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 15), for each of the three-month periods ending March 31, 2023 and 2022 follows (in millions).


	2023			2022
Balances at beginning of year:
Gross liabilities	$	107,472		$	86,664
Reinsurance recoverable on unpaid losses		(5,025	)		(2,960	)
Net liabilities		102,447			83,704
Incurred losses and loss adjustment expenses:
Current accident year		14,776			13,375
Prior accident years		(740	)		(251	)
Total		14,036			13,124
Paid losses and loss adjustment expenses:
Current accident year		(3,841	)		(3,908	)
Prior accident years		(9,747	)		(8,091	)
Total		(13,588	)		(11,999	)
Foreign currency effect		93			(106	)
Balances at March 31:
Net liabilities		102,988			84,723
Reinsurance recoverable on unpaid losses		4,969			2,944
Gross liabilities	$	107,957		$	87,667

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.

In the first quarter, we recorded net reductions of estimated ultimate liabilities for prior accident years of $740 million in 2023 and $251 million in 2022, 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 0.7% in 2023 and 0.3% in 2022.

We reduced estimated ultimate liabilities for prior accident years of primary insurance businesses in the first quarter by $379 million in 2023 and $114 million in 2022. In 2023, the reductions were driven by private passenger auto claims, whereas the decreases in 2022 were primarily attributable to private passenger auto, medical professional liability and workers’ compensation claims, partly offset by increases with respect to other casualty claims. In the first quarter, estimated ultimate liabilities for prior accident years of property and casualty reinsurance businesses were reduced $361 million in 2023 and $137 million in 2022.