| Short duration contracts | The Company’s reserves for losses and loss adjustment expenses primarily relate to short-duration contracts with various characteristics ( e.g. , type of coverage, geography, claims duration). The Company considered such information in determining the level of disaggregation for disclosures related to its short-duration contracts, as detailed in the table below: Reportable segment Level of disaggregation Included lines of business Insurance Property energy, marine and aviation Property energy, marine and aviation Third party occurrence business Excess and surplus casualty (excluding contract binding); construction and national accounts; and other (including alternative market risks, excess workers’ compensation and employer’s liability insurance coverages) Third party claims-made business Professional lines Multi-line and other specialty Programs; contract binding (part of excess and surplus casualty); travel, accident and health; warranty and lenders solutions; and other (c ontract and commercial surety coverages) Reinsurance Casualty Casualty Property catastrophe Property catastrophe Property excluding property catastrophe Property excluding property catastrophe Marine and aviation Marine and aviation Other specialty Other specialty Mortgage Direct mortgage insurance in the U.S. Mortgage insurance on U.S. primary exposures The Company determined the following to be insignificant for disclosure purposes: (i) certain mortgage business, including non-U.S. primary business, second lien and student loan exposures, global mortgage reinsurance and participation in various GSE credit risk-sharing products and (ii) certain reinsurance business, including casualty clash and non-traditional lines. Such amounts are included as reconciling items. The Company is required to establish reserves for losses and loss adjustment expenses (“Loss Reserves”) that arise from the business the Company underwrites. Loss Reserves for the insurance, reinsurance and mortgage segments represent estimates of future amounts required to pay losses and loss adjustment expenses for insured or reinsured events which have occurred at or before the balance sheet date. Loss Reserves do not reflect contingency reserve allowances to account for future loss occurrences. Losses arising from future events will be estimated and recognized at the time the losses are incurred and could be substantial. Insurance Segment Loss Reserves for the insurance segment are comprised of estimated amounts for (1) reported losses (“case reserves”) and (2) incurred but not reported losses (“IBNR reserves”). Generally, claims personnel determine whether to establish a case reserve for the estimated amount of the ultimate settlement of individual claims. The estimate reflects the judgment of claims personnel based on general corporate reserving practices, the experience and knowledge of such personnel regarding the nature and value of the specific type of claim and, where appropriate, advice of counsel. The Company also contracts with a number of outside third party administrators in the claims process who, in certain cases, have limited authority to establish case reserves. The work of such administrators is reviewed and monitored by our claims personnel. Loss Reserves are also established to provide for loss adjustment expenses and represent the estimated expense of settling claims, including legal and other fees and the general expenses of administering the claims adjustment process. Periodically, adjustments to the case reserves may be made as additional information is reported or payments are made. IBNR reserves are established to provide for incurred claims which have not yet been reported at the balance sheet date as well as to adjust for any projected variance in case reserving. Actuaries estimate ultimate losses and loss adjustment expenses using various generally accepted actuarial methods applied to known losses and other relevant information. Like case reserves, IBNR reserves are adjusted as additional information becomes known or payments are made. The process of estimating reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain. Ultimate losses and loss adjustment expenses are generally determined by projection of claim emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future. In forecasting ultimate losses and loss adjustment expenses with respect to any line of business, past experience with respect to that line of business is the primary resource, developed through both industry and company experience, but cannot be relied upon in isolation. Uncertainties in estimating ultimate losses and loss adjustment expenses are magnified by the length of the time lag between when a claim actually occurs and when it is reported and settled. This time lag is sometimes referred to as the “claim-tail.” During this period additional facts regarding coverages written in prior accident years, as well as about actual claims and trends, may become known and, as a result, may lead to adjustments of the related Loss Reserves. If the Company determines that an adjustment is appropriate, the adjustment is recorded in the accounting period in which such determination is made. Accordingly, should Loss Reserves need to be increased or decreased in the future from amounts currently established, future results of operations would be negatively or positively impacted respectively. The Company authorizes managing general agents, general agents and other producers to write program business on the Company’s behalf within prescribed underwriting authorities. This delegated authority process introduces additional complexity to the actuarial determination of unpaid future losses and loss adjustment expenses. In order to monitor adherence to the underwriting guidelines given to such parties, the Company periodically performs underwriting and claims due diligence reviews. In determining ultimate losses and loss adjustment expenses, the cost to indemnify claimants, provide needed legal defense and other services for insureds and administer the investigation and adjustment of claims are considered. These claim costs are influenced by many factors that change over time, such as expanded coverage definitions as a result of new court decisions, inflation in costs to repair or replace damaged property, inflation in the cost of medical services and legislated changes in statutory benefits, as well as by the particular, unique facts that pertain to each claim. As a result, the rate at which claims arose in the past and the costs to settle them may not always be representative of what will occur in the future. The factors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurred losses from historical trends are frequently subject to multiple and conflicting interpretations. Changes in coverage terms or claims handling practices may also cause future experience and/or development patterns to vary from the past. A key objective of actuaries in developing estimates of ultimate losses and loss adjustment expenses, and resulting IBNR reserves, is to identify aberrations and systemic changes occurring within historical experience and adjust for them so that the future can be projected more reliably. Because of the factors previously discussed, this process requires the substantial use of informed judgment and is inherently uncertain. Although Loss Reserves are initially determined based on underwriting and pricing analyses, the Company’s insurance segment applies several generally accepted actuarial methods, as discussed below, on a quarterly basis to evaluate the Loss Reserves, in addition to the expected loss method, in particular for Loss Reserves from more mature accident years (the year in which a loss occurred). Each quarter, as part of the reserving process, the segments’ actuaries reaffirm that the assumptions used in the reserving process continue to form a sound basis for the projection of liabilities. If actual loss activity differs substantially from expectations based on historical information, an adjustment to Loss Reserves may be supported. The Company places more or less reliance on a particular actuarial method based on the facts and circumstances at the time the estimates of Loss Reserves are made. These methods generally fall into one of the following categories or are hybrids of one or more of the following categories: • Expected loss methods - these methods are based on the assumption that ultimate losses vary proportionately with premiums. Expected loss and loss adjustment expense ratios are typically developed based upon the information derived by underwriters and actuaries during the initial pricing of the business, supplemented by industry data available from organizations, such as statistical bureaus and consulting firms, where appropriate. These ratios consider, among other things, rate increases and changes in terms and conditions that have been observed in the market. Expected loss methods are useful for estimating ultimate losses and loss adjustment expenses in the early years of long-tailed lines of business, when little or no paid or incurred loss information is available, and is commonly applied when limited loss experience exists for a company. • Historical incurred loss development methods - these methods assume that the ratio of losses in one period to losses in an earlier period will remain constant in the future. These methods use incurred losses ( i.e. , the sum of cumulative historical loss payments plus outstanding case reserves) over discrete periods of time to estimate future losses. Historical incurred loss development methods may be preferable to historical paid loss development methods because they explicitly take into account open cases and the claims adjusters’ evaluations of the cost to settle all known claims. However, historical incurred loss development methods necessarily assume that case reserving practices are consistently applied over time. Therefore, when there have been significant changes in how case reserves are established, using incurred loss data to project ultimate losses may be less reliable than other methods. • Historical paid loss development methods - these methods, like historical incurred loss development methods, assume that the ratio of losses in one period to losses in an earlier period will remain constant. These methods use historical loss payments over discrete periods of time to estimate future losses and necessarily assume that factors that have affected paid losses in the past, such as inflation or the effects of litigation, will remain constant in the future. Because historical paid loss development methods do not use incurred losses to estimate ultimate losses, they may be more reliable than the other methods that use incurred losses in situations where there are significant changes in how incurred losses are established by a company’s claims adjusters. However, historical paid loss development methods are more leveraged (meaning that small changes in payments have a larger impact on estimates of ultimate losses) than actuarial methods that use incurred losses because cumulative loss payments take much longer to equal the expected ultimate losses than cumulative incurred amounts. In addition, and for similar reasons, historical paid loss development methods are often slow to react to situations when new or different factors arise than those that have affected paid losses in the past. • Adjusted historical paid and incurred loss development methods - these methods take traditional historical paid and incurred loss development methods and adjust them for the estimated impact of changes from the past in factors such as inflation, the speed of claim payments or the adequacy of case reserves. Adjusted historical paid and incurred loss development methods are often more reliable methods of predicting ultimate losses in periods of significant change, provided the actuaries can develop methods to reasonably quantify the impact of changes. As such, these methods utilize more judgment than historical paid and incurred loss development methods. • Bornhuetter-Ferguson (“B-F”) paid and incurred loss methods - these methods utilize actual paid and incurred losses and expected patterns of paid and incurred losses, taking the initial expected ultimate losses into account to determine an estimate of expected ultimate losses. The B-F paid and incurred loss methods are useful when there are few reported claims and a relatively less stable pattern of reported losses. • Frequency-Severity methods - These methods utilize actual paid and incurred claim experience, but break the data down into its component pieces: claim counts, often expressed as a ratio to exposure or premium (frequency), and average claim size (severity). The component pieces are projected to an ultimate level and multiplied together to result in an estimate of ultimate loss. These methods are especially useful when the severity of claims can be confined to a relatively stable range of estimated ultimate average claim value. • Additional analyses - other methodologies are often used in the reserving process for specific types of claims or events, such as catastrophic or other specific major events. These include vendor catastrophe models, which are typically used in the estimation of Loss Reserves at the early stage of known catastrophic events before information has been reported to an insurer or reinsurer. In the initial reserving process for short-tail insurance lines (consisting of property, energy, marine and aviation and other exposures including travel, accident and health, and warranty and lenders solutions), the Company relies on a combination of the reserving methods discussed above. For catastrophe-exposed business, the reserving process also includes the usage of catastrophe models for known events and a heavy reliance on analysis of individual catastrophic events and management judgment. The development of losses on short-tail business can be unstable, especially for policies characterized by high severity, low frequency losses. As time passes, for a given accident year, additional weight is given to the paid and incurred B-F loss development methods and eventually to the historical paid and incurred loss development methods in the reserving process. The Company makes a number of key assumptions in their reserving process, including that historical paid and reported development patterns are stable, catastrophe models provide useful information about our exposure to catastrophic events that have occurred and underwriters’ judgment as to potential loss exposures can be relied on. The expected loss ratios used in the initial reserving process for short-tail business have varied over time due to changes in pricing, reinsurance structure, estimates of catastrophe losses, policy changes (such as attachment points, class and limits) and geographical distribution. As losses in short-tail lines are reported relatively quickly, expected loss ratios are selected for the current accident year based upon actual attritional loss ratios for earlier accident years, adjusted for rate changes, inflation, changes in reinsurance programs and expected attritional losses based on modeling. Furthermore, ultimate losses for short-tail business are known in a reasonably short period of time. In the initial reserving process for medium-tail and long-tail insurance lines ( consisting of third party occurrence business, third party claims made business, and other exposures including surety, programs and contract binding exposures), the Company primarily relies on the expected loss method. The development of the Company’s medium-tail and long-tail business may be unstable, especially if there are high severity major events, as a portion of the Company’s casualty business is in high excess layers. As time passes, for a given accident year, additional weight is given to the paid and incurred B-F loss development methods and historical paid and incurred loss development methods in the reserving process. The Company makes a number of key assumptions in reserving for medium-tail and long-tail lines, including that the pricing loss ratio is the best estimate of the ultimate loss ratio at the time the policy is entered into, that the loss development patterns, which are based on a combination of company and industry loss development patterns and adjusted to reflect differences in the insurance segment’s mix of business, are reasonable and that claims personnel and underwriters analyses of our exposure to major events are assumed to be the best estimate of exposure to the known claims on those events. The expected loss ratios used in the initial reserving process for medium-tail and long-tail business for recent accident years have varied over time, in some cases significantly, from earlier accident years. As the credibility of historical experience for earlier accident years increases, the experience from these accident years will be given a greater weighting in the actuarial analysis to determine future accident year expected loss ratios, adjusted for changes in pricing, loss trends, terms and conditions and reinsurance structure. From time to time, the Company enters into loss portfolio transfer and adverse development cover reinsurance agreements accounted for as retroactive reinsurance. These agreements transfer Loss Reserves and future favorable or adverse development on certain runoff programs and certain third party occurrence business, within multi-line and other specialty business (the “Covered Lines”). As incurred losses and allocated loss adjustment expenses for the Covered Lines are ceded to the reinsurer, the Company is not exposed to changes in the amount, timing and uncertainty of cash flows arising from the Covered Lines. To avoid distortion, the incurred losses and allocated loss adjustment expenses and cumulative paid losses and loss adjustment expenses for the Covered Lines are excluded entirely from the tables below. Unpaid loss and loss adjustment expenses recoverable at December 31, 2022 included $280.2 million related to such reinsurance agreements. The following tables present information on the insurance segment’s short-duration insurance contracts: Property, energy, marine and aviation ($000’s except claim count) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2022 Total of IBNR liabilities plus expected development on reported claims Cumulative Year ended December 31, Accident year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 158,548 $ 156,147 $ 148,622 $ 142,889 $ 134,473 $ 133,400 $ 128,157 $ 126,825 $ 125,813 $ 124,868 $ 27 3,982 2014 148,104 145,679 147,248 136,050 132,166 134,192 134,895 134,803 133,605 1,674 3,557 2015 112,299 109,769 103,921 102,449 97,789 91,770 91,833 90,816 2,654 4,244 2016 104,002 100,843 105,184 100,003 95,989 92,108 87,618 61 5,704 2017 280,686 246,264 235,924 230,413 231,199 225,298 3,268 6,287 2018 180,981 186,030 173,693 170,057 170,411 7,177 5,048 2019 179,056 178,564 165,477 161,156 4,162 5,942 2020 359,394 329,362 335,747 28,330 8,546 2021 426,870 428,719 54,746 7,566 2022 521,750 208,080 8,965 Total $ 2,279,988 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2013 $ 32,216 $ 84,680 $ 110,432 $ 119,649 $ 121,779 $ 125,014 $ 122,894 $ 124,227 $ 124,381 $ 124,402 2014 25,849 53,632 77,764 84,061 87,681 98,423 115,253 122,165 122,792 2015 23,561 64,900 76,282 86,196 87,870 86,190 87,260 87,564 2016 24,684 83,218 98,303 97,089 94,570 90,808 87,232 2017 30,215 139,849 195,512 211,688 215,874 217,764 2018 30,026 102,285 134,858 142,838 149,663 2019 26,130 105,380 133,911 139,141 2020 55,619 194,487 251,055 2021 90,423 267,677 2022 100,476 Total 1,547,766 All outstanding liabilities before 2013, net of reinsurance 18,239 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 750,461 Third party occurrence business ($000’s except claim count) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2022 Total of IBNR liabilities plus expected development on reported claims Cumulative Year ended December 31, Accident year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 282,852 $ 296,668 $ 306,572 $ 301,622 $ 281,637 $ 274,246 $ 272,385 $ 269,297 $ 270,110 $ 263,430 $ 43,148 66,118 2014 329,718 335,587 338,505 342,759 339,403 343,904 342,641 343,286 345,024 60,263 75,557 2015 358,769 391,570 398,565 391,797 391,132 382,427 386,465 379,226 75,540 78,507 2016 389,530 394,190 405,803 399,315 374,654 367,586 363,453 93,800 78,576 2017 417,097 417,662 422,360 412,231 406,857 406,165 114,603 84,418 2018 430,128 452,879 450,647 451,164 458,050 156,700 77,685 2019 455,928 487,080 480,535 471,279 195,283 84,985 2020 606,640 616,314 640,231 309,019 90,795 2021 621,972 662,716 431,302 89,718 2022 688,082 614,366 70,380 Total $ 4,677,656 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2013 $ 6,840 $ 29,215 $ 71,335 $ 101,153 $ 122,045 $ 149,012 $ 164,090 $ 174,591 $ 184,444 $ 192,159 2014 9,200 40,226 71,473 112,541 161,935 191,108 211,440 223,895 237,135 2015 11,110 44,514 88,411 139,364 181,505 211,510 227,439 249,399 2016 11,679 41,920 87,543 136,759 164,534 194,637 215,481 2017 13,391 52,309 99,806 134,988 165,468 220,660 2018 16,991 63,776 115,049 154,138 198,502 2019 18,375 73,075 121,646 172,948 2020 24,407 76,567 154,902 2021 26,235 90,791 2022 23,981 Total 1,755,958 All outstanding liabilities before 2013, net of reinsurance 263,297 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 3,184,995 Third party claims-made business ($000’s except claim count) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2022 Total of IBNR liabilities plus expected development on reported claims Cumulative Year ended December 31, Accident year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 301,608 $ 320,266 $ 324,044 $ 320,177 $ 294,372 $ 290,852 $ 281,642 $ 271,156 $ 273,607 $ 281,584 $ 14,639 14,953 2014 264,273 279,410 298,541 278,556 281,271 297,248 291,498 287,573 296,153 21,206 15,482 2015 258,740 277,358 276,256 259,830 255,207 252,263 267,725 266,758 18,198 14,392 2016 274,996 291,258 308,080 314,412 321,764 326,960 329,534 29,356 15,083 2017 270,272 285,738 311,724 308,172 323,128 316,673 45,042 15,198 2018 272,543 314,112 319,646 336,106 347,449 61,612 15,934 2019 289,128 317,312 317,363 322,178 93,422 15,858 2020 383,497 413,156 423,375 187,245 15,438 2021 514,676 517,975 351,736 15,751 2022 657,664 575,484 18,190 Total $ 3,759,343 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2013 $ 19,007 $ 87,386 $ 137,857 $ 179,261 $ 197,861 $ 216,984 $ 238,730 $ 245,423 $ 246,813 $ 253,570 2014 13,814 63,288 129,409 172,722 207,447 229,314 243,137 249,307 260,333 2015 9,059 52,007 100,030 126,431 174,084 193,105 216,892 220,871 2016 10,537 68,157 127,203 158,127 205,478 242,300 256,705 2017 9,281 67,529 112,975 143,064 195,788 232,508 2018 12,241 68,244 118,105 158,389 208,063 2019 12,373 65,286 122,046 154,630 2020 17,070 87,248 151,750 2021 23,253 90,487 2022 25,244 Total 1,854,161 All outstanding liabilities before 2013, net of reinsurance 86,120 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 1,991,302 Multi-line and other specialty ($000’s except claim count) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2022 Total of IBNR liabilities plus expected development on reported claims Cumulative Year ended December 31, Accident year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 $ 264,243 $ 272,335 $ 263,631 $ 263,928 $ 251,894 $ 253,271 $ 248,634 $ 245,825 $ 245,069 $ 244,191 $ 2,761 86,371 2014 301,548 325,705 318,453 318,268 317,197 313,221 310,051 309,061 310,977 3,968 130,844 2015 334,684 357,939 356,777 364,815 356,657 349,432 347,206 344,974 5,632 170,579 2016 408,686 430,976 427,829 416,108 409,987 408,004 408,716 8,616 189,406 2017 482,436 501,026 491,347 500,947 504,322 512,717 12,776 229,570 2018 512,406 564,563 562,848 565,116 564,693 21,722 256,621 2019 566,864 612,179 640,262 651,004 38,672 250,441 2020 618,340 569,123 515,016 87,261 162,214 2021 635,186 618,581 153,336 113,165 2022 678,479 425,107 89,859 Total $ 4,849,348 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2013 $ 86,680 $ 150,925 $ 180,428 $ 213,461 $ 225,324 $ 234,330 $ 236,375 $ 237,293 $ 238,321 $ 238,257 2014 107,726 196,899 234,267 267,079 281,195 291,727 293,131 294,630 295,896 2015 138,153 236,108 277,850 305,895 320,971 326,652 330,431 331,320 2016 175,948 304,743 341,789 362,823 379,305 385,314 390,350 2017 181,102 342,385 380,696 423,480 446,002 471,978 2018 211,711 389,047 442,643 479,824 508,649 2019 211,970 385,794 486,882 548,844 2020 171,994 309,106 358,967 2021 156,992 334,549 2022 177,092 Total 3,655,902 All outstanding liabilities before 2013, net of reinsurance 22,275 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 1,215,721 The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance, as of December 31, 2022: Average annual percentage payout of incurred losses and allocated loss adjustment expenses 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 Property, energy, marine and aviation 20.3 % 44.2 % 18.4 % 5.2 % 1.5 % 1.1 % 2.0 % 2.2 % 0.3 % — % Third party occurrence business 3.4 % 9.3 % 11.8 % 11.2 % 9.7 % 9.7 % 5.4 % 4.5 % 3.8 % 2.9 % Third party claims-made business 4.1 % 17.2 % 17.2 % 11.4 % 13.6 % 8.8 % 6.4 % 2.0 % 2.1 % 2.4 % Multi-line and other specialty 34.3 % 28.9 % 10.9 % 8.8 % 4.5 % 3.1 % 0.9 % 0.4 % 0.4 % — % Reinsurance Segment Loss Reserves for the Company’s reinsurance segment are comprised of (1) case reserves, (2) additional case reserves (“ACRs”) and (3) IBNR reserves. The Company receives reports of claims notices from ceding companies and records case reserves based upon the amount of reserves recommended by the ceding company. Case reserves may be supplemented by ACRs, which may be estimated by the Company’s claims personnel ahead of official notification from the ceding company, or when judgment regarding the size or severity of the known event differs from the ceding company. In certain instances, the Company establishes ACRs even when the ceding company does not report any liability on a known event. In addition, specific claim information reported by ceding companies or obtained through claim audits can alert the Company to emerging trends such as changing legal interpretations of coverage and liability, claims from unexpected sources or classes of business, and significant changes in the frequency or severity of individual claims. Such information is often used in the process of estimating IBNR reserves. IBNR reserves are established to provide for incurred claims which have not yet been reported at the balance sheet date as well as to adjust for any projected variance in case reserving. Actuaries estimate ultimate losses and loss adjustment expenses using various generally accepted actuarial methods applied to known losses and other relevant information. Like case reserves, IBNR reserves are adjusted as additional information becomes known or payments are made. The process of estimating Loss Reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain. The estimation of Loss Reserves for the reinsurance segment is subject to the same risk factors as the estimation of Loss Reserves for the insurance segment. In addition, the inherent uncertainties of estimating such reserves are even greater for reinsurers, due primarily to the following factors: (1) the claim-tail for reinsurers is generally longer because claims are first reported to the ceding company and then to the reinsurer through one or more intermediaries, (2) the reliance on premium estimates, where reports have not been received from the ceding company, in the reserving process, (3) the potential for writing a number of reinsurance contracts with different ceding companies with the same exposure to a single loss event, (4) the diversity of loss development patterns among different types of reinsurance contracts, (5) the necessary reliance on the ceding companies for information regarding reported claims and (6) the differing reserving practices among ceding companies. Ultimate losses and loss adjustment expenses are generally determined by projection of claim emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future. As with the insurance segment, the process of estimating Loss Reserves for the reinsurance segment involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain. As discussed above, such uncertainty is greater for reinsurers compared to insurers. As a result, our reinsurance operations obtain information from numerous sources to assist in the process. Pricing actuaries from the reinsurance segment devote considerable effort to understanding and analyzing a ceding company’s operations and loss history during the underwriting of the business, using a combination of ceding company and industry statistics. Such statistics normally include historical premium and loss data by class of business, individual claim information for larger claims, distributions of insurance limits provided, loss reporting and payment patterns, and rate change history. This analysis is used to project expected loss ratios for each treaty during the upcoming contract period. As mentioned above, there can be a considerable time lag from the time a claim is reported to a ceding company to the time it is reported to the reinsurer. The lag can be several years in some cases and may be attributed to a number of reasons, including the time it takes to investigate a claim, delays associated with the litigation process, the deterioration in a claimant’s physical condition many years after an accident occurs, the case reserving approach of the ceding company, etc. In the reserving process, the Company assumes that such lags are predictable, on average, over time and therefore the lags are contemplated in the loss reporting patterns used in their actuarial methods. This means that the reinsurance segment must rely on estimates for a longer period of time than does an insurance company. Backlogs in the recording of assumed reinsurance can also complicate the accuracy of loss reserve estimation. As of December 31, 2022 there were no significant backlogs related to the processing of assumed reinsurance information at our reinsurance operations. The reinsurance segment relies heavily on information reported by ceding companies, as discussed above. In order to determine the accuracy and completeness of such information, underwriters, actuaries, and claims personnel often perform audits of ceding companies and regularly review information received from ceding companies for unusual or unexpected results. Material findings are usually discussed with the ceding companies. The Company sometimes encounters situations where they determine that a claim presentation from a ceding company is not in accordance with contract terms. In these situations, the Company attempts to resolve the dispute with the ceding company. Most situations are resolved amicably and without the need for litigation or arbitration. However, in the infrequent situations where a resolution is not possible, the Company will vigorously defend its position in such disputes. Although Loss Reserves are initially determined based on underwriting and pricing analysis, the Company applies several generally accepted actuarial methods, as discussed above, on a quarterly basis to evaluate its Loss Reserves in addition to the expected loss method, in particular for reserves from more mature underwriting years (the year in which business is underwritten). Each quarter, as part of the reserving process, the Company’s actuaries reaffirm that the assumptions used in the reserving process continue to form a sound basis for projection of liabilities. If actual loss activity differs substantially from expectations based on |
