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 the six months ending June 30, 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		18,905		16,980
Prior accident years’ events		(1,054)		(166)

Total incurred losses and loss adjustment expenses		17,851		16,814


Paid losses and loss adjustment expenses:
Current accident year events		(7,332)		(6,656)
Prior accident years’ events		(8,581)		(7,253)

Total payments		(15,913)		(13,909)


Foreign currency translation adjustment		(111)		327
Balances – June 30:
Net liabilities		59,748		53,273
Reinsurance recoverable on unpaid losses		2,989		3,076

Gross liabilities	$	62,737	$	56,349

Incurred losses and loss adjustment expenses in the first six months of 2018 included net reductions of estimated ultimate liabilities for prior accident years of $1,054 million compared to $166 million in 2017. We reduced estimated ultimate liabilities for prior accident years related to primary insurance by $768 million in the first six months of 2018 compared to $532 million in the first six months of 2017. In the first six months of 2018, estimated liabilities for prior accident years for private passenger automobile insurance coverages were reduced $430 million compared to $106 million in 2017. In each period, we also reduced prior years’ claim liabilities for medical professional liability and workers’ compensation insurance coverages.

In the first six months of 2018, we reduced estimated ultimate liabilities with respect to prior accident years for property and casualty reinsurance by $286 million, compared to an increase of $366 million in the first six months of 2017. The comparative change reflected the impact in the 2017 period of unanticipated property claims and increases in estimated liabilities for certain U.K. personal injury claims resulting from the U.K. Ministry of Justice’s decision to reduce the fixed discount rate to be used by insurers in lump sum settlement calculations.