Insurance Claim Reserves

9 Months Ended

Sep. 30, 2023

INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:


(in millions)	September 30, 2023		December 31, 2022
Property-casualty	$	61,703	$	58,643
Accident and health	6		6
Total	$	61,709	$	58,649

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)	2023		2022
Claims and claim adjustment expense reserves at beginning of year	$	58,643	$	56,897
Less reinsurance recoverables on unpaid losses	7,790		8,209

Net reserves at beginning of year	50,853		48,688
Estimated claims and claim adjustment expenses for claims arising in the current year	20,205		17,257
Estimated increase (decrease) in claims and claim adjustment expenses for claims arising in prior years	62		(383)
Total increases	20,267		16,874
Claims and claim adjustment expense payments for claims arising in:
Current year	7,305		6,302
Prior years	10,031		8,638
Total payments	17,336		14,940
Unrealized foreign exchange gain	(1)		(391)
Net reserves at end of period	53,783		50,231
Plus reinsurance recoverables on unpaid losses	7,920		7,900
Claims and claim adjustment expense reserves at end of period	$	61,703	$	58,131

Gross claims and claim adjustment expense reserves at September 30, 2023 increased by $3.06 billion over December 31, 2022, primarily reflecting the impacts of (i) catastrophe losses in the first nine months of 2023, (ii) higher volumes of insured exposures and (iii) loss cost trends for the current accident year, partially offset by (iv) claim payments made during the first nine months of 2023 and (v) net favorable prior year reserve development.

Reinsurance recoverables on unpaid losses at September 30, 2023 increased by $130 million over December 31, 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, 2023 and 2022, estimated claims and claim adjustment expenses incurred included $(62) million and $383 million, respectively, of net favorable (unfavorable) development for claims arising in prior years, including $11 million and $464 million, respectively, of net favorable prior year reserve development, and $34 million and $35 million, respectively, of accretion of discount in each period that impacted the Company’s results of operations.

Business Insurance. Net unfavorable prior year reserve development in the third quarter of 2023 totaled $263 million, primarily driven by (i) an addition to asbestos reserves of $284 million and higher than expected loss experience in the domestic operations’, (ii) general liability product line (excluding asbestos), including additions to reserves attributable to childhood sexual molestation and environmental claims in the Company’s run-off operations and (iii) commercial automobile product line for recent accident years, partially offset by (iv) better than expected loss experience in the workers’ compensation product line for multiple accident years. 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 first nine months of 2023 totaled $345 million, primarily driven by (i) higher than expected loss experience in the domestic operations’ general liability product line (excluding asbestos) for multiple accident years, including additions to reserves attributable to childhood sexual molestation and environmental claims in the Company’s run-off operations, (ii) an addition to asbestos reserves of $284 million and (iii) higher than expected loss experience in the domestic operations’ commercial automobile product line for recent accident years, partially offset by (iv) 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’ (i) workers’ compensation product line for multiple accident years and (ii) commercial multi-peril and commercial property product lines for recent accident years, partially offset by (iii) an addition to asbestos reserves of $212 million and (iv) an addition to reserves in the domestic operations’ general liability product line (excluding asbestos and environmental) including for run-off operations. The first nine months of 2022 also included an increase to environmental reserves.

Bond & Specialty Insurance. Net favorable prior year reserve development in the third quarter and first nine months of 2023 totaled $72 million and $249 million, respectively, 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 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 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.

Personal Insurance. Net favorable prior year reserve development in the third quarter and first nine months of 2023 totaled $37 million and $107 million, respectively, primarily driven by better than expected loss experience in the domestic operations’ homeowners and other product line for recent accident years. Net favorable prior year reserve development in the third quarter and first nine months of 2022 totaled $18 million and $39 million, respectively.