Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. A reconciliation of the changes in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 14), for each of the nine-month periods ending September 30, 2022 and 2021 follows (in millions).


	2022			2021
Balances at beginning of year:
Gross liabilities	$	86,664		$	79,854
Reinsurance recoverable on unpaid losses		(2,960	)		(2,912	)
Net liabilities		83,704			76,942
Incurred losses and loss adjustment expenses:
Current accident year		44,472			38,447
Prior accident years		(2,141	)		(2,151	)
Total		42,331			36,296
Paid losses and loss adjustment expenses:
Current accident year		(17,543	)		(15,277	)
Prior accident years		(18,564	)		(15,076	)
Total		(36,107	)		(30,353	)
Foreign currency effect		(1,044	)		(119	)
Balances at September 30:
Net liabilities		88,884			82,766
Reinsurance recoverable on unpaid losses		2,758			2,988
Gross liabilities	$	91,642		$	85,754

Incurred losses and loss adjustment expenses shown in the preceding table were recorded in earnings and related to insured events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”). Incurred and paid losses and loss adjustment expenses are net of reinsurance recoveries. Current accident year incurred losses in the first nine months of 2022 and 2021 included approximately $4.0 billion and $2.7 billion, respectively, from significant catastrophe events (losses in excess of $100 million per event). Significant catastrophe events in the first nine months included Hurricane Ian ($3.4 billion) and floods in Australia and South Africa in 2022 and Winter Storm Uri, Hurricane Ida ($1.5 billion) and floods in Europe in 2021.

In the first nine months, we recorded net reductions of estimated ultimate liabilities for prior accident years of $2.1 billion in 2022 and $2.2 billion in 2021, which produced corresponding reductions in incurred losses and loss adjustment expenses in those periods. These reductions, as percentages of the net liabilities at the beginning of each year, were 2.6% in 2022 and 2.8% in 2021.

Estimated ultimate liabilities for prior accident years from primary insurance in the first nine months were reduced by $734 million in 2022 and $1.6 billion in 2021. The reductions in each period derived primarily from private passenger automobile, medical professional liability and workers’ compensation claims. Estimated ultimate liabilities for prior years attributable to property and casualty reinsurance in the first nine months decreased $1.4 billion in 2022 and $564 million in 2021.