INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:



(in millions)	September 30, 2018		December 31, 2017
Property-casualty	$	50,415	$	49,633
Accident and health	15		17
Total	$	50,430	$	49,650

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



(for the nine months ended September 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	13,707			13,261
Estimated decrease in claims and claim adjustment expenses for claims arising in prior years	(255		)	(197		)
Total increases	13,452			13,064

Claims and claim adjustment expense payments for claims arising in:
Current year	5,112			4,799
Prior years	7,419			6,831
Total payments	12,531			11,630
Unrealized foreign exchange (gain) loss	(82		)	215
Net reserves at end of period	42,349			41,597
Plus reinsurance recoverables on unpaid losses	8,066			8,136
Claims and claim adjustment expense reserves at end of period	$	50,415		$	49,733

Gross claims and claim adjustment expense reserves at September 30, 2018 increased by $782 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 nine 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 September 30, 2018 decreased by $57 million from December 31, 2017, primarily reflecting the impact of cash collections in the first nine months of 2018.

Prior Year Reserve Development

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

For the nine months ended September 30, 2018 and 2017, estimated claims and claim adjustment expenses incurred included $255 million and $197 million, respectively, of net favorable development for claims arising in prior years, including $350 million and $299 million, respectively, of net favorable prior year reserve development and $37 million and $38 million, respectively, of accretion of discount that impacted the Company's results of operations.

Business Insurance. Net unfavorable prior year reserve development in the third quarter of 2018 totaled $56 million, primarily driven by (i) a $225 million increase to asbestos reserves and (ii) higher than expected loss experience in the segment's domestic operations in the commercial automobile product line for recent accident years, partially offset by (iii) better than expected loss experience in the segment's domestic operations in the workers’ compensation product line for multiple accident years. Net favorable prior year reserve development in the third quarter of 2017 totaled $9 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, (ii) the general liability product line (excluding the increase to asbestos reserves) for both primary and excess coverages for multiple accident years, largely offset by (iii) a $225 million increase to asbestos reserves and (iv) the impact of higher than expected loss experience in the commercial automobile product line for recent accident years.

Net favorable prior year reserve development in the first nine months of 2018 totaled $94 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) the $225 million increase to asbestos reserves, (iv) higher than expected loss experience in the segment's domestic operations in the commercial automobile product line for recent accident years and (v) a $55 million increase to environmental reserves. Net favorable prior year reserve development in the first nine months of 2017 totaled $195 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, (ii) the general liability product line (excluding the increases to asbestos and 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) the $225 million increase to asbestos reserves, (v) a $65 million increase to environmental reserves and (vi) the impact of higher than expected loss experience in the segment’s domestic operations in the commercial automobile product line for recent accident years. The net favorable prior year reserve development in the segment's domestic operations for the first nine 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 third quarter and first nine months of 2018 totaled $53 million and $177 million, respectively, and net favorable prior year reserve development in the third quarter and first nine months of 2017 totaled $6 million and $98 million, respectively. Net favorable prior year reserve development for the third quarter of 2018 and the first nine months of 2018 and 2017 was 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 third quarter and first nine months of 2018 totaled $17 million and $79 million, respectively, 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 third quarter and first nine months of 2017 totaled $0 and $6 million, respectively.