Insurance

9 Months Ended

Sep. 30, 2020

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 nine months of 2020 and 2019 (in millions):


	Nine months ended September 30,
	2020		2019
Balance at beginning of year	$	10,232	$	9,741
Less reinsurance recoverables, net of allowance	3,024		2,942
Net liability at beginning of year	7,208		6,799
Provision for losses and LAE occurring in the current period	2,560		2,457
Net increase (decrease) in the provision for claims of prior years:
Special A&E charges	47		18
Other	(166)		(116)
Total losses and LAE incurred	2,441		2,359
Payments for losses and LAE of:
Current year	(592)		(731)
Prior years	(1,406)		(1,408)
Total payments	(1,998)		(2,139)

Foreign currency translation and other	(11)		(5)
Net liability at end of period	7,640		7,014
Add back reinsurance recoverables, net of allowance	3,114		2,833
Gross unpaid losses and LAE included in the balance sheet at end of period	$	10,754	$	9,847

The net decrease in the provision for claims of prior years during the first nine months of 2020 reflects (i) lower than expected claim frequency and severity in the agricultural businesses and lower than anticipated claim frequency and severity in the transportation businesses (within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses and lower than anticipated claim frequency in the executive liability business (within the Specialty casualty sub-segment) and (iii) lower than anticipated claim frequency in the trade credit business and lower than anticipated claim frequency and severity in the financial institutions, fidelity and surety businesses (within the Specialty financial sub-segment). This favorable development was partially offset by (i) the $47 million special charge to increase asbestos and environmental reserves and (ii) higher than expected claim frequency in general liability contractor claims and higher than expected claim frequency and severity in the excess and surplus businesses (within the Specialty casualty sub-segment).

The net decrease in the provision for claims of prior years during the first nine months of 2019 reflects (i) lower than expected claim frequency and severity in the transportation businesses and lower than expected losses in the crop business (all within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses (within the Specialty casualty sub-segment), and (iii) lower than expected claim frequency and severity in the surety and financial institutions businesses and lower than anticipated claim severity in the fidelity business (all within the Specialty financial sub-segment). This favorable development was partially offset by (i) the $18 million special charge to increase asbestos and environmental reserves, (ii) higher than expected claim severity in the excess and surplus lines businesses and higher than expected claim frequency in general liability contractor claims (all within the Specialty casualty sub-segment), and (iii) net adverse reserve development related to business outside the Specialty group that AFG no longer writes.

Recoverables from Reinsurers and Premiums Receivable See Note A — “Accounting Policies — Credit Losses on Financial Instruments,” for a discussion of new guidance effective January 1, 2020, which impacts the accounting for expected credit losses of recoverables from reinsurers and premiums receivable. Progressions of the 2020 allowance for expected credit losses are shown below (in millions):


	Recoverables from Reinsurers		Premiums Receivable
Balance at June 30	$	13	$	10

Provision for expected credit losses	1		1
Write-offs charged against the allowance	—		—
Balance at September 30	$	14	$	11

Balance at January 1	$	18	$	13
Impact of adoption of new accounting policy	(6)		(3)
Provision for expected credit losses	2		1
Write-offs charged against the allowance	—		—
Balance at September 30	$	14	$	11