INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:



(in millions)	June 30, 2018		December 31, 2017
Property-casualty	$	49,945	$	49,633
Accident and health	16		17
Total	$	49,961	$	49,650

The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses for the six months ended June 30, 2018 and 2017:



(for the six months ended June 30, in millions)	2018			2017
Claims and claim adjustment expense reserves at beginning of year	$	49,633		$	47,929
Less reinsurance recoverables on unpaid losses	8,123			7,981
Net reserves at beginning of year	41,510			39,948

Estimated claims and claim adjustment expenses for claims arising in the current year	9,084			8,493
Estimated decrease in claims and claim adjustment expenses for claims arising in prior years	(268		)	(214		)
Total increases	8,816			8,279

Claims and claim adjustment expense payments for claims arising in:
Current year	2,851			2,699
Prior years	5,454			4,966
Total payments	8,305			7,665
Unrealized foreign exchange (gain) loss	(102		)	117
Net reserves at end of period	41,919			40,679
Plus reinsurance recoverables on unpaid losses	8,026			7,877
Claims and claim adjustment expense reserves at end of period	$	49,945		$	48,556

Gross claims and claim adjustment expense reserves at June 30, 2018 increased by $312 million from December 31, 2017, primarily reflecting the impacts of (i) higher volumes of insured exposures and loss cost trends for the current accident year and (ii) catastrophe losses in the first six months of 2018, partially offset by the impacts of (iii) payments related to catastrophe losses incurred in 2017, (iv) net favorable prior year reserve development and (v) payments related to operations in runoff.

Reinsurance recoverables on unpaid losses at June 30, 2018 decreased by $97 million from December 31, 2017, primarily reflecting the impacts of cash collections in the first six months of 2018.

Prior Year Reserve Development

The following disclosures regarding reserve development are on a “net of reinsurance” basis.

For the six months ended June 30, 2018 and 2017, estimated claims and claim adjustment expenses incurred included $268 million and $214 million, respectively, of net favorable development for claims arising in prior years, including $336 million and $284 million, respectively, of net favorable prior year reserve development and $25 million of accretion of discount in each period that impacted the Company's results of operations.

Business Insurance. Net favorable prior year reserve development in the second quarter of 2018 totaled $84 million, primarily driven by better than expected loss experience in the segment’s domestic operations in (i) the workers’ compensation product line for multiple accident years, partially offset by (ii) higher than expected loss experience in the general liability product line, including a $55 million increase to environmental reserves, for accident years 2008 and prior. Net favorable prior year reserve development in the second quarter of 2017 totaled $125 million, primarily driven by better than expected loss experience in the segment's domestic operations in (i) the workers’ compensation product line for recent accident years, (ii) the commercial multi-peril product line for liability coverages for multiple accident years and (iii) the general liability product line (excluding the increase to environmental reserves) for both primary and excess coverages for multiple accident years, partially offset by (iv) a $65 million increase to environmental reserves.

Net favorable prior year reserve development in the first six months of 2018 totaled $150 million, primarily driven by better than expected loss experience in the segment’s domestic operations in (i) the workers’ compensation product line for multiple accident years and (ii) the commercial property product line for recent accident years, partially offset by (iii) higher than expected loss experience in the general liability product line, including a $55 million increase to environmental reserves, for accident years 2008 and prior and (iv) higher than expected loss experience in the commercial automobile product line for recent accident years. Net favorable prior year reserve development in the first six months of 2017 totaled $186 million, primarily driven by better than expected loss experience in the segment's domestic operations in (i) the workers' compensation product line for recent accident years, (ii) the general liability product line (excluding the increase to environmental reserves) for both primary and excess coverages for multiple accident years and (iii) the commercial multi-peril product line for liability coverages for multiple accident years, partially offset by (iv) a $65 million increase to environmental reserves. The net favorable prior year reserve development in the segment's domestic operations for the first six months of 2017 was partially offset by net unfavorable prior year reserve development in the segment's international operations in Europe due to the U.K. Ministry of Justice’s “Ogden” discount rate adjustment applied to lump sum bodily injury payouts.

Bond & Specialty Insurance. Net favorable prior year reserve development in the second quarter and first six months of 2018 totaled $89 million and $124 million, respectively, and net favorable prior year reserve development in the second quarter and first six months of 2017 totaled $78 million and $92 million, respectively, primarily driven by better than expected loss experience in the segment’s domestic operations in the general liability product line for multiple accident years.

Personal Insurance. Net favorable prior year reserve development in the second quarter and first six months of 2018 totaled $13 million and $62 million, respectively, primarily driven by better than expected loss experience in the segment's domestic operations in the Automobile product line for recent accident years. Net favorable prior year reserve development in the second quarter and first six months of 2017 totaled $0 and $6 million, respectively.