Insurance Claim Reserves

6 Months Ended

Jun. 30, 2021

Claims and claim adjustment expense reserves were as follows:


(in millions)	June 30, 2021		December 31, 2020
Property-casualty	$	55,895	$	54,510
Accident and health	11		11
Total	$	55,906	$	54,521

The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses:


	Six Months Ended June 30,
(in millions)	2021		2020
Claims and claim adjustment expense reserves at beginning of year	$	54,510	$	51,836
Less reinsurance recoverables on unpaid losses	8,153		8,035
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020	—		53
Net reserves at beginning of year	46,357		43,854

Estimated claims and claim adjustment expenses for claims arising in the current year	10,430		9,826
Estimated increase (decrease) in claims and claim adjustment expenses for claims arising in prior years	(459)		16
Total increases	9,971		9,842

Claims and claim adjustment expense payments for claims arising in:
Current year	3,113		2,664
Prior years	5,274		5,674
Total payments	8,387		8,338
Unrealized foreign exchange (gain) loss	53		(137)
Net reserves at end of period	47,994		45,221
Plus reinsurance recoverables on unpaid losses	7,901		7,876
Claims and claim adjustment expense reserves at end of period	$	55,895	$	53,097

Gross claims and claim adjustment expense reserves at June 30, 2021 increased by $1.39 billion from December 31, 2020, primarily reflecting the impacts of (i) catastrophe losses in the first six months of 2021, (ii) loss cost trends for the current accident year and (iii) reduced claim settlement activity largely due to the disruptions in the judicial system related to COVID-19.

Reinsurance recoverables on unpaid losses at June 30, 2021 decreased by $252 million from December 31, 2020, primarily reflecting the impacts of cash collections in the first six months of 2021, partially offset by catastrophe losses in the same period.

Prior Year Reserve Development

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

For the six months ended June 30, 2021 and 2020, estimated claims and claim adjustment expenses incurred included $459 million and $(16) million, respectively, of net favorable (unfavorable) development for claims arising in prior years, including $499 million and $29 million, respectively, of net favorable prior year reserve development, and $24 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 2021 totaled $73 million, primarily driven by better than expected loss experience in domestic operations in the workers' compensation product line for multiple accident years, partially offset by an increase in reserves related to run-off operations. There was no net prior year reserve development in the second quarter of 2020, which reflected better than expected loss experience in domestic operations in the workers' compensation and commercial property product lines for multiple accident years, offset by higher than expected loss experience in domestic operations for primary and excess coverages in the general liability (excluding asbestos and environmental) product line for multiple accident years and higher than expected loss experience in domestic operations in the commercial multi-peril product line for recent accident years.

Net favorable prior year reserve development in the first six months of 2021 totaled $207 million, primarily driven by better than expected loss experience in domestic operations in the workers' compensation product line for multiple accident years and in the commercial property and commercial automobile product lines for recent accident years, partially offset by an increase in reserves related to run-off operations and an increase to environmental reserves. Net favorable prior year reserve development in the first six months of 2020 totaled $5 million, primarily driven by better than expected loss experience in domestic operations in the workers' compensation and commercial property product lines for multiple accident years, largely offset by higher than expected loss experience in domestic operations in the commercial automobile and commercial multi-peril product lines for recent accident years and higher than expected loss experience in domestic operations for primary and excess coverages in the general liability (excluding asbestos and environmental) product line for multiple accident years.

Bond & Specialty Insurance. Net favorable prior year reserve development in the second quarter and first six months of 2021 totaled $44 million and $59 million, respectively, primarily driven by better than expected loss experience in the segment's domestic operations in the fidelity and surety product lines for recent accident years. Net unfavorable prior year reserve development in both of the second quarter and first six months of 2020 was $33 million, primarily driven by higher than expected loss experience in domestic operations in the general liability product line for recent accident years.

Personal Insurance. Net favorable prior year reserve development in the second quarter and first six months of 2021 totaled $65 million and $233 million, respectively, primarily driven by better than expected loss experience in the segment's domestic operations in both the automobile and homeowners and other product lines for recent accident years. Net favorable prior year reserve development in the second quarter and first six months of 2020 totaled $35 million and $57 million, respectively, primarily driven by better than expected loss experience in domestic operations in both the automobile and homeowners and other product lines for multiple accident years.