Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses of short-duration insurance contracts with respect to underlying loss events that occurred prior to the contract inception date. Depending on the contract terms, claims payments may commence immediately after the contract date or once a contractual retention amount has been reached. Reconciliations of the changes in estimated liabilities for retroactive reinsurance unpaid losses and loss adjustment expenses (“claim liabilities”) and related deferred charge reinsurance assumed assets for each of the nine months ending September 30, 2019 and 2018 follows (in millions).

	2019						2018
	Unpaid losses and loss adjustment expenses			Deferred charges reinsurance assumed			Unpaid losses and loss adjustment expenses			Deferred charges reinsurance assumed
Balances – beginning of year:	$	41,834		$	(14,104	)	$	42,937		$	(15,278	)
Incurred losses and loss adjustment expenses
Current year contracts		175			(82	)		—			—
Prior years’ contracts		(2	)		827			(36	)		827
Total		173			745			(36	)		827
Paid losses and loss adjustment expenses		(643	)		—			(966	)		—
Balances – September 30:	$	41,364		$	(13,359	)	$	41,935		$	(14,451	)
Incurred losses and loss adjustment expenses, net of deferred charges	$	918					$	791

In the preceding table, classifications of incurred losses and loss adjustment expenses are based on the inception dates of the contracts. Incurred losses and loss adjustment expenses in the first nine months related to contracts written in prior years were $825 million in 2019 and $791 million in 2018. Such losses reflected the periodic amortization of deferred charge assets and the effects of changes in the timing and amount of ultimate claim liabilities.

In 2017, National Indemnity Company (“NICO”) entered into a contract with various subsidiaries of American International Group, Inc. (collectively, “AIG”). Our estimated ultimate claim liabilities with respect to the AIG contract at both September 30, 2019 and December 31, 2018 were $18.2 billion. Deferred charge assets related to the AIG contract were approximately $6.4 billion at September 30, 2019 and $6.9 billion at December 31, 2018.