ARCH CAPITAL GROUP LTD.
For the period ended Dec 31, 2025. Filed Feb 26, 2026.
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FY2025 · Filed Feb 26, 2026
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“Reserve for Losses and Loss Adjustment Expenses“
- Reserve for Losses and Loss Adjustment Expenses
The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:
| Year Ended December 31, | |||
|---|---|---|---|
| 2025 | 2024 | 2023 | |
| Reserve for losses and loss adjustment expenses at beginning of year | $29,369 | $22,752 | $20,032 |
| Unpaid losses and loss adjustment expenses recoverable | 7,821 | 6,690 | 6,280 |
| Net reserve for losses and loss adjustment expenses at beginning of year | 21,548 | 16,062 | 13,752 |
| Net incurred losses and loss adjustment expenses relating to losses occurring in: | |||
| Current year | 9,970 | 8,849 | 6,784 |
| Prior years | (600) | (507) | (538) |
| Total net incurred losses and loss adjustment expenses | 9,370 | 8,342 | 6,246 |
| Net losses and loss adjustment expense reserves of acquired business (1) | 50 | 2,477 | — |
| Foreign exchange (gains) losses and other | 550 | (260) | 157 |
| Net paid losses and loss adjustment expenses relating to losses occurring in: | |||
| Current year | (1,862) | (1,176) | (1,081) |
| Prior years | (5,163) | (3,897) | (3,012) |
| Total net paid losses and loss adjustment expenses | (7,025) | (5,073) | (4,093) |
| Net reserve for losses and loss adjustment expenses at end of year | 24,493 | 21,548 | 16,062 |
| Unpaid losses and loss adjustment expenses recoverable | 9,054 | 7,821 | 6,690 |
| Reserve for losses and loss adjustment expenses at end of year | $33,547 | $29,369 | $22,752 |
(1)Activity in the 2025 and 2024 periods primarily related to the MCE Acquisition (see note 2).
Prior year development (“PYD”) arises from changes in loss estimates during the current period related to events occurring in prior calendar years. Long-tailed lines include lines of business that typically take many years for claims to settle such as third party liability; short-tailed lines are those that settle more quickly such as property. The table below summarizes (favorable) and adverse net PYD by segment and tail length:
| (Favorable) Adverse | Year Ended December 31, | ||
|---|---|---|---|
| 2025 | Short-tailed | Long-tailed | Total |
| Insurance | $(61) | $18 | $(43) |
| Reinsurance | (386) | 64 | (322) |
| Mortgage | (235) | — | (235) |
| Total | $(682) | $82 | $(600) |
| Insurance | $(53) | $16 | $(37) |
| Reinsurance | (232) | 44 | (188) |
| Mortgage | (282) | — | (282) |
| Total | $(567) | $60 | $(507) |
| Insurance | $(85) | $43 | $(42) |
| Reinsurance | (202) | 50 | (152) |
| Mortgage | (344) | — | (344) |
| Total | $(631) | $93 | $(538) |
Year Ended December 31, 2025
The insurance segment’s short-tailed lines included $26 million of favorable development in travel and accident, primarily from the 2023 and 2024 accident years, (i.e., the year in which a loss occurred), and $21 million of favorable development in property, energy, marine and aviation, primarily from the 2023 and 2024 accident years. Net adverse development in long-tailed lines included adverse development in programs, mainly from the 2021 to 2023 accident years.
The reinsurance segment’s short-tailed lines included $178 million of favorable development from property other than property catastrophe, primarily from the 2023 and 2024 underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given 12 month period), and $141 million of favorable development from property catastrophe, primarily from the 2023 and 2024 underwriting years. Long-tailed lines included $64 million of adverse development in casualty, primarily from the 2021, 2023 and 2024 underwriting years.
The mortgage segment’s favorable development was driven by reserve releases associated with the U.S. first lien portfolio from the 2023 and 2024 accident years. The Company’s credit risk transfer and international businesses also contributed to the favorable development.
Year Ended December 31, 2024
The insurance segment’s short-tailed lines included $32 million of favorable development in travel and accident, primarily from the 2023 accident year, and $31 million of favorable development in surety, primarily from the 2007, 2022 and 2023 accident years. Net adverse development in long-tailed lines included adverse development in programs, mainly from the 2023 accident year.
The reinsurance segment’s short-tailed lines included $99 million of favorable development from property other than property catastrophe, primarily from the 2022 and 2023 underwriting years, $74 million of favorable development from specialty lines, primarily from the 2015 to 2022 underwriting years, and $64 million of favorable development from property catastrophe, primarily from the 2020 to 2023 underwriting years. Long-tailed lines included $44 million of adverse development in casualty, primarily from the 2016, 2017 and 2020 underwriting years.
The mortgage segment’s favorable development was driven by reserve releases associated with the U.S. first lien portfolio from the 2022 and 2023 accident years. The Company’s credit risk transfer and international businesses also contributed to the favorable development.
Year Ended December 31, 2023
The insurance segment’s short-tailed lines included $43 million of favorable development in property, energy marine and aviation, primarily from the 2021 and 2022 accident years, $22 million of favorable development in warranty and lenders solutions, primarily from the 2022 accident year, and $15 million of favorable development in travel and accident, primarily from the 2022 accident year. Long-tailed lines included $50 million of adverse development in professional liability, primarily from the 2017 to 2020 accident years.
The reinsurance segment’s short-tailed lines included $93 million of favorable development in property other than property catastrophe, primarily from the 2020 to 2022 underwriting years, $51 million of favorable development in property catastrophe, primarily from the 2019 to 2022 underwriting years, and $35 million from specialty lines, primarily from the 2021 underwriting year. Long-tailed lines included $45 million of adverse development in casualty business, primarily from the 2013 to 2020 underwriting years.
The mortgage segment’s favorable development was driven by reserve releases associated with the U.S. first lien portfolio from the 2020 to 2022 accident years. The Company’s credit risk transfer and international businesses also contributed to the favorable development.
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