NOTE 5. LOSS RESERVES

We establish reserves for the estimated unpaid ultimate liability for losses and LAE under the terms of our policies and agreements. The determination of reserves for losses and LAE is partially dependent upon the receipt of information from agents and brokers. Reserves include estimates for both claims that have been reported and for IBNR, and include estimates of expenses associated with processing and settling these claims. Reserves are recorded in Reserves for losses and LAE in the Consolidated Balance Sheets. Our estimates and judgements may be revised as additional experience and other data become available and are reviewed, as new or improved methodologies are developed, or as laws change. Frequency/severity analyses are also performed for certain books of business. To the extent that reserves are found deficient or redundant, a strengthening or release is recognized as a charge or credit to earnings.

The following table summarizes our Company’s Reserves for losses and LAE activity for the three months ended March 31, 2017 and 2016:

	For the Three Months Ended March 31,
amounts in thousands	2017			2016
Net reserves for losses and LAE at beginning of year	$	1,510,451		$	1,393,126
Provision for losses and LAE for claims occurring in the current year		162,515			154,790
Increase (decrease) in estimated losses and LAE for claims occurring in prior years		7,085			(1,834	)
Incurred losses and LAE	$	169,600		$	152,956
Losses and LAE paid for claims occurring during:
Current year		(16,287	)		(15,325	)
Prior years		(126,722	)		(112,084	)
Losses and LAE payments	$	(143,009	)	$	(127,409	)
Foreign currency adjustment		(226	)		(457	)
Net reserves for losses and LAE at end of period		1,536,816			1,418,216
Reinsurance recoverables on unpaid losses and LAE		794,576			793,632
Gross reserves for losses and LAE at end of period	$	2,331,392		$	2,211,848

For the three months ended March 31, 2017, our Incurred losses and LAE increased $16.6 million as compared to the same period in 2016, primarily due to increases in Net earned premium resulting from growth in production, an $8.9 million increase in net prior accident year (“AY”) reserve strengthening, and $4.9 million of additional net current AY loss activity.

During the three months ended March 31, 2017 we had Net prior AY reserve strengthening of $7.1 million compared to Net prior AY reserve releases of $1.8 million for the same period in 2016. This was mostly due to large loss activity in our Int’l Insurance and GlobalRe reporting segments, as well as a lower level of reserve releases within our U.S. Insurance reporting segment.

Additional net current AY loss activity of $4.9 million increased $2.5 million as compared to the same period in 2016, primarily due to a large loss in our Int’l Insurance reporting segment and catastrophic loss activity mostly in our GlobalRe reporting segment.