Claim and Claim Adjustment Expense Reserves

12 Months Ended

Dec. 31, 2017

Liability for Claims and Claims Adjustment Expense [Abstract]

Claim and Claim Adjustment Expense Reserves

The Company's property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including IBNR claims as of the reporting date. The Company's reserve projections are based primarily on detailed analysis of the facts in each case, the Company's experience with similar cases and various historical development patterns. Consideration is given to such historical patterns as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions, including inflation, and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.

Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers' compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the Company's ultimate cost for insurance losses will not exceed current estimates.

Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company's results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $380 million, $165 million and $141 million for the years ended December 31, 2017, 2016 and 2015. Net catastrophe losses for the year ended December 31, 2017 included $256 million related to Hurricanes Harvey, Irma and Maria. Catastrophe-related reinsurance reinstatement premium was $4 million for the year ended December 31, 2017. The remaining net catastrophe losses in 2017 resulted primarily from the California wildfires and U.S. weather related events. Net catastrophe losses in 2016 related primarily to U.S. weather-related events and the Fort McMurray wildfires. Net catastrophe losses in 2015 related primarily to U.S. weather-related events.

Liability for Unpaid Claim and Claim Adjustment Expenses

The table below reconciles the net liability for unpaid claim and claim adjustment expenses for the property and casualty segments to the amount presented in the Consolidated Balance Sheets.



As of December 31
(In millions)	2017
Net liability for unpaid claim and claim adjustment expenses:
Specialty	$	5,179
Commercial	7,964
International	1,432
Corporate & Other	205
Life & Group ⁽¹⁾	3,290
Total net claim and claim adjustment expenses	18,070
Reinsurance receivables: ⁽²⁾
Specialty	669
Commercial	621
International	204
Corporate & Other ⁽³⁾	2,231
Life & Group	209
Total reinsurance receivables	3,934
Total gross liability for unpaid claim and claim adjustment expenses	$	22,004

(1) The Life & Group segment amount is primarily related to long term care claim reserves, but also includes amounts related to unfunded structured settlements arising from short duration contracts. Long term care policies are long duration contracts.

(2) Reinsurance receivables presented do not include reinsurance receivables related to paid losses.

(3) The Corporate & Other Reinsurance receivables are primarily related to A&EP claims covered under the Loss Portfolio Transfer.

The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group segment.



As of or for the years ended December 31
(In millions)	2017			2016			2015
Reserves, beginning of year:
Gross	$	22,343		$	22,663		$	23,271
Ceded	4,094			4,087			4,344
Net reserves, beginning of year	18,249			18,576			18,927
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year	5,201			5,025			4,934
Decrease in provision for insured events of prior years	(381		)	(342		)	(255		)
Amortization of discount	179			175			166
Total net incurred ⁽¹⁾	4,999			4,858			4,845
Net payments attributable to:
Current year events	(975		)	(967		)	(856		)
Prior year events	(4,366		)	(4,167		)	(4,089		)
Total net payments	(5,341		)	(5,134		)	(4,945		)
Foreign currency translation adjustment and other	163			(51		)	(251		)
Net reserves, end of year	18,070			18,249			18,576
Ceded reserves, end of year	3,934			4,094			4,087
Gross reserves, end of year	$	22,004		$	22,343		$	22,663


(1)	Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and loss deductible receivables, and benefit expenses related to future policy benefits, which are not reflected in the table above.

Reserving Methodology

In developing claim and claim adjustment expense (“loss” or “losses”) reserve estimates, our actuaries perform detailed reserve analyses that are staggered throughout the year. Every reserve group is reviewed at least once during the year. The analyses generally review losses gross of ceded reinsurance and apply the ceded reinsurance terms to the gross estimates to establish estimates net of reinsurance. In addition to the detailed analyses, we review actual loss emergence for all products each quarter. In developing the loss reserve estimates for property and casualty contracts, we generally project ultimate losses using several common actuarial methods as listed below. We review the various indications from the various methods and apply judgment to select an actuarial point estimate. The indicated required reserve is the difference between the selected ultimate loss and the inception-to-date paid losses. The difference between the selected ultimate loss and the case incurred or reported loss is IBNR. IBNR includes a provision for development on known cases as well as a provision for late reported incurred claims. Further, the Company does not establish case reserves for allocated loss adjustment expenses (ALAE), therefore ALAE reserves are included in our estimate of IBNR. The most frequently utilized methods to project ultimate losses include the following:


•	Paid development: The paid development method estimates ultimate losses by reviewing paid loss patterns and applying them to accident years with further expected changes in paid loss.


•	Incurred development: The incurred development method is similar to the paid development method, but it uses case incurred losses instead of paid losses.


•	Loss ratio: The loss ratio method multiplies premiums by an expected loss ratio to produce ultimate loss estimates for each accident year.


•	Bornhuetter-Ferguson using premiums and paid loss: The Bornhuetter-Ferguson using premiums and paid loss method is a combination of the paid development approach and the loss ratio approach. This method normally determines expected loss ratios similar to the approach used to estimate the expected loss ratio for the loss ratio method.


•	Bornhuetter-Ferguson using premiums and incurred loss: The Bornhuetter-Ferguson using premiums and incurred loss method is similar to the Bornhuetter-Ferguson using premiums and paid loss method except that it uses case incurred losses.


•	Frequency times severity: The frequency times severity method multiplies a projected number of ultimate claims by an estimated ultimate average loss for each accident year to produce ultimate loss estimates.


•	Stochastic modeling: The stochastic modeling produces a range of possible outcomes based on varying assumptions related to the particular product being modeled.

For many exposures, especially those that can be considered long-tail, a particular accident or policy year may not have a sufficient volume of paid losses to produce a statistically reliable estimate of ultimate losses. In such a case, our actuaries typically assign more weight to the incurred development method than to the paid development method. As claims continue to settle and the volume of paid loss increases, the actuaries may assign additional weight to the paid development method. For most of our products, even the incurred losses for accident or policy years that are early in the claim settlement process will not be of sufficient volume to produce a reliable estimate of ultimate losses. In these cases, we may not assign any weight to the paid and incurred development methods. We will use the loss ratio, Bornhuetter-Ferguson and frequency times severity methods. For short-tail exposures, the paid and incurred development methods can often be relied on sooner, primarily because our history includes a sufficient number of years to cover the entire period over which paid and incurred losses are expected to change. However, we may also use the loss ratio, Bornhuetter-Ferguson and frequency times severity methods for short-tail exposures. For other more complex reserve groups where the above methods may not produce reliable indications, we use additional methods tailored to the characteristics of the specific situation.

Future Policy Benefit Reserves

Reserves for policyholder benefits for our Life & Group segment, which primarily includes long term care, are based on actuarial assumptions which include estimates of morbidity, persistency, inclusive of mortality, discount rates, future premium rate increases and expenses over the life of the contracts. Under GAAP, the best estimates of the actuarial assumptions at the date the contract was issued are locked-in throughout the life of the contract, unless a premium deficiency develops, which occurred in 2015. As a result, the Company updated the assumptions to represent management’s best estimates at the time of the premium deficiency and these revised assumptions are locked-in unless another premium deficiency is identified.

Certain claim liabilities are more difficult to estimate and have differing methodologies and considerations which are described below.

Mass Tort and A&EP Reserves

Our mass tort and A&EP reserving methodologies are similar as both are based on detailed account reviews of large accounts with estimates based on ultimate payments considering the applicable law and coverage litigation. These reserves are subject to greater inherent variability than is typical of the remainder of the Company’s reserves due to, among other things, a general lack of sufficiently detailed data, expansion of the population being held responsible for these exposures and significant unresolved legal issues such as the existence of coverage and the definition of an occurrence.

Property and Casualty Reserve Reviews

Our actuarial reserve analyses result in point estimates. Each quarter, the results of detailed reserve reviews are summarized and discussed with our senior management to determine management's best estimate of reserves. Senior management considers many factors in making this decision. The factors include, but are not limited to, the historical pattern and volatility of the actuarial indications, the sensitivity of the actuarial indications to changes in paid and incurred loss patterns, the consistency of claims handling processes, the consistency of case reserving practices, changes in our pricing and underwriting, pricing and underwriting trends in the insurance market and legal, judicial, social and economic trends. Our recorded reserves reflect our best estimate as of a particular point in time based upon known facts, consideration of the factors cited above and our judgment. The carried reserve may differ from the actuarial point estimate as the result of our consideration of the factors noted above as well as the potential volatility of the projections associated with the specific product being analyzed and other factors affecting claims costs that may not be quantifiable through traditional actuarial analysis.

The following tables present the gross and net carried reserves.



December 31, 2017	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
(In millions)	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
Gross Case Reserves	$	1,805	$	4,364	$	744	$	3,386	$	1,371	$	11,670
Gross IBNR Reserves	4,043		4,221		892		113		1,065		10,334
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	5,848	$	8,585	$	1,636	$	3,499	$	2,436	$	22,004
Net Case Reserves	$	1,656	$	4,047	$	640	$	3,208	$	94	$	9,645
Net IBNR Reserves	3,523		3,917		792		82		111		8,425
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	5,179	$	7,964	$	1,432	$	3,290	$	205	$	18,070



December 31, 2016	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
(In millions)	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
Gross Case Reserves	$	1,871	$	4,661	$	632	$	3,172	$	1,524	$	11,860
Gross IBNR Reserves	4,278		4,233		696		186		1,090		10,483
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	6,149	$	8,894	$	1,328	$	3,358	$	2,614	$	22,343
Net Case Reserves	$	1,681	$	4,353	$	548	$	2,951	$	94	$	9,627
Net IBNR Reserves	3,723		3,952		653		158		136		8,622
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	5,404	$	8,305	$	1,201	$	3,109	$	230	$	18,249

Development Tables

The loss reserve development tables presented herein illustrate the change over time of reserves established for claim and allocated claim adjustment expenses arising from short duration insurance contracts for certain lines of business within our property & casualty segments. Not all lines of business or segments are presented based on their context to the Company's overall loss reserves, calendar year reserve development, or calendar year net earned premiums. Insurance contracts are considered to be short duration contracts when the contracts are not expected to remain in force for an extended period of time. The Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses tables, reading across, show the cumulative net incurred claim and allocated claim adjustment expenses relating to each accident year at the end of the stated calendar year. Changes in the cumulative amount across time are the result of the Company's expanded awareness of additional facts and circumstances that pertain to the unsettled claims. The Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses tables, reading across, show the cumulative amount paid for claims in each accident year as of the end of the stated calendar year. The Net Strengthening or (Releases) of Prior Accident Year Reserves tables, reading across, show the net increase or decrease in the cumulative net incurred accident year claim and allocated claim adjustment expenses during each stated calendar year and indicates whether the reserves for that accident year were strengthened or released.

The information in the tables is reported on a net basis after reinsurance and does not include the effects of discounting. The information contained in the years preceding calendar year 2016 is unaudited. Information contained in the tables pertaining to our International segment has been presented at the year-end 2017 foreign currency exchange rates for all periods presented to remove the effects of foreign currency exchange rate changes between calendar years. The Company has presented development information for the Hardy business prospectively from the date of acquisition and is presented as a separate table within our International segment. To the extent the Company enters into a commutation, the transaction is reported on a prospective basis. To the extent that the Company enters into a disposition, the effects of the disposition are reported on a retrospective basis by removing the balances associated with the disposed of business.

The amounts reported for the cumulative number of reported claims include direct and assumed open and closed claims by accident year at the claimant level. The number excludes claim counts for claims within a policy deductible where the insured is responsible for payment of losses in the deductible layer. Claim count data for certain assumed reinsurance contracts is unavailable.

In the loss reserve development tables, IBNR includes reserves for incurred but not reported losses and expected development on case reserves. The Company does not establish case reserves for ALAE, therefore ALAE reserves are also included in the estimate of IBNR.

Net Prior Year Development

Changes in estimates of claim and claim adjustment expense reserves and premium accruals, net of reinsurance, for prior years are defined as net prior year development. These changes can be favorable or unfavorable. The following tables and discussion present the net prior year development recorded for Specialty, Commercial, International and Corporate & Other segments.



December 31, 2017
(In millions)	Specialty			Commercial			International			Corporate & Other			Total
Pretax (favorable) unfavorable net prior year claim and claim adjustment expense reserve development	$	(202	)	$	(87	)	$	(9	)	$	(10	)	$	(308	)
Pretax (favorable) unfavorable premium development	(14		)	28			(18		)	—			(4		)
Total pretax (favorable) unfavorable net prior year development	$	(216	)	$	(59	)	$	(27	)	$	(10	)	$	(312	)



December 31, 2016
(In millions)	Specialty			Commercial			International			Corporate & Other		Total
Pretax (favorable) unfavorable net prior year claim and claim adjustment expense reserve development	$	(287	)	$	55		$	(58	)	$	2	$	(288	)
Pretax (favorable) unfavorable premium development	(18		)	(2		)	(6		)	—		(26		)
Total pretax (favorable) unfavorable net prior year development	$	(305	)	$	53		$	(64	)	$	2	$	(314	)



December 31, 2015
(In millions)	Specialty			Commercial			International			Corporate & Other		Total
Pretax (favorable) unfavorable net prior year claim and claim adjustment expense reserve development	$	(141	)	$	(15	)	$	(54	)	$	—	$	(210	)
Pretax (favorable) unfavorable premium development	(11		)	(15		)	18			—		(8		)
Total pretax (favorable) unfavorable net prior year development	$	(152	)	$	(30	)	$	(36	)	$	—	$	(218	)

Favorable net prior year development of $79 million, $45 million and $50 million was recorded in the Life & Group segment for the years ended December 31, 2017, 2016 and 2015. The favorable net prior year development for the year ended December 31, 2017 was driven by lower than expected claim severity.

Premium development can occur in the property and casualty business when there is a change in exposure on auditable policies or when premium accruals differ from processed premium. Audits on policies usually occur in a period after the expiration date of the policy. See further information on the premium development in the Commercial segment for the years ended December 31, 2017 and 2016 within the Small Business discussion in Note F.

Specialty

The following table presents further detail of the net prior year claim and claim adjustment expense reserve development (development) recorded for the Specialty segment.



Years ended December 31
(In millions)	2017			2016			2015
Pretax (favorable) unfavorable development:
Medical Professional Liability	$	5		$	(37	)	$	(43	)
Other Professional Liability and Management Liability	(131		)	(130		)	—
Surety	(84		)	(63		)	(69		)
Warranty	4			4			(2		)
Other	4			(61		)	(27		)
Total pretax (favorable) unfavorable development	$	(202	)	$	(287	)	$	(141	)

2017

Unfavorable development in medical professional liability was primarily due to continued higher than expected frequency in aging services and higher than expected severity for hospitals in recent accident years. This was partially offset by favorable development in life sciences and hospitals in prior accident years as well as favorable development related to unallocated claim adjustment expenses.

Favorable development in other professional liability and management liability was primarily due to favorable settlements on closed claims and a lower frequency of large losses for accident years 2011 through 2015 for professional and management liability, lower than expected claim frequency in accident years 2012 through 2015 for professional liability and lower than expected severity in accident years 2014 through 2015 for professional liability.

Favorable development in surety coverages was primarily due to lower than expected frequency of large losses in accident years 2015 and prior.

2016

Favorable development for medical professional liability was primarily due to lower than expected severities for individual healthcare professionals, allied facilities and hospitals in accident years 2011 and prior and better than expected severity in medical products liability in accident years 2010 through 2015. This was partially offset by unfavorable development in accident years 2012 and 2013 related to higher than expected large loss emergence in hospitals and higher than expected frequency and severity in accident years 2014 and 2015 in our aging services business.

Favorable development in other professional liability and management liability was primarily due to favorable settlements on closed claims and lower than expected frequency of claims in accident years 2010 through 2014 related to professional services and financial institutions. This was partially offset by unfavorable development related to a specific financial institutions claim in accident year 2014, higher management liability severities in accident year 2015, and deterioration on credit crises-related claims in accident year 2009.

Favorable development in surety coverages was primarily due to lower than expected frequency of large losses in accident years 2014 and prior.

Favorable development for other coverages provided to Specialty customers was due to better than expected claim frequency and claim severity in commercial lines coverages in accident years 2010 through 2015.

2015

Overall, favorable development for medical professional liability was related to lower than expected severity in accident years 2012 and prior. Unfavorable development was recorded related to increased claim frequency and severity in the aging services business in accident years 2013 and 2014.

Favorable development in other professional liability and management liability related to better than expected large loss emergence in financial institutions primarily in accident years 2011 through 2014. Additional favorable development related to lower than expected severity for professional services in accident years 2011 and prior. Unfavorable development was recorded related to increased frequency of large claims on public company management liability in accident years 2012 through 2014.

Favorable development for surety coverages was primarily due to lower than expected frequency of large losses in accident years 2013 and prior.

Favorable development for other coverages was due to better than expected claim frequency in property coverages provided to Specialty customers in accident year 2014.

Specialty - Line of Business Composition

The table below provides the line of business composition of the net liability for unpaid claim and claim adjustment expenses for the Specialty segment.



As of December 31
(In millions)	2017
Net liability for unpaid claim and claim adjustment expenses:
Medical Professional Liability	$	1,700
Other Professional Liability and Management Liability	2,912
Surety	368
Warranty	54
Other	145
Total net liability for unpaid claim and claim adjustment expenses	$	5,179

Specialty - Medical Professional Liability

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2017
(In millions, except reported claims data)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017		IBNR		Cumulative Number of Claims
Accident Year
2008	$	426	$	451	$	496	$	480	$	468	$	468	$	467	$	455	$	442	$	438	$	4	14,102
2009			462		469		494		506		480		471		463		432		422		3		15,594
2010					483		478		478		486		470		446		403		398		9		15,239
2011							486		492		507		533		501		491		491		16		17,481
2012									526		529		575		567		559		563		39		18,503
2013											534		540		560		567		573		44		19,777
2014													511		548		585		564		78		19,764
2015															480		539		543		164		17,690
2016																	469		527		268		14,743
2017																			452		370		11,137
																	Total		$	4,971	$	995

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017
Accident Year
2008	$	9	$	90	$	207	$	282	$	332	$	377	$	395	$	409	$	428	$	431
2009			9		75		180		278		328		353		377		396		408
2010					11		93		186		273		338		361		371		380
2011							18		121		225		315		379		407		435
2012									15		121		236		359		428		475
2013											18		121		259		364		429
2014													25		149		274		374
2015															22		105		241
2016																	18		126
2017																			20
																	Total		$	3,319
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,652
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2008																			20
Liability for unallocated claim adjustment expenses for accident years presented																			28
Total net liability for unpaid claim and claim adjustment expenses																			$	1,700

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾			2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017			Total
Accident Year
2008	$	25	$	45	$	(16	)	$	(12	)	$	—		$	(1	)	$	(12	)	$	(13	)	$	(4	)	$	12
2009			7		25			12			(26		)	(9		)	(8		)	(31		)	(10		)	(40		)
2010					(5		)	—			8			(16		)	(24		)	(43		)	(5		)	(85		)
2011								6			15			26			(32		)	(10		)	—			5
2012											3			46			(8		)	(8		)	4			37
2013														6			20			7			6			39
2014																	37			37			(21		)	53
2015																				59			4			63
2016																							58			58
Total net development for the accident years presented above																	(27		)	(2		)	32
Total net development for accident years prior to 2008																	(16		)	(35		)	(19		)
Total unallocated claim adjustment expense development																	—			—			(8		)
Total																	$	(43	)	$	(37	)	$	5

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Specialty - Other Professional Liability and Management Liability

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2017
(In millions, except reported claims data)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017		IBNR		Cumulative Number of Claims
Accident Year
2008	$	916	$	933	$	954	$	924	$	915	$	880	$	850	$	845	$	827	$	818	$	26	16,331
2009			829		873		903		898		891		900		895		903		901		32		17,274
2010					825		827		850		848		846		836		823		826		31		17,805
2011							876		904		933		948		944		910		898		71		18,643
2012									907		894		876		870		833		832		73		18,262
2013											844		841		879		840		824		83		17,362
2014													841		859		854		798		158		16,984
2015															847		851		832		296		16,603
2016																	859		859		426		17,004
2017																			810		701		15,206
																	Total		$	8,398	$	1,897

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017
Accident Year
2008	$	39	$	181	$	376	$	515	$	600	$	641	$	678	$	719	$	741	$	753
2009			37		195		358		550		638		719		769		798		821
2010					31		203		404		541		630		670		721		753
2011							71		313		502		604		682		726		781
2012									57		248		398		570		648		698
2013											51		240		426		583		667
2014													51		212		375		494
2015															48		209		377
2016																	60		236
2017																			52
																	Total		$	5,632
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	2,766
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2008																			79
Liability for unallocated claim adjustment expenses for accident years presented																			67
Total net liability for unpaid claim and claim adjustment expenses																			$	2,912

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾			2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017			Total
Accident Year
2008	$	17	$	21	$	(30	)	$	(9	)	$	(35	)	$	(30	)	$	(5	)	$	(18	)	$	(9	)	$	(98	)
2009			44		30			(5		)	(7		)	9			(5		)	8			(2		)	72
2010					2			23			(2		)	(2		)	(10		)	(13		)	3			1
2011								28			29			15			(4		)	(34		)	(12		)	22
2012											(13		)	(18		)	(6		)	(37		)	(1		)	(75		)
2013														(3		)	38			(39		)	(16		)	(20		)
2014																	18			(5		)	(56		)	(43		)
2015																				4			(19		)	(15		)
2016																							—			—
Total net development for the accident years presented above																	26			(134		)	(112		)
Total net development for accident years prior to 2008																	(26		)	4			(14		)
Total unallocated claim adjustment expense development																	—			—			(5		)
Total																	$	—		$	(130	)	$	(131	)

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Specialty - Surety

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2017
(In millions, except reported claims data)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017		IBNR		Cumulative Number of Claims
Accident Year
2008	$	114	$	114	$	73	$	68	$	61	$	52	$	48	$	45	$	44	$	44	$	—	7,199
2009			114		114		103		85		68		59		52		53		53		1		6,679
2010					112		112		111		84		76		66		63		59		7		5,962
2011							120		121		116		87		75		70		66		9		5,795
2012									120		122		98		70		52		45		9		5,519
2013											120		121		115		106		91		10		4,993
2014													123		124		94		69		25		4,938
2015															131		131		104		63		4,670
2016																	124		124		84		4,707
2017																			120		97		2,901
																	Total		$	775	$	305

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017
Accident Year
2008	$	9	$	27	$	35	$	39	$	42	$	43	$	43	$	43	$	43	$	43
2009			13		24		34		41		43		45		46		47		47
2010					13		34		50		55		57		58		55		52
2011							19		42		55		58		60		60		56
2012									5		32		34		35		35		36
2013											16		40		69		78		78
2014													7		30		38		36
2015															7		26		38
2016																	5		37
2017																			23
																	Total		$	446
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	329
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2008																			9
Liability for unallocated claim adjustment expenses for accident years presented																			30
Total net liability for unpaid claim and claim adjustment expenses																			$	368

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾			2011⁽¹⁾			2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017			Total
Accident Year
2008	$	—	$	(41	)	$	(5	)	$	(7	)	$	(9	)	$	(4	)	$	(3	)	$	(1	)	$	—		$	(70	)
2009			—			(11		)	(18		)	(17		)	(9		)	(7		)	1			—			(61		)
2010						—			(1		)	(27		)	(8		)	(10		)	(3		)	(4		)	(53		)
2011									1			(5		)	(29		)	(12		)	(5		)	(4		)	(54		)
2012												2			(24		)	(28		)	(18		)	(7		)	(75		)
2013															1			(6		)	(9		)	(15		)	(29		)
2014																		1			(30		)	(25		)	(54		)
2015																					—			(27		)	(27		)
2016																								—			—
Total net development for the accident years presented above																		(65		)	(65		)	(82		)
Total net development for accident years prior to 2008																		(4		)	2			1
Total unallocated claim adjustment expense development																		—			—			(3		)
Total																		$	(69	)	$	(63	)	$	(84	)

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Commercial

The following table presents further detail of the development recorded for the Commercial segment.



Years ended December 31
(In millions)	2017			2016			2015
Pretax (favorable) unfavorable development:
Commercial Auto	$	(38	)	$	(46	)	$	(22	)
General Liability	—			(28		)	(33		)
Workers' Compensation	(65		)	150			80
Property and Other	16			(21		)	(40		)
Total pretax (favorable) unfavorable development	$	(87	)	$	55		$	(15	)

2017

Favorable development for commercial auto was primarily due to lower than expected severity in accident years 2013 through 2016, as well as a large favorable recovery on a claim in accident year 2012.

Favorable development for workers’ compensation was primarily related to decreases in frequency and severity in recent accident years, partially attributable to California reforms impacting medical costs. This was partially offset by unfavorable development related to an adverse arbitration ruling on reinsurance recoverables from older accident years as well as the recognition of loss estimates associated with favorable premium development.

Unfavorable development for property and other was primarily due to higher than expected severity in accident year 2016.

2016

Favorable development for commercial auto was primarily due to favorable settlements on claims in accident years 2010 through 2014 and lower than expected severities in accident years 2012 through 2015.

Favorable development for general liability was primarily due to better than expected claim settlements in accident years 2012 through 2014 and better than expected severity on umbrella claims in accident years 2010 through 2013. This was partially offset by unfavorable development related to an increase in reported claims prior to the closing of the three year window set forth by the Minnesota Child Victims Act in accident years 2006 and prior.

Unfavorable development for workers' compensation was primarily due to higher than expected severity for Defense Base Act contractors that largely resulted from a reduction of expected future recoveries from the US Department of Labor under the War Hazard Act. Further unfavorable development was due to the impact of recent Florida court rulings for accident years 2008 through 2015. These were partially offset by favorable development related to lower than expected frequencies related to our ongoing Middle Market and Small Business results for accident years 2009 through 2014.

Favorable development for property and other was primarily due to better than expected loss frequency in accident years 2013 through 2015. This was partially offset by unfavorable development related to higher than expected severity from a fourth quarter 2015 catastrophe event.

2015

Favorable development for commercial auto was primarily due to lower than expected severity in accident years 2009 through 2014.

Favorable development for general liability was primarily due to favorable settlements on claims in accident years 2010 through 2013.

Unfavorable development for workers’ compensation was primarily due to higher than expected severity related to Defense Base Act contractors in accident years 2008 through 2014.

Favorable development for property and other was primarily due to better than expected claim emergence from 2012 and 2014 catastrophe events and better than expected frequency of large claims in accident year 2014.

The year ended December 31, 2015 also included unfavorable loss development related to extra contractual obligation losses and losses associated with premium development.

Commercial - Line of Business Composition

The table below provides the line of business composition of the net liability for unpaid claim and claim adjustment expenses for the Commercial segment.



As of December 31
(In millions)	2017
Net Claim and claim adjustment expenses:
Commercial Auto	$	389
General Liability	3,123
Workers' Compensation	4,012
Property and Other	440
Total net liability for claim and claim adjustment expenses	$	7,964

Commercial - Commercial Auto

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2017
(In millions, except reported claims data)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017		IBNR		Cumulative Number of Claims
Accident Year
2008	$	322	$	323	$	316	$	306	$	309	$	305	$	298	$	298	$	296	$	297	$	—	56,424
2009			287		272		274		278		281		277		275		272		272		—		47,343
2010					262		274		279		283		291		286		281		280		1		46,335
2011							262		273		279		293		290		285		285		3		46,691
2012									270		282		292		296		300		292		7		45,288
2013											242		259		257		241		237		10		38,539
2014													231		221		210		204		19		33,029
2015															199		197		187		35		29,924
2016																	196		183		53		29,745
2017																			196		117		25,173
																	Total		$	2,433	$	245

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017
Accident Year
2008	$	83	$	158	$	210	$	244	$	274	$	289	$	291	$	292	$	293	$	295
2009			72		128		188		229		257		269		270		270		271
2010					72		137		197		240		265		274		279		280
2011							78		141		193		241		264		275		277
2012									77		157		214		253		276		278
2013											73		132		164		195		219
2014													63		100		135		163
2015															52		95		128
2016																	51		91
2017																			58
																	Total		$	2,060
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	373
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2008																			6
Liability for unallocated claim adjustment expenses for accident years presented																			10
Total net liability for unpaid claim and claim adjustment expenses																			$	389

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾			2011⁽¹⁾			2012⁽¹⁾		2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017			Total
Accident Year
2008	$	1	$	(7	)	$	(10	)	$	3	$	(4	)	$	(7	)	$	—		$	(2	)	$	1		$	(25	)
2009			(15		)	2			4		3			(4		)	(2		)	(3		)	—			(15		)
2010						12			5		4			8			(5		)	(5		)	(1		)	18
2011									11		6			14			(3		)	(5		)	—			23
2012											12			10			4			4			(8		)	22
2013														17			(2		)	(16		)	(4		)	(5		)
2014																	(10		)	(11		)	(6		)	(27		)
2015																				(2		)	(10		)	(12		)
2016																							(13		)	(13		)
Total net development for the accident years presented above																	(18		)	(40		)	(41		)
Total net development for accident years prior to 2008																	(4		)	(6		)	1
Total unallocated claim adjustment expense development																	—			—			2
Total																	$	(22	)	$	(46	)	$	(38	)

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Commercial - General Liability

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2017
(In millions, except reported claims data)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017		IBNR		Cumulative Number of Claims
Accident Year
2008	$	611	$	604	$	630	$	647	$	633	$	632	$	613	$	600	$	591	$	592	$	13	44,655
2009			591		637		634		633		629		623		619		622		627		18		44,038
2010					566		597		599		649		695		675		659		654		19		43,472
2011							537		534		564		610		611		621		615		29		38,216
2012									539		563		579		570		558		569		34		34,249
2013											615		645		634		643		604		62		33,255
2014													627		634		635		627		131		27,478
2015															573		574		585		208		23,082
2016																	622		647		351		21,893
2017																			627		547		15,375
																	Total		$	6,147	$	1,412

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017
Accident Year
2008	$	31	$	129	$	261	$	390	$	473	$	528	$	550	$	560	$	567	$	574
2009			33		112		270		392		486		532		557		584		596
2010					27		139		267		414		530		577		608		618
2011							27		135		253		389		484		534		562
2012									27		127		233		340		417		473
2013											33		135		257		377		469
2014													29		115		245		379
2015															31		132		247
2016																	34		163
2017																			27
																	Total		$	4,108
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	2,039
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2008																			1,026
Liability for unallocated claim adjustment expenses for accident years presented																			58
Total net liability for unpaid claim and claim adjustment expenses																			$	3,123

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2009⁽¹⁾			2010⁽¹⁾		2011⁽¹⁾			2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017			Total
Accident Year
2008	$	(7	)	$	26	$	17		$	(14	)	$	(1	)	$	(19	)	$	(13	)	$	(9	)	$	1		$	(19	)
2009				46		(3		)	(1		)	(4		)	(6		)	(4		)	3			5			36
2010						31			2			50			46			(20		)	(16		)	(5		)	88
2011									(3		)	30			46			1			10			(6		)	78
2012												24			16			(9		)	(12		)	11			30
2013															30			(11		)	9			(39		)	(11		)
2014																		7			1			(8		)	—
2015																					1			11			12
2016																								25			25
Total net development for the accident years presented above																		(49		)	(13		)	(5		)
Total net development for accident years prior to 2008																		16			(15		)	(2		)
Total unallocated claim adjustment expense development																		—			—			7
Total																		$	(33	)	$	(28	)	$	—

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Commercial - Workers' Compensation

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2017
(In millions, except reported claims data)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017		IBNR		Cumulative Number of Claims
Accident Year
2008	$	558	$	575	$	593	$	606	$	608	$	612	$	622	$	630	$	638	$	652	$	34	59,911
2009			583		587		594		596		600		611		617		625		632		34		51,161
2010					576		619		641		663		683		697		717		721		33		48,144
2011							593		628		637		648		642		666		668		23		44,691
2012									589		616		648		661		671		667		63		41,756
2013											528		563		584		610		584		57		38,153
2014													459		474		474		448		106		33,072
2015															416		426		401		154		31,470
2016																	421		399		200		31,310
2017																			434		254		27,929
																	Total		$	5,606	$	958

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017
Accident Year
2008	$	92	$	233	$	323	$	381	$	425	$	461	$	489	$	505	$	520	$	541
2009			88		223		315		381		435		468		495		516		539
2010					94		245		352		433		500		531		565		603
2011							97		245		353		432		471		515		557
2012									86		229		338		411		465		503
2013											79		211		297		366		413
2014													60		157		213		256
2015															50		130		179
2016																	52		127
2017																			62
																	Total		$	3,780
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,826
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2008																			2,216
Other⁽²⁾																			(37		)
Liability for unallocated claim adjustment expenses for accident years presented																			7
Total net liability for unpaid claim and claim adjustment expenses																			$	4,012

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾			2016⁽¹⁾		2017			Total
Accident Year
2008	$	17	$	18	$	13	$	2	$	4	$	10	$	8		$	8	$	14		$	94
2009			4		7		2		4		11		6			8		7			49
2010					43		22		22		20		14			20		4			145
2011							35		9		11		(6		)	24		2			75
2012									27		32		13			10		(4		)	78
2013											35		21			26		(26		)	56
2014													15			—		(26		)	(11		)
2015																10		(25		)	(15		)
2016																		(22		)	(22		)
Total net development for the accident years presented above													71			106		(76		)
Adjustment for development on a discounted basis													(2		)	1		(4		)
Total net development for accident years prior to 2008													11			43		14
Total unallocated claim adjustment expense development													—			—		1
Total													$	80		$	150	$	(65	)

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

(2) Other includes the effect of discounting lifetime claim reserves.

International

The following table presents further detail of the development recorded for the International segment.



Years ended December 31
(In millions)	2017			2016			2015
Pretax (favorable) unfavorable development:
Medical Professional Liability	$	(4	)	$	(5	)	$	(9	)
Other Professional Liability	(13		)	12			(16		)
Liability	2			(30		)	(17		)
Property & Marine	(15		)	(34		)	(29		)
Other	21			(1		)	17
Total pretax (favorable) unfavorable development	$	(9	)	$	(58	)	$	(54	)

2017

Favorable development for other professional liability was primarily due to better than expected emergence in the Canadian run-off business in accident years 2014 and prior, several favorable settlements relating to large claims in the Europe Professional Indemnity portfolio, and lower than expected large loss frequency in the Europe Financial Institutions portfolio. This was partially offset by higher than expected severity in accident year 2015 arising from the management liability business.

Favorable development for property and marine was due to better than expected frequency in accident years 2014 and 2015.

Unfavorable development for other coverages was primarily due to higher than expected large claim frequency in the Hardy Political Risks portfolio, relating largely to accident year 2016.

2016

Unfavorable development for other professional liability was primarily due to higher than expected large loss emergence in accident years 2011 through 2015 associated with our Commercial Institutions business, partially offset by favorable settlements on claims in accident years 2013 and prior.

Favorable development for liability was primarily due to favorable settlements on claims in accident years 2013 and prior related to our Canadian package business. Additional favorable development in accident years 2013 and 2015 was primarily due to lower than expected frequency of large losses related to our Europe business.

Favorable development for property and marine was due to better than expected severity on the December 2015 UK floods and better than expected attritional losses and large loss experience on accident years 2013 through 2015 for Hardy business. Additional favorable development was due to a commutation of exposures in marine run-off classes on our Europe business.

2015

Favorable development in medical professional liability was due to better than expected frequency of losses in accident years 2011 to 2013.

Favorable development in other professional liability was due to better than expected large loss emergence in accident years 2011 and prior.

Favorable development in liability was due to better than expected large loss emergence in accident years 2012 and prior.

Favorable development in property and marine was due to better than expected individual large loss emergence and favorable settlements on large claims in accident years 2013 and 2014.

Unfavorable development in other is due to higher than expected large losses in financial institutions and political risk, primarily in accident year 2014.

International - Line of Business Composition

The table below provides the composition of the net liability for unpaid claim and claim adjustment expenses for the International segment.



As of December 31
(In millions)	2017
Net Claim and claim adjustment expenses:
International excluding Hardy	$	1,026
Hardy	406
Total net liability for claim and claim adjustment expenses	$	1,432

International - Excluding Hardy

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2017
(In millions, except reported claims data)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017		IBNR		Cumulative Number of Claims
Accident Year
2008	$	243	$	246	$	234	$	226	$	226	$	218	$	227	$	229	$	225	$	224	$	7	25,185
2009			272		268		270		271		256		252		242		233		232		7		21,402
2010					247		244		239		232		222		215		208		202		13		22,943
2011							281		283		275		253		242		235		232		11		25,448
2012									282		289		273		266		267		259		28		25,450
2013											304		307		298		278		273		43		24,276
2014													292		308		308		296		68		25,343
2015															307		323		321		88		23,563
2016																	301		320		120		17,166
2017																			317		178		14,772
																	Total		$	2,676	$	563

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2008⁽¹⁾		2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017
Accident Year
2008	$	37	$	92	$	137	$	148	$	156	$	164	$	179	$	187	$	207	$	208
2009			42		99		130		146		163		174		186		197		203
2010					50		103		126		143		157		167		176		178
2011							47		121		143		158		172		184		193
2012									46		118		153		175		191		204
2013											53		118		146		165		179
2014													55		128		157		174
2015															59		140		171
2016																	69		139
2017																			67
Total																			$	1,716
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	960
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2008																			42
Liability for unallocated claim adjustment expenses for accident years presented																			24
Total net liability for unpaid claim and claim adjustment expenses																			$	1,026

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾			2011⁽¹⁾			2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾⁽²⁾			2016⁽¹⁾⁽²⁾			2017⁽²⁾			Total ⁽²⁾
Accident Year
2008	$	3	$	(12	)	$	(8	)	$	—		$	(8	)	$	9		$	2		$	(4	)	$	(1	)	$	(19	)
2009			(4		)	2			1			(15		)	(4		)	(10		)	(9		)	(1		)	(40		)
2010						(3		)	(5		)	(7		)	(10		)	(7		)	(7		)	(6		)	(45		)
2011									2			(8		)	(22		)	(11		)	(7		)	(3		)	(49		)
2012												7			(16		)	(7		)	1			(8		)	(23		)
2013															3			(9		)	(20		)	(5		)	(31		)
2014																		16			—			(12		)	4
2015																					16			(2		)	14
2016																								19			19

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

(2) The amounts included in the loss reserve development tables above are presented at the year-end 2017 foreign currency exchange rates for all periods presented to remove the effects of foreign currency exchange rate fluctuations between calendar years. The amounts included within the table on page 101 presenting the detail of the development recorded within the International segment include the impact of fluctuations in foreign currency exchange rates.

International - Hardy

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31								Calendar Year													As of December 31, 2017
(In millions, except reported claims data)	Net Claim and Allocated Claim Adjustment Expense Reserves at Acquisition		Net Incurred Claim and Allocated Claim Adjustment Expenses in 2012⁽¹⁾⁽²⁾			Total Acquired Net Claim and Allocated Claim Adjustment Expense Reserves and 2012 Incurreds		2013⁽¹⁾		2014⁽¹⁾			2015⁽¹⁾		2016⁽¹⁾			2017			IBNR			Cumulative Number of Claims
Accident Year
2008	$	18	$	(3	)	$	15	$	11	$	13		$	13	$	12		$	13		$	1		4,237
2009	12		—			12		7		(4		)	1		(2		)	(3		)	—			3,852
2010	49		(10		)	39		48		53			47		53			52			(1		)	4,524
2011	126		—			126		136		136			140		140			140			(2		)	6,228
2012	34		71			105		106		113			121		114			115			(1		)	6,863
2013								133		148			140		141			142			1			7,525
2014										187			185		179			172			(2		)	7,954
2015													192		182			180			9			8,578
2016															232			251			53			8,443
2017																		247			117			6,508
															Total			$	1,309		$	175

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2012⁽¹⁾⁽²⁾		2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017
Accident Year
2008	$	3	$	14		$	10		$	10		$	11		$	11
2009	2		(2		)	(4		)	(4		)	(4		)	(5		)
2010	19		36			43			46			48			49
2011	31		84			124			129			133			134
2012	15		81			101			110			108			110
2013			39			103			123			129			133
2014						56			124			143			153
2015									30			99			131
2016												64			147
2017															53
Total															$	916
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented															$	393
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2008															5
Liability for unallocated claim adjustment expenses for accident years presented															8
Total net liability for unpaid claim and claim adjustment expenses															$	406

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2012⁽¹⁾⁽²⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾⁽³⁾			2016⁽¹⁾⁽³⁾			2017⁽³⁾			Total ⁽³⁾
Accident Year
2008	$	(3	)	$	(4	)	$	2		$	—		$	(1	)	$	1		$	(5	)
2009	—			(5		)	(11		)	5			(3		)	(1		)	(15		)
2010	(10		)	9			5			(6		)	6			(1		)	3
2011	—			10			—			4			—			—			14
2012				1			7			8			(7		)	1			10
2013							15			(8		)	1			1			9
2014										(2		)	(6		)	(7		)	(15		)
2015													(10		)	(2		)	(12		)
2016																19			19

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

(2) Data presented for this calendar year is post-acquisition of Hardy.

(3) The amounts included in the loss reserve development tables above are presented at the year-end 2017 foreign currency exchange rates for all periods presented to remove the effects of foreign currency exchange rate fluctuations between calendar years. The amounts included within the table on page 101 presenting the detail of the development recorded within the International segment include the impact of fluctuations in foreign currency exchange rates.

The table below presents information about average historical claims duration as of December 31, 2017 and is presented as required supplementary information, which is unaudited.



Average Annual Percentage Payout of Ultimate Net Incurred Claim and Allocated Claim Adjustment Expenses in Year:
	1		2		3		4		5		6		7		8		9		10		Total
Specialty
Medical Professional Liability	3.3	%	18.9	%	23.5	%	19.8	%	12.7	%	7.2	%	4.5	%	3.3	%	3.6	%	0.7	%	97.5	%
Other Professional Liability and Management Liability	5.9	%	21.0	%	21.1	%	17.3	%	9.9	%	6.0	%	5.6	%	4.0	%	2.6	%	1.5	%	94.9	%
Surety⁽¹⁾	21.4	%	38.4	%	17.7	%	7.5	%	3.4	%	2.0	%	(2.3	)%	(1.1	)%	—	%	—	%	87.0	%

Commercial
Commercial Auto	28.1	%	22.9	%	18.4	%	14.1	%	9.2	%	3.4	%	0.9	%	0.2	%	0.4	%	0.7	%	98.3	%
General Liability	4.9	%	16.6	%	20.7	%	20.8	%	15.2	%	8.4	%	4.2	%	2.5	%	1.5	%	1.2	%	96.0	%
Workers' Compensation	13.5	%	21.2	%	14.4	%	10.7	%	7.8	%	5.5	%	4.9	%	3.7	%	3.0	%	3.2	%	87.9	%

International
International - Excluding Hardy	19.6	%	25.6	%	12.2	%	6.8	%	5.9	%	4.7	%	5.1	%	3.1	%	5.8	%	0.4	%	89.2	%
International - Hardy ⁽²⁾	24.7	%	39.0	%	14.3	%	5.0	%	2.8	%											85.8	%

(1) Due to the nature of the Surety business, average annual percentage payout of ultimate net incurred claim and allocated claim adjustment expenses has been calculated using only the payouts of mature accident years presented in the loss reserve development tables.

(2) Average historical claims duration for Hardy is presented prospectively beginning with the first full year subsequent to acquisition, 2013.

A&EP Reserves

In 2010, Continental Casualty Company (CCC) together with several of the Company’s insurance subsidiaries completed a transaction with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the Company’s legacy A&EP liabilities were ceded to NICO through a Loss Portfolio Transfer (LPT). At the effective date of the transaction, the Company ceded approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of $4 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third-party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third-party reinsurance related to these liabilities. The Company paid NICO a reinsurance premium of $2 billion and transferred to NICO billed third-party reinsurance receivables related to A&EP claims with a net book value of $215 million, resulting in total consideration of $2.2 billion.

Subsequent to the effective date of the LPT, the Company recognized adverse prior year development on its A&EP reserves which resulted in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which the Company recognizes a change in the estimate of A&EP reserves that increases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders' benefits in the Consolidated Statement of Operations.

The following table presents the impact of the Loss Portfolio Transfer on the Consolidated Statements of Operations.



Years ended December 31
(In millions)	2017			2016			2015
Net A&EP adverse development before consideration of LPT	$	60		$	200		$	150
Retroactive reinsurance benefit recognized	(68		)	(107		)	(85		)
Pretax impact of A&EP reserve development and the LPT	$	(8	)	$	93		$	65

Based upon the Company's annual A&EP reserve review, net unfavorable prior year development of $60 million, $200 million and $150 million was recognized before consideration of cessions to the LPT for the years ended December 31, 2017, 2016 and 2015. The 2017 unfavorable development was driven by modestly higher anticipated payouts on claims from known sources of asbestos exposure. The 2016 unfavorable development was driven by an increase in anticipated future expenses associated with determination of coverage, higher anticipated payouts associated with a limited number of historical accounts having significant asbestos exposures and higher than expected severity on pollution claims. The 2015 unfavorable development was recorded to reflect a decrease in anticipated future reinsurance recoveries related to asbestos claims and higher than expected severity on pollution claims. While the unfavorable development in these years was ceded to NICO under the LPT, the Company’s Net income in the periods was negatively affected due to the application of retroactive reinsurance accounting.

As of December 31, 2017 and 2016, the cumulative amounts ceded under the LPT were $2.9 billion and $2.8 billion. The unrecognized deferred retroactive reinsurance benefit was $326 million and $334 million as of December 31, 2017 and 2016.

NICO established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was $3.1 billion and $2.8 billion as of December 31, 2017 and 2016. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the Company’s A&EP claims.