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 three months ended March 31, 2018 and 2017:

	For the Three Months Ended March 31,
amounts in thousands	2018			2017
Net Reserves for Losses and LAE at Beginning of Year	$	1,705,380		$	1,510,451
Provision for Losses and LAE for Claims Occurring in the Current Year		184,179			162,515
Increase (Decrease) in Estimated Losses and LAE for Claims Occurring in Prior Years		1,966			7,085
Incurred Losses and LAE	$	186,145		$	169,600
Losses and LAE Paid for Claims Occurring During:
Current Year		(9,206	)		(16,287	)
Prior Years		(155,860	)		(126,722	)
Losses and LAE Payments	$	(165,066	)	$	(143,009	)
Foreign Currency Adjustment		4,980			(226	)
Net Reserves for Losses and LAE at End of Period		1,731,439			1,536,816
Reinsurance Recoverables on Unpaid Losses and LAE		790,388			794,576
Gross Reserves for Losses and LAE at End of Period	$	2,521,827		$	2,331,392

For the three months ended March 31, 2018, our Incurred Losses and LAE increased $16.5 million as compared to the same period in 2017.

The Provision for Losses and LAE for Claims Occurring in the Current Year increased primarily due to growth in Net Earned Premium over the prior year.

In addition, we incurred $2.0 million of net prior AY reserve strengthening for the three months ended March 31, 2018 due to net unfavorable non-catastrophe related loss emergence of $6.8 million primarily within our U.S. and Int’l Insurance reporting segments, partially offset by net catastrophe loss releases $4.8 million primarily related to the Hurricane events (Hurricanes Harvey, Irma and Maria) that occurred in the third quarter of 2017. This compared to $7.1 million of net prior AY reserve strengthening for the same period in 2017 related to unfavorable loss emergence within our Int’l Insurance and GlobalRe reporting segments.

For the three months ended March 31, 2018, our Losses and LAE Payments increased $22.1 million as compared to the same period in 2017, primarily due to increased claim payments associated with the catastrophe activity occurring in the third quarter of 2017.

Our March 31, 2018 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.