As of December 31, 2013 our reserves are almost entirely comprised of long-tail risk exposures. The estimation of long-tailed insurance losses is inherently difficult and is subject to significant judgment on the part of management. Loss costs, even for claims with similar characteristics, can vary significantly depending upon many factors, including but not limited to: the nature of the claim, including whether or not the claim is an individual or a mass tort claim, the personal situation of the claimant or the claimant's family, the outcome of jury trials, the legislative and judicial climate where any potential litigation may occur, general economic conditions and, for claims involving bodily injury, the trend of healthcare costs. Long-tailed insurance is characterized by the extended period of time typically required to resolve claims, often five years or more. The combination of changing conditions and the extended time required for claim resolution results in a loss cost estimation process that requires actuarial skill and the application of significant judgment, and such estimates require periodic revision.
Over the past several years the most influential factor affecting our analysis of reserves and the development recognized has been the change, or lack thereof, in the severity of claims, particularly for our HCPL claims. Severity is defined as the average cost of resolving claims. The severity trend assumption is a key assumption for both pricing models and actuarial estimation of reserves. The severity trend is an explicit component of our pricing models, whereas in our reserving process the severity trend's impact is implicit. Our estimate of this trend and our expectations about changes in this trend impact a variety of factors, from the selection of expected loss ratios to the ultimate point estimates established by management.
The following table represents the percentage of known HCPL claims closed:
The timing of our net loss payments varies from period to period because the process for resolving claims is complex and occurs at an uneven pace depending upon the circumstances of the individual claim.
At December 31, 2013 our gross reserve for losses included case reserves of approximately $1.1 billion and IBNR reserves of approximately $0.9 billion. Our consolidated gross reserve for losses on a GAAP basis exceeds the combined gross reserves of our insurance subsidiaries on a statutory basis by approximately $0.1 billion, which is principally due to the portion of the GAAP reserve for losses that is reflected for statutory accounting purposes as unearned premiums. These unearned premiums are applicable to extended reporting endorsements (“tail” coverage) issued without a premium charge upon death, disability or retirement of an insured who meets certain qualifications.
The following table identifies those reinsurers for which our recoverables for both paid and unpaid claims (net of amounts due to the reinsurer) and our prepaid balances are aggregately $20 million or more as of December 31, 2013:
Treasury share activity for 2013, 2012 and 2011 was as follows:
The above table presumes no borrowings under our revolving credit agreement and standby letter of credit through expiration of the agreements, though borrowings could occur. For more information regarding these agreements see Note 10 of the Notes to Consolidated Financial Statements.
The calendar year net loss ratio for 2013 was 42.6%, a 9.9 percentage point increase as compared to 2012. The increase was principally attributable to lower favorable loss development in 2013 as compared to 2012 by $49.3 million. Our current accident year net loss ratio increased by 2.7 percentage points for 2013 primarily due to a reduced effect from prior accident year ceded premiums.
During 2013, we entered into quota share arrangements under which we share the risk of loss with captive insurers affiliated with one of our agents.
The impairment recognized as part of Other investments related to an interest in an LLC which converted to a public fund during 2012.
The impact of purchase accounting related to deferred policy acquisition costs reduced the reported expenses by approximately $4.4 million in 2013.