Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under short-duration property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences on or before the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. Reconciliations of the changes in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 17), for each of the nine months ending September 30, 2019 and 2018 follow (in millions).

	2019			2018
Balances – beginning of year:
Gross liabilities	$	68,458		$	61,122
Reinsurance recoverable on unpaid losses		(3,060	)		(3,201	)
Net liabilities		65,398			57,921
Incurred losses and loss adjustment expenses:
Current accident year events		31,179			29,071
Prior accident years’ events		(396	)		(1,566	)
Total incurred losses and loss adjustment expenses		30,783			27,505
Paid losses and loss adjustment expenses:
Current accident year events		(13,144	)		(12,474	)
Prior accident years’ events		(13,967	)		(11,516	)
Total payments		(27,111	)		(23,990	)
Foreign currency translation adjustment		(178	)		(117	)
Balances – September 30:
Net liabilities		68,892			61,319
Reinsurance recoverable on unpaid losses		3,105			2,944
Gross liabilities	$	71,997		$	64,263

Incurred losses and loss adjustment expenses in the first nine months of 2019 and 2018 included net decreases of estimated ultimate liabilities for prior accident years of $396 million and $1,566 million, respectively. Increases and decreases in estimated ultimate liabilities produce corresponding decreases and increases to pre-tax earnings. The reductions in incurred losses for prior accident years’ events for the first nine months as percentages of net liabilities at the beginning of the respective year were 0.6% in 2019 and 2.7% in 2018.

In the first nine months of 2019, we lowered estimated ultimate liabilities of primary insurance for prior years’ events by $321 million, compared to $985 million in 2018. Reductions of estimated liabilities in the first nine months of 2019 were lower than the first nine months of 2018 with respect to private passenger automobile and medical malpractice insurance. In addition, we increased estimated liabilities in the first nine months of 2019 for legacy casualty exposures and other commercial insurance business.

In the first nine months of 2019, we decreased estimated ultimate property and casualty reinsurance liabilities for prior years’ events by $75 million, compared to $581 million in the first nine months of 2018. The decreases in prior years’ incurred losses in each year derived primarily from property claims.