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 those that have been incurred but not reported (“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 nine months ended September 30, 2017 and 2016:

	For the Nine Months Ended September 30,
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		578,272			504,599
Increase (Decrease) in Estimated Losses and LAE for Claims Occurring in Prior Years		44,609			(11,644	)
Incurred Losses and LAE	$	622,881		$	492,955
Losses and LAE Paid for Claims Occurring During:
Current Year		(75,707	)		(72,897	)
Prior Years		(358,684	)		(323,761	)
Losses and LAE Payments	$	(434,391	)	$	(396,658	)
Foreign Currency Adjustment		11,688			(9,213	)
Net Reserves for Losses and LAE at End of Period		1,710,629			1,480,210
Reinsurance Recoverables on Unpaid Losses and LAE		847,505			787,917
Gross Reserves for Losses and LAE at End of Period	$	2,558,134		$	2,268,127

For the nine months ended September 30, 2017, our Incurred Losses and LAE increased $129.9 million as compared to the same period in 2016.

The Provision for Losses and LAE for Claims Occurring in the Current Year increased primarily due to additional net current accident year (“AY”) loss activity related to a higher level of catastrophe losses during the nine months ended September 30, 2017, including Hurricanes Maria ($26.4 million), Irma ($25.8 million) and Harvey ($17.1 million) and the Puebla, Mexico Earthquake ($3.5 million), as compared to the same period in 2016, which included the Alberta Wildfires, Ecuador Earthquake and Taiwan Earthquake. Additionally, growth in Net Earned Premium over the prior year added to the increase in the Provision for Losses and LAE for Claims Occurring in the Current Year.

In addition, we incurred $44.6 million of net prior AY reserve strengthening for the nine months ended September 30, 2017 primarily related to loss development in our Int’l Insurance reporting segment, large loss activity in our U.S. D&O division, strengthening of our U.S. casualty business and the settlement of a large claim in our GlobalRe reporting segment compared to $11.6 million of net prior AY reserve releases for the same period in 2016 attributable to better than expected loss emergence within all three reporting segments.

For the nine months ended September 30, 2017, our Losses and LAE Payments increased $37.7 million as compared to the same period in 2016, primarily due to increased claim payments in our Int’l Insurance reporting segment.

Our September 30, 2017 Net Reserves for Losses and LAE includes estimated amounts for numerous catastrophe events. We caution that the magnitude and complexity of losses arising from these events inherently increases the level of uncertainty and therefore the level of management judgment involved in arriving at our estimated Net Reserves for Losses and LAE. As a result, our actual losses for these events may ultimately differ materially from our current estimates.