Insurance

Property and Casualty Insurance Reserves The following table provides an analysis of changes in the liability for losses and loss adjustment expenses during the first six months of 2018 and 2017 (in millions):



	Six months ended June 30,
	2018			2017
Balance at beginning of year	$	9,678		$	8,563
Less reinsurance recoverables, net of allowance	2,957			2,302
Net liability at beginning of year	6,721			6,261
Provision for losses and LAE occurring in the current period	1,434			1,294
Net increase (decrease) in the provision for claims of prior years	(100		)	(50		)
Total losses and LAE incurred	1,334			1,244
Payments for losses and LAE of:
Current year	(294		)	(253		)
Prior years	(975		)	(953		)
Total payments	(1,269		)	(1,206		)
Reserves of business disposed (*)	(319		)	—
Foreign currency translation and other	(4		)	24
Net liability at end of period	6,463			6,323
Add back reinsurance recoverables, net of allowance	2,630			2,407
Gross unpaid losses and LAE included in the balance sheet at end of period	$	9,093		$	8,730


(*)	Reflects the reinsurance to close transaction at Neon discussed below.

The net decrease in the provision for claims of prior years during the first six months of 2018 reflects (i) lower than expected losses in the crop business and lower than expected claim severity in the transportation businesses (all within the Property and transportation sub-segment), (ii) lower than anticipated claim frequency and severity in the workers’ compensation businesses (within the Specialty casualty sub-segment), and (iii) lower than expected claim frequency and severity in the surety business and lower than expected claim severity in the fidelity business (all within the Specialty financial sub-segment).

The net decrease in the provision for claims of prior years during the first six months of 2017 reflects (i) lower than expected losses in the crop and equine operations and lower than expected claim severity in the property and inland marine business (all within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses and at Neon (all within the Specialty casualty sub-segment) and (iii) lower than anticipated claim severity in the fidelity business and lower than expected claim frequency and severity in the surety business (all within the Specialty financial sub-segment). This favorable development was partially offset by (i) higher than expected claim severity in the ocean marine business (within the Property and transportation sub-segment), (ii) higher than anticipated claim severity in the targeted markets and general liability business (all within the Specialty casualty sub-segment) and (iii) an adjustment to the deferred gain on the retroactive reinsurance transaction entered into in connection with the sale of businesses in 1998 (included in Other specialty sub-segment).

In December 2017, the Neon Lloyd’s syndicate entered into a reinsurance to close transaction for the 2015 and prior years of account with StarStone Underwriting Limited, a subsidiary of Enstar Group Limited, which was effective as of December 31, 2017 (the transaction settled in early 2018). In the Lloyd’s market, a reinsurance to close transaction transfers the responsibility for discharging all of the liabilities that attach to the transferred year of account plus the right to any income due to the closing year of account in return for a premium. This transaction provided Neon with finality on its legacy business.