reserves for loss and loss adjustment expenses before 2013, net of reinsurance 4,727 Reserves for loss and loss adjustment expenses, net of reinsurance $ 761,628 Reinsurance & Monoline Excess Casualty (In thousands) Loss and Loss Expenses Incurred, Net of Reinsurance As of December 31, 2022 For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 IBNR 2013 $ 318,365 $ 269,340 $ 272,475 $ 282,307 $ 291,105 $ 298,317 $ 302,595 $ 301,415 $ 302,672 $ 302,135 $ 12,543 2014 319,454 318,904 318,443 330,382 324,693 324,150 335,883 336,990 341,649 16,184 2015 259,019 231,430 230,085 252,277 293,094 303,261 304,805 309,317 19,728 2016 240,655 252,638 245,268 267,850 301,663 301,355 310,451 24,928 2017 231,082 220,699 238,883 261,482 281,254 298,486 36,491 2018 221,193 210,397 230,790 246,898 261,148 44,474 2019 236,318 230,460 239,131 240,848 72,504 2020 299,602 293,345 289,878 136,865 2021 359,952 346,736 243,222 2022 446,676 402,204 Total $ 3,147,324 Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 28,945 $ 63,745 $ 108,852 $ 144,331 $ 178,060 $ 205,553 $ 225,882 $ 241,573 $ 254,273 $ 263,467 2014 21,297 68,374 115,779 155,070 197,996 227,448 252,155 271,512 284,360 2015 17,888 48,442 91,140 141,254 178,521 205,289 233,643 250,880 2016 19,904 61,770 100,200 140,299 171,719 205,354 225,077 2017 16,469 40,085 69,350 123,614 147,311 175,059 2018 11,076 40,953 77,498 109,474 141,553 2019 14,560 39,091 64,020 94,856 2020 20,750 49,664 81,789 2021 10,918 43,838 2022 11,595 Total $ 1,572,474 Reserves for loss and loss adjustment expenses before 2013, net of reinsurance 417,861 Reserves for loss and loss adjustment expenses, net of reinsurance $ 1,992,711 Monoline Excess (In thousands) Loss and Loss Expenses Incurred, Net of Reinsurance As of December 31, 2022 For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 IBNR 2013 $ 63,995 $ 50,355 $ 48,143 $ 44,162 $ 40,207 $ 35,120 $ 31,752 $ 29,758 $ 25,701 $ 23,306 $ 5,184 2014 63,561 57,650 49,570 45,823 41,671 42,541 42,618 40,652 35,707 7,484 2015 69,977 57,897 50,099 45,115 39,682 39,781 36,774 30,104 8,683 2016 72,657 70,281 71,404 64,957 65,485 65,222 61,432 13,634 2017 76,701 80,508 70,749 71,025 66,795 62,647 16,529 2018 77,820 72,505 71,448 66,180 57,847 20,826 2019 78,929 77,482 76,242 73,978 21,878 2020 84,354 83,468 80,452 35,638 2021 98,110 87,980 48,670 2022 98,923 66,865 Total $ 612,376 Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 647 $ 1,897 $ 3,588 $ 3,008 $ 3,396 $ 4,418 $ 5,349 $ 6,476 $ 8,805 $ 9,490 2014 377 2,341 3,354 4,175 5,808 7,595 11,154 11,938 13,491 2015 2,069 2,481 3,272 4,099 4,416 5,083 5,421 6,457 2016 2,498 4,783 5,573 5,928 7,685 9,883 11,819 2017 6,282 12,810 15,356 17,327 18,375 19,275 2018 6,141 8,230 9,368 10,359 12,414 2019 6,241 10,884 12,728 15,436 2020 4,869 8,699 10,471 2021 4,586 6,026 2022 5,898 Total $ 110,777 Reserves for loss and loss adjustment expenses before 2013, net of reinsurance 644,712 Reserves for loss and loss adjustment expenses, net of reinsurance $ 1,146,311 Property (In thousands) Loss and Loss Expenses Incurred, Net of Reinsurance As of December 31, 2022 For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 IBNR 2013 $ 141,380 $ 112,616 $ 114,100 $ 111,937 $ 112,572 $ 111,890 $ 109,697 $ 107,552 $ 106,316 $ 105,711 $ 72 2014 112,907 96,492 97,195 99,941 99,176 98,838 99,244 97,315 96,656 177 2015 127,118 117,452 131,625 130,301 129,398 131,071 130,642 131,342 1,061 2016 167,901 174,423 181,634 180,885 186,159 184,150 185,249 1,482 2017 206,560 200,394 199,410 197,978 191,867 192,379 1,209 2018 108,220 112,068 103,104 105,101 102,953 1,754 2019 103,113 77,062 81,858 81,014 3,637 2020 114,590 117,867 116,774 3,946 2021 133,938 146,761 28,634 2022 167,039 78,818 Total $ 1,325,878 Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Unaudited Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 36,577 $ 74,572 $ 92,625 $ 101,538 $ 104,323 $ 106,043 $ 107,603 $ 104,403 $ 104,388 $ 105,059 2014 38,780 66,829 82,119 88,257 91,390 93,099 94,565 95,198 95,633 2015 53,474 89,121 109,051 118,552 122,566 125,439 126,848 127,995 2016 78,920 133,516 157,404 168,506 175,949 178,060 182,411 2017 72,126 141,340 171,675 179,749 182,609 185,823 2018 33,991 65,079 82,259 87,736 94,870 2019 23,081 54,499 68,457 71,054 2020 26,574 65,575 86,888 2021 15,235 71,797 2022 25,584 Total $ 1,047,114 Reserves for loss and loss adjustment expenses before 2013, net of reinsurance 1,036 Reserves for loss and loss adjustment expenses, net of reinsurance $ 279,800 The reconciliation of the net incurred and paid claims development tables to the reserves for losses and loss expenses in the consolidated balance sheet is as follows: (In thousands) December 31, 2022 Undiscounted reserves for loss and loss expenses, net of reinsurance: Other liability $ 5,536,127 Workers' compensation 1,921,971 Professional liability 1,749,386 Commercial automobile 1,152,717 Short-tail lines 761,628 Other 124,586 Insurance 11,246,415 Casualty 1,992,711 Monoline excess 1,146,311 Property 279,800 Reinsurance & Monoline Excess 3,418,822 Total undiscounted reserves for loss and loss expenses, net of reinsurance $ 14,665,237 (In thousands) December 31, 2022 Due from reinsurers on unpaid claims: Other liability $ 730,029 Workers' compensation 221,769 Professional liability 1,019,810 Commercial automobile 67,895 Short-tail lines 414,549 Other 97,511 Insurance 2,551,563 Casualty 108,390 Monoline excess 35,926 Property 66,465 Reinsurance & Monoline Excess 210,781 Total due from reinsurers on unpaid claims $ 2,762,344 (In thousands) December 31, 2022 Loss reserve discount: Other liability $ — Workers' compensation (12,491) Professional liability — Commercial automobile — Short-tail lines — Other — Insurance (12,491) Casualty (84,668) Monoline excess (319,199) Property — Reinsurance & Monoline Excess (403,867) Total loss reserve discount $ (416,358) Total gross reserves for loss and loss expenses $ 17,011,223 The following is supplementary information regarding average historical claims duration as of December 31, 2022: Insurance Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Years 1 2 3 4 5 6 7 8 9 10 Other liability 6.9 % 13.7 % 16.3 % 16.0 % 13.1 % 9.2 % 6.7 % 4.2 % 2.7 % 2.8 % Workers' compensation 23.5 % 29.9 % 15.7 % 9.1 % 5.5 % 3.2 % 2.1 % 1.7 % 1.5 % 1.0 % Professional liability 7.4 % 17.6 % 17.7 % 15.7 % 9.1 % 10.3 % 5.1 % 2.6 % 3.0 % 1.9 % Commercial automobile 36.1 % 20.9 % 15.5 % 11.5 % 6.7 % 2.8 % 1.6 % 0.4 % 0.1 % 0.4 % Short-tail lines 54.7 % 32.8 % 5.8 % 2.0 % 1.0 % 0.8 % 0.4 % 0.1 % 0.2 % — % Reinsurance & Monoline Excess Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Years 1 2 3 4 5 6 7 8 9 10 Casualty 5.7 % 10.9 % 12.5 % 13.7 % 11.0 % 9.3 % 7.4 % 5.5 % 4.0 % 3.0 % Monoline excess 6.1 % 4.7 % 3.1 % 1.7 % 2.6 % 3.3 % 4.6 % 3.5 % 7.2 % 2.9 % Property 30.5 % 33.2 % 16.1 % 5.8 % 3.6 % 1.7 % 1.6 % 0.3 % 0.1 % — % The table below provides a reconciliation of the beginning and ending reserve balances: (In thousands) 2022 2021 2020 Net reserves at beginning of year $ 12,848,362 $ 11,620,393 $ 10,697,998 Cumulative effect adjustment resulting from changes in accounting principles (1) — — 5,927 Restated net reserves at beginning of period 12,848,362 11,620,393 10,703,925 Net provision for losses and loss expenses: Claims occurring during the current year (2) 5,774,713 4,921,191 4,432,937 Increase in estimates for claims occurring in prior years (3) 54,511 863 627 Loss reserve discount accretion 32,526 31,906 35,142 Total 5,861,750 4,953,960 4,468,706 Net payments for claims: Current year 1,068,577 887,896 921,054 Prior year 3,279,333 2,777,798 2,677,595 Total 4,347,910 3,665,694 3,598,649 Foreign currency translation (113,323) (60,297) 46,411 Net reserves at end of year 14,248,879 12,848,362 11,620,393 Ceded reserve at end of year 2,762,344 2,542,526 2,164,037 Gross reserves at end of year $ 17,011,223 $ 15,390,888 $ 13,784,430 Net change in premiums and losses occurring in prior years: Increase in estimates for claims occurring in prior years (3) $ (54,511) $ (863) $ (627) Retrospective premium adjustments for claims occurring in prior years (4) 18,106 7,510 16,807 Net premium and reserve development on prior years $ (36,405) $ 6,647 $ 16,180 _______________________________________ (1) The cumulative effect adjustment resulting from changes in accounting principals relates to the allowance for expected credit losses on reinsurance recoverables that commenced on January 1, 2020 due to the adoption of ASU 2016-13. See Note 1 for more details. (2) Claims occurring during the current year are net of loss reserve discounts of $35 million, $21 million and $10 million in 2022, 2021, and 2020, respectively. (3) The change in estimates for claims occurring in prior years is net of loss reserve discount. On an undiscounted basis, the estimates for claims occurring in prior years increased by $16 million in 2022, decreased by $19 million in 2021, and decreased by $21 million in 2020, respectively. (4) For certain retrospectively rated insurance polices and reinsurance agreements, changes in loss and loss expenses for prior years are offset by additional or return premiums. The COVID-19 global pandemic has impacted, and may further impact, the Company’s results through its effect on claim frequency and severity. Loss cost trends have been impacted and may be further impacted by COVID-19-related claims in certain lines of business. Losses incurred from COVID-19-related claims have been offset, to a certain extent, by lower claim frequency in certain lines of our businesses; however, as the economy and legal systems have reopened, the benefit of lower claim frequency has partially abated. The ultimate net impact of COVID-19 on the Company remains uncertain. New variants of the COVID-19 virus continue to create risks with respect to loss costs and the potential for renewed impact of the other effects of COVID-19 associated with economic conditions, inflation, and social distancing and work from home rules. Most of the COVID-19-related claims reported to the Company to date involve certain short-tailed lines of business, including contingency and event cancellation, business interruption, and film production delay. The Company has also received COVID-19-related claims for longer-tailed casualty lines of business such as workers’ compensation and other liability; however, the estimated incurred loss impact for these reported claims are not material at this time. Given the continuing uncertainty regarding the pandemic's pervasiveness, the future impact that the pandemic may have on claim frequency and severity remains uncertain at this time. The Company has estimated the potential COVID-19 impact to its contingency and event cancellation, workers’ compensation, and other lines of business under a number of possible scenarios; however, due to COVID-19’s continued evolving impact, there remains uncertainty around the Company’s COVID-19 reserves. In addition, should the pandemic continue or worsen as a result of new COVID-19 variants or otherwise, governments in the jurisdictions where we operate may impose restrictions, including lockdowns, as well as renew their efforts to expand policy coverage terms beyond the policy’s intended coverage. Accordingly, losses arising from these actions, and the other factors described above, could exceed the Company’s reserves established for those related policies. As of December 31, 2022, the Company had recognized losses for COVID-19-related claims activity, net of reinsurance, of approximately $341 million, of which $290 million relates to the Insurance segment and $51 million relates to the Reinsurance & Monoline Excess segment. Such $341 million of COVID-19-related losses included $337 million of reported losses and $4 million of IBNR. For the year ended December 31, 2022, the Company recognized current accident year losses for COVID-19-related claims activity, net of reinsurance, of approximately $5 million, of which $3 million relates to the Insurance segment and $2 million relates to the Reinsurance & Monoline Excess segment. Unfavorable prior year development (net of additional and return premiums) was $36 million in 2022. Insurance – Reserves for the Insurance segment developed unfavorably by $40 million in 2022 (net of additional and return premiums). The unfavorable development in the segment primarily related to COVID-19 losses at two businesses. These businesses wrote policies providing coverage for event cancellation and film production delay which were heavily impacted by losses directly caused by the COVID-19 pandemic. Most of this COVID-19 related unfavorable development emerged during the third quarter as a result of settlements of claims at values higher than our expectations. However, the Company believes that as a result of these settlements the remaining level of uncertainty around the ultimate value of its known COVID-19 claims has been significantly reduced. The unfavorable development mentioned above also includes favorable prior year development for the Insurance segment primarily attributable to the 2020 and 2021 accident years and unfavorable development on the 2015 through 2019 accident years. The favorable development on the 2020 and 2021 accident years was concentrated in certain casualty lines of business including general liability, professional liability, and workers’ compensation. The Company experienced lower reported claim frequency in these lines of business during 2020 and 2021 relative to historical averages, and continued to experience lower reported incurred losses relative to our expectations for these accident years as they developed during 2022. These trends began in 2020 and we believe were caused by the impacts of the COVID-19 pandemic, including for example, lockdowns, reduced driving/traffic and increased work from home. Due to the ongoing uncertainty regarding the ultimate impacts of the pandemic on accident years 2020 and 2021 incurred losses, the Company has been cautious in reacting to these lower trends in setting and updating its loss ratio estimates for these years. As these accident years have continued to mature, the Company has continued to recognize some of the favorable reported experience in its ultimate loss estimates made during 2022. The unfavorable development on the 2015 through 2019 accident years was concentrated in the general liability and professional liability, including medical professional, lines of business, as well as commercial auto liability. The development was driven by a larger than expected number of large losses reported. The Company believes social inflation is contributing to an increase in the frequency of large losses for these accident years. Social inflation can include higher settlement demands from plaintiffs, use of tactics such as litigation funding by the plaintiffs’ bar, negative public sentiment towards large businesses and corporations, and erosion of tort reforms, among others. Reinsurance & Monoline Excess – Reserves for the Reinsurance & Monoline Excess segment developed favorably by $4 million in 2022 (net of additional and return premiums). The overall favorable development for the segment was driven mainly by favorable development in excess workers compensation, substantially offset by unfavorable development in the professional liability and non-proportional reinsurance assumed liability lines of business. The favorable excess workers’ compensation development was spread across most prior accident years, including 2012 and prior years, and was driven by a review of the Company’s claim reporting patterns as well as a number of favorable claim settlements relative to expectations. The unfavorable professional liability and non-proportional reinsurance assumed liability development was concen |
