Unpaid losses and loss adjustment expenses

3 Months Ended

Mar. 31, 2018

Insurance [Abstract]

Unpaid losses and loss adjustment expenses

Note 15. Unpaid losses and loss adjustment expenses

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 as of 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 16), for each of the three months ending March 31, 2018 and 2017 follow (in millions).

	2018			2017
Balances – beginning of year:
Gross liabilities	$	61,122		$	53,379
Reinsurance recoverable on unpaid losses		(3,201	)		(3,338	)
Net liabilities		57,921			50,041
Incurred losses and loss adjustment expenses:
Current accident year events		9,475			8,165
Prior accident years’ events		(753	)		134
Total incurred losses and loss adjustment expenses		8,722			8,299
Paid losses and loss adjustment expenses:
Current accident year events		(3,091	)		(2,678	)
Prior accident years’ events		(4,759	)		(4,216	)
Total payments		(7,850	)		(6,894	)
Foreign currency translation adjustment		253			77
Balances – March 31:
Net liabilities		59,046			51,523
Reinsurance recoverable on unpaid losses		3,048			3,221
Gross liabilities	$	62,094		$	54,744

Incurred losses and loss adjustment expenses in the first quarter of 2018 included net reductions of estimated ultimate liabilities for prior accident years of $753 million compared to net increases of $134 million in 2017. We decreased estimated ultimate liabilities with respect to primary insurance by $571 million in the first quarter of 2018 and $261 million in 2017. In each period, these reductions primarily related to medical malpractice, workers’ compensation and private passenger automobile insurance. Estimated ultimate liabilities with respect to property and casualty reinsurance decreased by $182 million in the first quarter of 2018 compared to an increase of $395 million in 2017. Incurred losses for prior years’ events in 2017 included increases in the estimated liabilities for certain personal injury claims in the United Kingdom due to a regulatory decision, for unanticipated property claims under certain reinsurance contracts and for estimates of IBNR losses.