Finance of America Companies Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Estimate of Claims Losses

Estimate of Claims Losses

12 Months Ended

Dec. 31, 2021

24. Estimate of Claims Losses

The Company is occasionally named as a defendant in claims concerning title insurance policies, closing protection letters, and alleged errors or omissions pertaining to the issuance of title policies or the performance of escrow services. The Company assesses pending and threatened claims to determine whether losses are probable and reasonably estimable in accordance with ASC 450,

Contingencies

. To the extent losses are deemed to meet the probable and estimable criteria, the Company establishes an accrual for those losses based on historical experience and analysis of specific claim attributes, which is included in estimate of claim losses within payables and other liabilities on the Consolidated Statements of Financial Condition.

The activity related to the outstanding estimate of claim losses consisted of the following (in thousands):


	For the year ended December 31, 2021			For the year ended December 31, 2020
	Successor			Predecessor
Beginning balance	$	8,609		$	5,762
Provision charged to income from operations		7,043			3,520
Claim loss payments		(659	)		(673	)

Ending balance	$	14,993		$	8,609

Activity in the liability for loss and loss adjustment expense of the Company’s insurance subsidiary, which is included in estimate of claim losses within payables and other liabilities on the Consolidated Statements of Financial Condition, consisted of the following (in thousands):


	For the year ended December 31, 2021		For the year ended December 31, 2020
	Successor		Predecessor
Beginning balance, net of reinsurance recoverable of $99 as of January 1, 2021 and 2020	$	6,334	$	4,487
Incurred related to:
Current year		6,203		3,238
Prior years		43		(931	)

Total incurred		6,246		2,307
Paid related to:
Current year		307		55
Prior years, net of reinsurance and other receivables of $99 as of December 31, 2021 and 2020		91		405

Total paid		398		460

Ending balance, net of reinsurance recoverable of $99 as of December 31, 2021 and 2020	$	12,182	$	6,334

A known claim reserve is an amount estimated by the Company to be sufficient to cover all unpaid losses, claims, and allocated loss adjustment expenses arising under title insurance policies for which the Company may be liable, and for which they have discovered or received notice by or on behalf of the insured or escrow or security depositor.

The Company’s insuranc

e subsidiary has paid cumulative gross loss and loss adjustment expenses of $8.1 million for the year ended December 31, 2021 and $7.5 million and $7.1 million for the years ended December 31, 2020 and 2019, respectively. The Company’s insurance subsidiary has recovered $0.2 million for each year ended December 31, 2021, 2020, and 2019. No unsecured aggregate recoverable for losses, paid and unpaid, loss adjustment expenses, and unearned premiums existed as of December 31, 2021 (Successor) or December 31, 2020 Predecessor, or 2019.

The effects of reinsurance on premiums written by the Company’s insurance subsidiary consisted of the following (in thousands):


	For the year ended December 31, 2021			For the year ended December 31, 2020
	Successor			Predecessor
Title premiums written:
Direct	$	143,668		$	63,826
Ceded		(1,691	)		(509	)

Net title premiums written	$	141,977		$	63,317