Insurance Claim Reserves

9 Months Ended

Sep. 30, 2022

INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:


(in millions)	September 30, 2022		December 31, 2021
Property-casualty	$	58,131	$	56,897
Accident and health	7		10
Total	$	58,138	$	56,907

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


	Nine Months Ended September 30,
(in millions)	2022		2021
Claims and claim adjustment expense reserves at beginning of year	$	56,897	$	54,510
Less reinsurance recoverables on unpaid losses	8,209		8,153

Net reserves at beginning of year	48,688		46,357

Estimated claims and claim adjustment expenses for claims arising in the current year	17,257		15,813
Estimated decrease in claims and claim adjustment expenses for claims arising in prior years	(383)		(398)
Total increases	16,874		15,415

Claims and claim adjustment expense payments for claims arising in:
Current year	6,302		5,653
Prior years	8,638		7,339
Total payments	14,940		12,992
Unrealized foreign exchange gain	(391)		(18)
Net reserves at end of period	50,231		48,762
Plus reinsurance recoverables on unpaid losses	7,900		8,033
Claims and claim adjustment expense reserves at end of period	$	58,131	$	56,795

Gross claims and claim adjustment expense reserves at September 30, 2022 increased by $1.23 billion from December 31, 2021, primarily reflecting the impacts of (i) higher volumes of insured exposures, (ii) loss cost trends for the current accident year and (iii) catastrophe losses in the first nine months of 2022, partially offset by (iv) net favorable prior year reserve development.

Reinsurance recoverables on unpaid losses at September 30, 2022 decreased by $309 million from December 31, 2021, primarily reflecting decreases in mandatory pools and associations and structured settlements in the first nine months of 2022.

Prior Year Reserve Development

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

For the nine months ended September 30, 2022 and 2021, estimated claims and claim adjustment expenses incurred included $383 million and $398 million, respectively, of net favorable development for claims arising in prior years, including $464 million and $443 million, respectively, of net favorable prior year reserve development, and $35 million and $36 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 2022 totaled $61 million, primarily driven by an addition to asbestos reserves of $212 million, partially offset by better than expected loss experience in the domestic operations' workers' compensation product line for multiple accident years and in the commercial property product line for recent accident years. Net unfavorable prior year reserve development in the third quarter of 2021 totaled $108 million, primarily driven by an addition to asbestos reserves of $225 million, partially offset by better than expected loss experience in the domestic operations' workers' compensation product line for multiple accident years.

Net favorable prior year reserve development in the first nine months of 2022 totaled $254 million, primarily driven by better than expected loss experience in the domestic operations' workers' compensation product line for multiple accident years, and in the commercial multi-peril and commercial property product lines for recent accident years, partially offset by an addition to asbestos reserves of $212 million, an addition to reserves in the domestic operations' general liability product line (excluding asbestos and environmental) including for run-off operations and an addition to environmental reserves. Net favorable prior year reserve development in the first nine months of 2021 totaled $99 million, primarily driven by better than expected loss experience in the domestic operations' workers' compensation product line for multiple accident years and in the commercial automobile and commercial property product lines for recent accident years and better than expected loss experience in the segment's international operations, partially offset by an addition to asbestos reserves of $225 million, an addition to other reserves related to run-off operations and an addition to environmental reserves.

Bond & Specialty Insurance. Net favorable prior year reserve development in the third quarter of 2022 totaled $63 million, primarily driven by better than expected loss experience in the domestic operations' fidelity and surety product lines and in the general liability product line for management liability coverages for recent accident years. Net favorable prior year reserve development in the third quarter of 2021 totaled $22 million, primarily driven by better than expected loss experience in the domestic operations' fidelity and surety product lines for recent accident years.

Net favorable prior year reserve development in the first nine months of 2022 totaled $171 million, primarily driven by better than expected loss experience in the domestic operations' fidelity and surety product lines for recent accident years. Net favorable prior year reserve development in the first nine months of 2021 totaled $81 million, primarily driven by better than expected loss experience in the domestic operations' fidelity and surety product lines for recent accident years, partially offset by higher than expected loss experience in the general liability product line for management liability coverages for multiple accident years.

Personal Insurance. Net favorable prior year reserve development in the third quarter of 2022 totaled $18 million. Net favorable prior year reserve development in the third quarter of 2021 totaled $30 million, primarily driven by better than expected loss experience in domestic operations in the homeowners and other product line for recent accident years.

Net favorable prior year reserve development in the first nine months of 2022 totaled $39 million. Net favorable prior year reserve development in the first nine months of 2021 totaled $263 million, primarily driven by better than expected loss experience in the domestic operations in both the homeowners and other and automobile product lines for recent accident years.