several of our product lines that reduced prior period loss reserves by approximately $13.9 million. As an example, our 2006 selected net loss ratios in our professional insurance product line for maturing accident periods in 2004 and 2005 reduced to 61.6% from 68.2% in 2005. This development resulted in reserve reductions associated with loss occurrences in these accident periods of approximately $3.5 million in the fourth quarter of 2006. In 2006, we also recorded adverse development of $5.0 million, excluding the impact of reinstatement premiums, related to the hurricanes of 2005 and net adverse development of $2.6 million related to the 2005 oil pipeline claim. We believe that as our net earned premiums reduce, other than in Lloyd’s segment, our net loss ratio may become volatile in future periods if our loss estimates change.
Premiums. Gross premiums written were $158.7 million for the year ended December 31, 2006, a decrease of $450.2 million, or 73.9%, compared to $608.9 million for the year ended December 31, 2005. The decrease in our gross premiums written reflects the decision to discontinue writing new business in our insurance and reinsurance lines of business, other than in our Lloyd’s segment, and the associated return of premiums to our clients totaling $97.8 million during 2006 following cancellation or commutation of policies.
Our Lloyd’s segment contributed $91.8 million of total gross written premiums in 2006, or 57.8%, compared to $80.7 million, or 13.2% in 2005. This increase in Lloyd’s contribution reflects the run-off status of other segments in 2006 and modest growth in our Lloyd’s operations in 2006.
Premiums ceded were $218.9 million for the year ended December 31, 2005 an increase of $144.0 million compared to $74.9 million for the year ended December 31, 2004. The increase in premiums ceded primarily reflected the growth in gross premiums written, approximately $57.3 million of premiums ceded resulting from the October 2005 portfolio transfer of substantially all of our in-force technical risk property insurance and property reinsurance business and approximately $20.8 million in purchased reinsurance and retrocessional protection (including reinstatement premiums) to help limit our net loss exposures to natural catastrophe events. The increase of premiums ceded was attributable to a lesser extent to the development of the reinsurance program for our specialty insurance segment product lines, which was restructured during the year ended December 31, 2005. The restructure involved the commutation of our 2004 reinsurance treaty protection in our professional liability and fidelity product lines, which was ceded on an excess of loss basis. The unexpired portions of this business were then transferred, effective April 1, 2005, into our 2005 reinsurance treaty, which was ceded on a proportional quota share basis.
• the number of insurance and reinsurance contracts we entered into and the associated net premiums earned as our insurance and reinsurance portfolios continued to mature;
Our total net loss ratio (calculated by dividing net losses and loss expenses by net premiums earned) was 89.1% for the year ended December 31, 2005, an increase of 5.1% compared to a total net loss ratio of 83.9% for the year ended December 31, 2004. The increase in the total net loss ratio was due both to the greater magnitude of the hurricanes that occurred in the second half of 2005 as compared to those that occurred in the third quarter of 2004 and to the oil pipeline loss. However, the extent of the impact of the actual catastrophes in 2005 was mitigated by our purchased reinsurance and retrocessional protection and increased net premiums earned compared to the year ended December 31, 2004.
Acquisition expenses. Acquisition expenses were $69.6 million for the year ended December 31, 2005, an increase of $15.6 million, or 28.9%, compared to $54.0 million for the year ended December 31, 2004. The increase in acquisition expenses was due to the increase in the number of insurance and reinsurance contracts we entered into and the associated net premiums earned.
Net losses and loss expenses. Net losses and loss expenses were $65.7 million for the year ended December 31, 2006, a decrease of $55.0 million compared to $120.7 million for the year ended December 31, 2005. Net losses and loss expenses are a function of our net premiums earned and our expected ultimate losses and loss expenses for reported and unreported claims on contracts of insurance and reinsurance underwritten. The decrease in net losses and loss expenses is due to:
Approximately 56.6% of our specialty insurance run-off segment gross premiums written of $311.3 million were generated from our program business, of which 53.3% is attributable to our HBW program. The remaining 43.4% of our specialty insurance run-off segment gross premiums written
Net losses and loss expenses. Net losses and loss expenses were $178.9 million for the year ended December 31, 2005, an increase of $29.8 million, or 20.0%, compared to $149.1 million for the year ended December 31, 2004. The increase in net losses and loss expenses incurred was due to increased loss occurrences, particularly those related to the 2005 hurricanes, as well as the increase in the number of reinsurance contracts we entered into and the associated net premiums earned. Net losses and loss expenses were a function of our net premiums earned and our expected ultimate losses and loss expenses for reported and unreported claims on contracts of reinsurance underwritten.
In 2005 we recorded approximately $83.3 million in net loss and loss expenses (excluding reinstatement premiums) in our property and marine reinsurance and technical property and fidelity insurance product lines associated with the 2005 hurricanes, Katrina, Rita and Wilma. We also recorded approximately $13.0 million in net loss and loss expenses associated with an oil pipeline claim in our environmental product line. With respect to the year ended December 31, 2005, we worked closely with our independent loss specialists and concluded to generally strengthen our loss ratios and net loss reserves in several product lines including our environmental, professional and HBW lines. This resulted in approximately $13.2 million of reserve adjustments at the end of 2005. In 2006 we increased our 2005 hurricane loss estimates (excluding reinstatement premiums) by $5.0 million to approximately $88.3 million as new information was reported to us by our clients and others. In addition, we increased our net loss reserves on the oil pipeline claim by approximately $2.6 million during 2006 as we were required by the relevant environmental agencies to extend our remediation activities.
If we experience a change of control, we may be required to make offers to redeem our series A preferred shares at a price of $25.25 per share, plus declared but unpaid dividends and additional amounts, if any, to the date of redemption and on the terms described in the Certificate of Designation. Our series A preferred shares have no stated maturity and are not subject to any sinking fund and are not convertible into any of our other securities or property.
In the normal course of our operations, we may have entered into certain contracts that do not meet the risk transfer provisions of Statement of Financial Accounting Standards (‘‘SFAS’’) No. 113, ‘‘Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts’’ (‘‘SFAS 113’’) for financial reporting purposes either due to insufficient underwriting risk or insufficient timing risk that do not provide indemnification for insurance accounting under SFAS
• the type of policies which insure losses, for example losses insured under contracts of reinsurance rely primarily on loss data and reports from other insurers or reinsurers and not directly with underlying insureds who have suffered the loss,