NOTE 7. 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, 2018 and 2017:

	For the Nine Months Ended September 30,
amounts in thousands	2018			2017
Net Reserves for Losses and LAE at Beginning of Year	$	1,705,380		$	1,510,451
Acquired Net Reserves		16,159			—
Provision for Losses and LAE for Claims Occurring in the Current Year		603,564			578,272
Increase (Decrease) in Estimated Losses and LAE for Claims Occurring in Prior Years		19,814			44,609
Incurred Losses and LAE	$	623,378		$	622,881
Losses and LAE Paid for Claims Occurring During:
Current Year		(65,445	)		(75,707	)
Prior Years		(420,870	)		(358,684	)
Losses and LAE Payments	$	(486,315	)	$	(434,391	)
Foreign Currency Adjustment		(4,982	)		11,688
Net Reserves for Losses and LAE at End of Period		1,853,620			1,710,629
Reinsurance Recoverables on Unpaid Losses and LAE		780,215			847,505
Gross Reserves for Losses and LAE at End of Period	$	2,633,835		$	2,558,134

For the nine months ended September 30, 2018, our Incurred Losses and LAE increased $0.5 million as compared to the same period in 2017, with an increase due to growth in Net Earned Premium over the prior year largely offset by a higher level of catastrophe losses and prior year reserve strengthening in 2017.

The nine months ended September 30, 2018 recognized total net catastrophe losses of $12.6 million, which included losses from Typhoon Jebi and Hurricane Florence. This compared to total net catastrophe losses of $77.9 million for the same period in 2017, which included losses from Hurricanes Harvey, Irma, and Maria (the “Hurricane events”) and the Puebla, Mexico Earthquake.

The nine months ended September 30, 2018 recognized $19.8 million of net prior AY reserve strengthening primarily driven by our Primary Casualty division within the U.S. Insurance P&C operating segment due to significant loss development within our Premises product. This compares to $44.6 million of net prior accident year reserve strengthening for the same period in 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.

For the nine months ended September 30, 2018, our Losses and LAE Payments increased $51.9 million as compared to the same period in 2017, primarily due to increased claim payments associated with growth in our business and the catastrophe activity occurring in the third quarter of 2017.

Our September 30, 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.