v3.25.4
RESERVE FOR LOSSES AND LAE
 12 Months Ended
Dec. 31, 2025
Insurance [Abstract]  
RESERVE FOR LOSSES AND LAE RESERVE FOR LOSSES AND LAE
Reserve for losses and LAE.
The following table provides a roll forward of the Company’s beginning and ending reserve for losses and LAE and is summarized for the periods indicated:
Years Ended December 31,
(Dollars in millions)202520242023
Gross reserves beginning of period$29,889 $24,604 $22,065 
Less reinsurance recoverables on unpaid losses(2,915)(2,098)(2,105)
Net reserves beginning of period26,975 22,506 19,960 
Incurred related to:
Current year10,202 9,967 8,432 
Prior years, excluding impact from retroactive reinsurance535 1,337 (5)
Prior years, impact from retroactive reinsurance (1)
122 — — 
Total incurred losses and LAE10,859 11,305 8,427 
Paid related to:
Current year1,253 1,258 1,379 
Prior years6,525 5,279 4,731 
Total paid losses and LAE7,778 6,537 6,110 
Foreign exchange/translation adjustment663 (298)229 
Retroactive reinsurance adjustment (1)
(122)— — 
Net reserves end of period30,597 26,975 22,506 
Plus reinsurance recoverables on unpaid losses (2)
3,715 2,915 2,098 
Gross reserves end of period$34,312 $29,889 $24,604 
(Some amounts may not reconcile due to rounding.)
(1) The consideration paid ($1,372 million) exceeds the ceded loss reserves at the inception of the Agreement ($1,250 million), as a result the Company recognized an immediate pre-tax loss of $122 million in earnings, in accordance with retroactive reinsurance accounting guidance. The Company recognized the loss by writing off the reinsurance recoverable of $122 million, which represents excess compensation for the uncertainty of future claims development, and is not a component of our best estimate of loss reserves.
(2) This amount excludes the unpaid recoverable of the adverse development reinsurance agreements of $1,253 million as of December 31, 2025.
Current year incurred losses were $10.2 billion, $10.0 billion and $8.4 billion in 2025, 2024 and 2023, respectively. The increase in current year incurred losses from 2024 to 2025 was primarily related to an increase of $308 million in current year attritional losses, resulting from the impact of the increase in premiums earned, strengthening of U.S. casualty reserves and changes in the mix of business, partially offset by a decrease of $73 million in current year catastrophe losses.
The increase in current year incurred losses from 2023 to 2024, was primarily related to an increase in underlying exposure due to premium growth, year over year and changes in the mix of business as well an increase of $423 million in 2024 current year catastrophe losses.
Incurred prior years unfavorable development in losses was $657 million and $1.3 billion in 2025 and 2024, respectively, and incurred prior years favorable development in losses of $5 million in 2023. The unfavorable development on prior year reserves of $657 million in 2025 was primarily due to strengthening of U.S. casualty reserves, as well as aviation
losses associated with the Russia/Ukraine war within the Reinsurance segment, partially offset by the release of well-seasoned reserves in the property and mortgage lines within the Reinsurance segment. The reserve strengthening for prior year loss development was driven by elevated loss experience in excess casualty and U.S. liability lines primarily on accident years 2022-2024.
In 2025, the United Kingdom’s High Court concluded that the confiscation of certain aircraft was covered under the war provision within certain reinsurance contracts. As a result of the court’s decision, the Company increased its net ultimate loss reserve for contracts that were exposed to the war in Russia/Ukraine. This increase in ultimate loss is reflected in the prior year incurred loss line in the table above.
The net unfavorable development on prior year reserves of $1.3 billion in 2024 is primarily comprised of $1.1 billion of unfavorable development on prior years attritional losses for the Insurance segment, mainly driven by a combination of social inflation and portfolio concentrations in certain U.S. casualty lines and $403 million of unfavorable development on prior years attritional losses for the Other segment, mainly related to certain sports and leisure lines for accident years 2019 through 2023, including A&E reserve strengthening of $54 million. In addition, the Reinsurance segment recorded $684 million of unfavorable development on prior year casualty reserves. This unfavorable development in the Reinsurance segment was largely offset by favorable development booked on property and mortgage lines.
The net favorable development on prior year reserves of $5 million in 2023 is comprised of $401 million of favorable development on prior years attritional losses for reinsurance lines, mainly related to mortgage and short-tail lines of business, mostly offset by $285 million of unfavorable development on prior years attritional losses for insurance lines, mainly related to casualty lines for accident years from 2016 through 2019 as well as $110 million of unfavorable development on prior years attritional losses for other lines.
The following is information about incurred and paid claims development as of December 31, 2025, net of reinsurance, as well as cumulative claim frequency and the total of IBNR liabilities plus expected development on reported claims included within the net incurred claims amounts. Each of the Company’s financial reporting segments has been disaggregated into casualty and property business. The casualty and property segregation results in groups that have homogeneous loss development characteristics and are large enough to represent credible trends. Generally, casualty claims take longer to be reported and settled, resulting in longer payout patterns and increased volatility. Property claims on the other hand, tend to be reported and settled quicker and therefore tend to exhibit less volatility. The property business is more exposed to catastrophe losses, which can result in year over year fluctuations in incurred claims depending on the frequency and severity of catastrophes claims in any one accident year.
The information about incurred and paid claims development for the years ended December 31, 2016 to December 31, 2024 is presented as supplementary information.
The Cumulative Number of Reported Claims is shown only for Insurance Casualty as it is impractical to provide the information for the remaining groups. The reinsurance groups each include pro rata contracts for which ceding companies provide only summary information via a bordereau. This summary information does not include the number of reported claims underlying the paid and reported losses. Therefore, it is not possible to provide this information. The Insurance Property group includes Accident and Health insurance business. This business is written via a master contract and individual claim counts are not provided. This business represents a significant enough portion of the business in the Insurance Property group so that including the number of reported claims for the remaining business would distort any analytics performed on the group.
The Cumulative Number of Reported Claims shown for the Insurance Casualty is determined by claim and line of business. For example, a claim event with three claimants in the same line of business is a single claim. However, a claim event with a single claimant that spans two lines of business contributes two claims.
Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid Claims and Claim Adjustment Expenses
The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated statement of financial position is as follows:
December 31, 2025
(Dollars in millions)
Net outstanding liabilities
Reinsurance Casualty$14,048 
Reinsurance Property7,423 
Insurance Casualty6,597 
Insurance Property983 
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance (1)
29,052 
Reinsurance recoverable on unpaid claims
Reinsurance Casualty152 
Reinsurance Property901 
Insurance Casualty2,094 
Insurance Property314 
Total reinsurance recoverable on unpaid claims (1), (3)
3,461 
Unallocated claims adjustment expenses360 
Other (2)
1,439 
1,799 
Total gross liability for unpaid claims and claim adjustment expense$34,312 
(Some amounts may not reconcile due to rounding.)
(1) Amounts disclosed are for reinsurance and insurance reportable segments.
(2) The other amount is primarily comprised of the Other segment, which includes the results of our sports and leisure business sold in October 2024, consisting of policies written prior to the sale and polices renewed and certain new business written on the Company’s paper post-sale. It also includes run-off A&E exposures, certain discontinued insurance programs primarily written prior to 2012 and certain discontinued insurance and reinsurance coverage classes. The Other segment does not generally sell insurance or reinsurance products but is responsible for the management of existing policies and settlement of related losses.
(3) This amount excludes the unpaid recoverable of the adverse development reinsurance agreements of $1,253 million as of December 31, 2025.
Adverse Development Reinsurance Agreements
Effective October 1, 2025, the Company through its subsidiaries Everest Re and Bermuda Re (collectively, the “Ceding Companies”) (1) entered into an adverse development reinsurance agreement (the “State National Reinsurance Agreement”) with State National Insurance Company, Inc. (“State National Reinsurer”) and (2) entered into an adverse development reinsurance agreement (the “MS Transverse Reinsurance Agreement”) with MS Transverse Insurance Company (“MS Transverse Reinsurer”) (collectively the “Reinsurers”). The Reinsurance Agreements are supported on a retrocessional basis by Longtail Re, an affiliate of Stone Ridge Capital.
The agreements reinsure potential adverse loss development for accident years 2024 and prior arising out of the Ceding Companies’ North American liabilities within the Insurance and Other segments (“Subject Business”), subject to exclusions for certain liabilities, including among others those related to the Asbestos and Environmental reserves included in the Other segment. The carried reserves held for the Subject Business, pursuant to the Reinsurance Agreements, were $5.4 billion as of September 30, 2025 and $5.0 billion as of December 31, 2025, respectively.
Under the State National Reinsurance Agreement, the Company paid a reinsurance premium of $1.3 billion, including interest, to State National Reinsurer to assume $1.3 billion of carried reserves as of September 30, 2025, and potential subsequent adverse development for net paid losses on an approximately 85.7 percent coinsurance basis up to an aggregate limit of $600 million above the Company’s net carried reserves for the Subject Business.
Under the State National Reinsurance Agreement $250 million of the reinsurance premium was placed into a funds withheld collateral trust account as security for State National Reinsurer’s claim payment obligations to the Company.
Under the MS Transverse Reinsurance Agreement, the Company paid a reinsurance premium of $122 million to MS Transverse Reinsurer to assume potential subsequent adverse development for net paid losses on an 80 percent
coinsurance basis up to an aggregate limit of $400 million. The $122 million payment to MS Transverse Reinsurer exceeds the retroactive reinsured liabilities and represents excess compensation for the uncertainty of future claims development, as a result the Company recognized an immediate pre-tax loss of $122 million in Incurred losses and loss adjustment expenses in the Company’s consolidated statement of operations. Mitsui Sumitomo Insurance Company Limited, the parent of MS Transverse Reinsurer, has provided a parental guarantee to secure its obligations under the agreement.
The Company has retained the risk of collection on amounts due from other third-party reinsurers and continues to be responsible for claims handling and other administrative services, subject to certain conditions.
As of December 31, 2025, the Company had a deferred gain of $3 million. The deferred gain would be recognized over the claim settlement period in the proportion of the amount of cumulative ceded losses collected from the reinsurer to the estimated ultimate reinsurance recoveries. The total covered losses ceded to State National Reinsurer were $1,253 million and the aggregated unexpired limit was $597 million and $400 million for State National Reinsurer and MS Transverse Reinsurer, respectively.
Prior Year Development
The following table presents net prior year development before the adverse development cover reinsurance agreements (“ADC”) cessions for the year ended December 31, 2025:
(Dollars in millions)
Prior Year Development Net of External Reinsurance Before ADC Cessions (1)
Reinsurance - Casualty Business$456 
Reinsurance - Property Business(428)
Insurance - Casualty Business474 
Insurance - Property Business(113)
Subtotal, adjusted pre-tax basis$389 
(1) Excluding the impact of:
- Our Other segment which has $146 million of prior year development.
- $122 million of excess compensation for the uncertainty of future claims development of which $105 million is from our Insurance segment and $17 million from our Other segment.
The following tables present the ultimate loss and allocated LAE and the paid loss and allocated LAE, net of reinsurance for casualty and property, as well as the average annual percentage payout of incurred claims by age, net of reinsurance for each of our disclosed lines of business.
Reinsurance - Casualty Business
At December 31, 2025
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Years Ended December 31,		Total of
IBNR Liabilities
Plus Expected
Development
on Reported
Claims		Cumulative
Number of
Reported
Claims
Accident Year2016201720182019202020212022202320242025
(Dollars in millions)(Unaudited)
2016$798 $880 $877 $872 $947 $949 $980 $1,009 $1,032 $1,055 $37  N/A
2017880 840 847 928 936 992 1,056 1,084 1,156 50  N/A
20181,464 1,462 1,539 1,569 1,638 1,734 1,791 1,686 93  N/A
20191,785 1,850 1,853 1,877 1,918 1,978 1,980 255  N/A
20201,977 1,949 1,928 1,889 1,932 1,899 349  N/A
20212,505 2,501 2,441 2,532 2,370 748  N/A
20222,959 2,917 2,968 3,098 1,439  N/A
20232,993 3,158 3,276 1,927  N/A
20243,143 3,237 2,434  N/A
20253,228 2,760  N/A
$22,986 
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
Accident Year2016201720182019202020212022202320242025
(Dollars in millions)(Unaudited)
2016$93 $195 $330 $437 $552 $627 $706 $775 $840 $903 
201783 192 325 466 582 692 802 931 1,020 
2018200 304 507 665 837 1,017 1,224 1,347 
2019251 375 548 740 969 1,240 1,424 
2020210 323 505 740 1,009 1,246 
2021229 327 552 858 1,194 
2022220 388 693 1,104 
2023211 433 832 
2024236 485 
2025268 
$9,824 
All outstanding liabilities prior to 2016, net of reinsurance886 
Liabilities for claims and claim adjustment expenses, net of reinsurance$14,048 
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years12345678910
Casualty8.7 %6.5 %10.6 %11.7 %12.2 %11.2 %9.9 %8.2 %6.9 %6.0 %
Reinsurance - Property Business
At December 31, 2025
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Years Ended December 31,		Total of
IBNR Liabilities
Plus Expected
Development
on Reported
Claims		Cumulative
Number of
Reported
Claims
Accident Year2016201720182019202020212022202320242025
(Dollars in millions)(Unaudited)
2016$1,711 $1,539 $1,574 $1,568 $1,546 $1,547 $1,543 $1,545 $1,539 $1,542 $3  N/A
20172,802 3,425 3,536 3,664 3,710 3,720 3,734 3,753 3,817 5  N/A
20182,641 2,516 2,518 2,456 2,409 2,394 2,429 2,532 60  N/A
20192,111 2,142 2,087 1,972 1,975 2,026 2,107 62  N/A
20202,448 2,521 2,465 2,437 2,439 2,582 65  N/A
20212,802 2,828 2,750 2,639 2,749 83  N/A
20223,313 2,991 2,697 2,601 97  N/A
20232,870 2,493 2,217 256  N/A
20244,056 3,763 1,254  N/A
20254,505 2,354  N/A
$28,415 
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
Accident Year2016201720182019202020212022202320242025
(Dollars in millions)(Unaudited)
2016$445 $855 $1,130 $1,239 $1,289 $1,312 $1,320 $1,332 $1,345 $1,346 
2017905 1,581 1,843 2,064 2,171 2,203 2,248 2,377 2,384 
20181,254 2,847 3,566 3,969 4,179 4,324 4,511 4,511 
2019465 1,077 1,374 1,501 1,601 1,733 1,748 
2020272 992 1,409 1,676 1,967 2,059 
2021630 1,362 1,825 2,153 2,360 
2022769 1,613 2,177 2,419 
2023609 1,297 1,721 
2024761 1,443 
20251,020 
$21,011 
All outstanding liabilities prior to 2016, net of reinsurance20 
Liabilities for claims and claim adjustment expenses, net of reinsurance$7,423 
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years12345678910
Property25.1 %29.1 %17.0 %9.5 %6.3 %3.4 %2.6 %1.8 %0.4 %— %
Insurance - Casualty Business
At December 31, 2025
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Years Ended December 31,		2025 Prior Year Development Excluding the Impact of ADCTotal of
IBNR Liabilities
Plus Expected
Development
on Reported
Claims		Cumulative
Number of
Reported
Claims		Incurred Impact of ADCIBNR Impact of ADC2025 (Net of Impact of ADC)Total of IBNR Liabilities Net of Impact of ADC
Accident Year2016201720182019202020212022202320242025
(Dollars in millions)(Unaudited)
2016$509 $495 $539 $558 $489 $474 $478 $488 $493 $507 $13 $17 31,277 $9 $3 $498 $14 
2017551 558 568 585 559 559 584 580 596 15 31 34,849 11 5 584 26 
2018644 649 679 685 697 772 810 832 21 43 34,920 16 6 816 37 
2019776 778 798 804 954 1,089 1,080 (9)98 37,936 37 19 1,044 79 
2020913 990 978 975 1,095 1,080 (15)163 39,683 53 32 1,027 131 
20211,119 1,161 1,154 1,353 1,343 (10)310 44,838 102 63 1,241 246 
20221,243 1,241 1,597 1,720 124 591 48,143 191 130 1,530 460 
20231,425 1,739 1,931 191 891 47,258 274 191 1,657 701 
20241,792 1,935 143 1,251 43,636 322 257 1,612 994 
20251,698 — 1,458 30,732 — — 1,698 1,458 
$12,721 $474 $4,853 $1,015 $706 $11,706 $4,148 
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance from the table below(6,227)— (6,227)
Liabilities for losses and loss adjustment expenses and prior year development before accident year 2016, net of reinsurance104 — 27 32 7 72 20 
Liabilities for losses and loss adjustment expenses and prior year loss development, net of reinsurance$6,597 $474 $4,880 $1,046 $713 $5,551 $4,167 
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
Accident Year2016201720182019202020212022202320242025
(Dollars in millions)(Unaudited)
2016$53 $149 $253 $314 $362 $398 $430 $448 $460 $471 
201749 165 263 343 404 467 493 526 537 
201861 196 296 407 539 623 678 722 
201969 218 364 498 646 828 901 
202063 229 372 531 659 808 
2021105 246 428 654 855 
202279 282 577 859 
202393 308 642 
202485 347 
202586 
$6,227 
All outstanding liabilities prior to 2016, net of reinsurance104 
Liabilities for claims and claim adjustment expenses, net of reinsurance$6,597 
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years12345678910
Casualty6.4 %14.3 %15.3 %14.2 %12.7 %11.5 %6.1 %4.6 %2.6 %1.9 %
Insurance - Property Business
At December 31, 2025
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Years Ended December 31,		2025 Prior Year Development Excluding the Impact of ADCTotal of
IBNR Liabilities
Plus Expected
Development
on Reported
Claims		Cumulative
Number of
Reported
Claims		Incurred Impact of ADCIBNR Impact of ADC2025 (Net of Impact of ADC)Total of IBNR Liabilities Net of Impact of ADC
Accident Year2016201720182019202020212022202320242025
(Dollars in millions)(Unaudited)
2016$289 $280 $284 $292 $297 $299 $300 $302 $302 $300 $(2)$—  N/A $— $— $300 $— 
2017486 494 486 494 496 508 509 506 505 (1)—  N/A — — 505 — 
2018403 399 401 410 428 436 435 432 (3)1  N/A — — 432 1 
2019348 352 350 365 380 375 372 (3)2  N/A — — 372 1 
2020602 508 498 503 492 490 (2)6  N/A 1 — 489 6 
2021647 586 602 628 603 (25)13  N/A 2 1 601 11 
2022771 797 698 661 (37)19  N/A 4 2 656 16 
2023717 669 635 (35)33  N/A 7 4 628 29 
2024598 592 (6)53  N/A 14 6 578 46 
2025900 — 410  N/A — — 900 410 
$5,490 $(113)$536 $29 $14 $5,461 $522 
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance from the table below(4,507)— (4,507)
Liabilities for losses and loss adjustment expenses and prior year development before accident year 2016, net of reinsurance— — — — — — — 
Liabilities for losses and loss adjustment expenses and prior year loss development, net of reinsurance$983 $(113)$537 $29 $14 $954 $522 
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
Accident Year2016201720182019202020212022202320242025
(Dollars in millions)(Unaudited)
2016$167 $248 $272 $290 $296 $297 $299 $300 $300 $300 
2017176 416 452 477 493 505 504 505 505 
2018240 356 376 407 424 429 431 431 
2019226 313 335 355 363 368 370 
2020292 413 450 465 473 478 
2021325 482 544 565 576 
2022377 567 594 615 
2023400 503 565 
2024200 379 
2025289 
$4,507 
All outstanding liabilities prior to 2016, net of reinsurance— 
Liabilities for claims and claim adjustment expenses, net of reinsurance983 
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years12345678910
Property54.0 %30.1 %7.2 %4.5 %2.5 %1.4 %0.3 %— %— %— %
Reserving Methodology
The Company maintains reserves equal to management’s estimated ultimate liability for losses and LAE for reported and unreported claims for our insurance and reinsurance businesses. Because reserves are based on estimates of ultimate losses and LAE by underwriting or accident year, the Company uses a variety of statistical and actuarial techniques to monitor reserve adequacy over time, evaluate new information as it becomes known and adjust reserves whenever an adjustment appears warranted. The Company considers many factors when setting reserves including: (1) exposure base and projected ultimate premium; (2) expected loss ratios by product and class of business, which are developed collaboratively by underwriters and actuaries; (3) actuarial methodologies and assumptions which analyze loss reporting and payment experience, size of loss distributions, reports from ceding companies and historical trends, such as reserving
patterns, loss payments and product mix; (4) current legal interpretations of coverage and liability; and (5) economic conditions including but not limited to social inflation. Management’s best estimate is developed through collaboration with actuarial, underwriting, claims, legal and finance departments and culminates with the input of reserve committees. Each segment reserve committee includes the participation of the relevant parties from actuarial, finance, claims and segment senior management. Reserves are further reviewed by Everest’s Chief Reserving Actuary and senior management. The objective of such process is to determine a single best estimate viewed by management to be the best estimate of its ultimate loss liability. Our insurance and reinsurance loss and LAE reserves represent management’s best estimate of our ultimate liability. Actual loss and LAE ultimately paid may deviate, perhaps substantially, from such reserves. Net income will be impacted in a period in which the change in estimated ultimate loss and LAE is recorded.
The detailed data required to evaluate ultimate losses for the Company’s insurance business is accumulated from its underwriting and claim systems. Reserving for reinsurance requires evaluation of loss information received from ceding companies. Ceding companies report losses in many forms depending on the type of contract and the agreed or contractual reporting requirements. Generally, pro rata contracts require the submission of a monthly/quarterly account, which includes premium and loss activity for the period with corresponding reserves as established by the ceding company. This information is recorded in the Company’s records. For certain pro rata contracts, the Company may require a detailed loss report for claims that exceed a certain dollar threshold or relate to a particular type of loss. Excess of loss and facultative contracts generally require individual loss reporting with precautionary notices provided when a loss reaches a significant percentage of the attachment point of the contract or when certain causes of loss or types of injury occur. Experienced Claims staff handle individual loss reports and supporting claim information. Based on evaluation of a claim, the Company may establish additional case reserves in addition to the case reserves reported by the ceding company. To ensure ceding companies are submitting required and accurate data, Everest’s Underwriting, Claim, Reinsurance Accounting and Internal Audit departments perform various reviews of ceding companies, particularly larger ceding companies, including on-site audits.
The Company segments both reinsurance and insurance reserves into exposure groupings for actuarial analysis. The Company assigns business to exposure groupings so that the underlying exposures have reasonably homogeneous loss development characteristics and are large enough to facilitate credible estimation of ultimate losses. The Company periodically reviews its exposure groupings and may change groupings over time as business changes. The Company currently uses approximately 250 exposure groupings to develop reserve estimates. One of the key selection characteristics for the exposure groupings is the historical duration of the claims settlement process. Business in which claims are reported and settled relatively quickly are commonly referred to as short tail lines, principally property lines. Casualty claims tend to take longer to be reported and settled and casualty lines are generally referred to as long tail lines. Estimates of ultimate losses for shorter tail lines, with the exception of loss estimates for large catastrophic events, generally exhibit less uncertainty than those for the longer tail lines.
The Company uses a variety of actuarial methodologies, such as the expected loss ratio method, chain ladder methods and Bornhuetter-Ferguson methods, supplemented by judgment where appropriate, to estimate ultimate loss and LAE for each exposure group.
Expected Loss Ratio Method: The expected loss ratio method uses earned premium times an expected loss ratio to calculate ultimate losses for a given underwriting or accident year. This method relies entirely on expectation to project ultimate losses with no consideration given to actual losses. As such, it may be appropriate for an immature underwriting or accident year where few, if any, losses have been reported or paid, but less appropriate for a more mature year.
Chain Ladder Method: Chain ladder methods use a standard loss development triangle to project ultimate losses. Age-to-age development factors are selected for each development period and combined to calculate age-to-ultimate development factors which are then applied to paid or reported losses to project ultimate losses. This method relies entirely on actual paid or reported losses to project ultimate losses. No other factors such as changes in pricing or other expectations are taken into account. It is most appropriate for groups with homogeneous, stable experience where past development patterns are expected to continue in the future. It is least appropriate for groups which have changed significantly over time, or which are more volatile.
Bornhuetter-Ferguson Method: The Bornhuetter-Ferguson method is a combination of the expected loss ratio method and the chain ladder method. Ultimate losses are projected based partly on actual paid or reported losses and partly on expectation. IBNR reserves are calculated using earned premium, an a priori loss ratio and selected age-to-age development factors and added to actual reported (paid) losses to determine ultimate losses. It is more responsive to actual reported or paid development than the expected loss ratio method but less responsive than the chain ladder method.
For both short and long tail lines, the Company supplements these general approaches with analytically based judgments. Although the Company uses similar actuarial methods for both short tail and long tail lines, the faster reporting of experience for the short tail lines allows the Company to have greater confidence in its estimates of ultimate losses at an earlier stage than for long tail lines. For immature underwriting or accident years, the initial expected loss ratios are key inputs that involve management’s judgment and are based on a variety of factors, including: (1) expected loss ratios developed during the Company’s pricing process; (2) historical loss ratios adjusted for rate change and trend; and (3) industry benchmarks for similar business. These judgments take into account management’s view of past, current and future factors that may influence ultimate losses, including: (1) market conditions; (2) changes in the business underwritten; (3) changes in timing of the emergence of claims; and (4) other factors. The determination of when reported losses are sufficient and credible to warrant selection of an ultimate loss ratio different from the initial expected loss ratio also requires judgment.
Carried reserves at each reporting date are the management’s best estimate of ultimate unpaid losses and LAE at that date. The Company completes detailed reserve studies for each exposure group annually for both reinsurance and insurance operations. The completed annual reserve studies are “rolled-forward” for each accounting period until the subsequent reserve study is completed. Analyzing the roll-forward process involves comparing actual reported losses to expected losses based on the most recent reserve study. The Company analyzes significant variances between actual and expected losses and also considers recent market, underwriting and management criteria to determine management’s best estimate of ultimate unpaid losses and LAE.
Certain reserves, including losses from widespread catastrophic events, cannot be estimated using traditional actuarial methods. Rather, loss and LAE reserves are estimated by management by completing an in-depth analysis of the individual contracts which may potentially be impacted by the loss. The analysis uses inputs from various sources and methodology, to build up a comprehensive perspective. Such analysis generally involves: (1) estimating the size of insured industry losses; (2) reviewing portfolios to identify contracts which are exposed; (3) reviewing information reported or otherwise provided by customers and brokers; (4) discussing the loss with customers and brokers; and (5) estimating the ultimate expected cost to settle all claims and administrative costs arising from the loss on a contract-by-contract basis and in aggregate for the event. Due to the inherent uniqueness or specific nature of a catastrophic event, each event has its own unique assessment, and different weights may be applied to various inputs based on management’s judgment. Once a loss has occurred, during the then current reporting period, the Company records its best estimate of the ultimate expected cost to settle all claims arising from the loss. The Company’s estimate of loss and LAE reserves is then determined by deducting cumulative paid losses from its estimate of the ultimate expected loss. The Company’s estimate of IBNR is determined by deducting cumulative paid losses, case reserves and additional case reserves from its estimate of the ultimate expected loss.
Because catastrophe losses are typically due to prominent, public events such as hurricanes and earthquakes, the Company is often able to use independent reports as part of its loss reserve estimation process. The Company also reviews catastrophe bulletins published by various statistical modeling agencies to assist in determining the size of the industry loss, although these reports may not be available for some time after an event. For smaller events including localized severe weather events such as windstorms, hail, ice, snow, flooding, freezing and tornadoes, which are not necessarily prominent, public occurrences, the Company initially places greater reliance on catastrophe bulletins published by statistical modeling agencies to assist in determining what events occurred during the reporting period than the Company does for large events. This includes reviewing catastrophe bulletins published by Property Claim Services for U.S. catastrophes. The Company sets its initial estimates of reserves for loss and LAE for these smaller events based on a combination of its historical market share for these types of losses and the estimate of the total insured industry property losses as reported by statistical modeling agencies, although management may make significant adjustments based on the Company’s current exposure to the geographic region involved as well as the size of the loss and the peril involved.
In general, reserves for the Company’s more recent large losses are subject to greater uncertainty and, therefore, greater potential variability, and are likely to experience material changes from one period to the next. This is due to the uncertainty as to the size of the industry losses, uncertainty as to which contracts have been exposed, uncertainty due to complex legal and coverage issues that can arise out of large or complex losses and uncertainty as to the magnitude of losses and LAE incurred by the Company’s customers. As the Company’s losses age, more information becomes available, and the Company believes its estimates become more certain.
The Company continues to receive claims under expired insurance and reinsurance contracts asserting injuries and/or damages relating to or resulting from environmental pollution and hazardous substances, including asbestos. Environmental claims typically assert liability for (a) the mitigation or remediation of environmental contamination or (b) bodily injury or property damage caused by the release of hazardous substances into the land, air or water. Asbestos
claims typically assert liability for bodily injury from exposure to asbestos or for property damage resulting from asbestos or products containing asbestos. The results of run-off A&E exposures are included within the Company’s Other Segment.
Our reserves include an estimate of our ultimate liability for A&E claims. There are significant uncertainties surrounding our estimates of our potential losses from A&E claims. Among the uncertainties are: (a) potentially long waiting periods between exposure and manifestation of any bodily injury or property damage; (b) difficulty in identifying sources of asbestos or environmental contamination; (c) difficulty in properly allocating responsibility and/or liability for asbestos or environmental damage; (d) changes in underlying laws and judicial interpretation of those laws; (e) the potential for an asbestos or environmental claim to involve many insurance providers over many policy periods; (f) questions concerning interpretation and application of insurance and reinsurance coverage; and (g) uncertainty regarding the number and identity of insureds with potential asbestos or environmental exposure. Due to the uncertainties discussed above, the ultimate losses attributable to A&E, and particularly asbestos, may be subject to more variability than are non-A&E reserves.
The Company’s reserves include an estimate of the Company’s ultimate liability for A&E claims. The Company’s A&E liabilities emanate from Mt. McKinley Insurance Company’s (“Mt. McKinley”), a former wholly owned subsidiary that was sold in 2015, direct insurance business and Everest Re’s assumed reinsurance business. All of the contracts of insurance and reinsurance, under which the Company has received claims during the past three years, expired more than 20 years ago.  There are significant uncertainties surrounding the Company’s reserves for its A&E losses.
A&E exposures represent a separate exposure group for monitoring and evaluating reserve adequacy.  The following table summarizes incurred losses with respect to A&E reserves on both a gross and net of reinsurance basis for the periods indicated:
At December 31,
(Dollars in millions)202520242023
Gross basis:
Beginning of period reserves$260 $247 $278 
Incurred losses2 62 — 
Paid losses(52)(49)(31)
End of period reserves$209 $260 $247 
Net basis:
Beginning of period reserves$242 $232 $257 
Incurred losses— 54 — 
Paid losses(49)(43)(25)
End of period reserves$193 $242 $232 
(Some amounts may not reconcile due to rounding.)
In 2015, the Company sold Mt. McKinley to Clearwater Insurance Company (“Clearwater”), a subsidiary of Fairfax Financial. Concurrently with the closing, the Company entered into a retrocession treaty with an affiliate of Clearwater.  Per the retrocession treaty, the Company retroceded 100% of the liabilities associated with certain Mt. McKinley policies, which related entirely to A&E business and had been reinsured by Bermuda Re.  As consideration for entering into the retrocession treaty, Everest Re Bermuda transferred cash of $140 million, an amount equal to the net loss reserves as of the closing date.  The maximum liability retroceded under the retrocession treaty will be $440 million, equal to the retrocession payment plus $300 million.  The Company will retain liability for any amounts exceeding the maximum liability retroceded under the retrocession treaty.
On December 20, 2019, the retrocession treaty was amended and included a partial commutation. As a result of this amendment and partial commutation, gross A&E reserves and correspondingly reinsurance receivable were reduced by $43 million. In addition, the maximum liability permitted to be retroceded increased to $450 million.
Reinsurance Recoverables.
Reinsurance recoverables for both paid and unpaid losses totaled $5.1 billion and $3.1 billion at December 31, 2025 and December 31, 2024, respectively. At December 31, 2025, in connection with the ADC reinsurance agreements, $1,253 million was unpaid recoverable from State National Insurance Company, Inc. Additionally at December 31, 2025, $411 million, or 8.1%, was recoverable from Mt. Logan Re collateralized segregated accounts and $289 million, or 5.7%, was recoverable from Munich Reinsurance America, Inc. No other retrocessionaire accounted for more than 5% of our recoverables.