6. INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:

(in millions)	September 30, 2017		December 31, 2016
Property-casualty	$	49,733	$	47,929
Accident and health	17		20

Total	$	49,750	$	47,949

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, 2017 and 2016:

(for the nine months ended September 30, in millions)	2017			2016

Claims and claim adjustment expense reserves at beginning of year	$	47,929		$	48,272
Less reinsurance recoverables on unpaid losses	7,981			8,449

Net reserves at beginning of year	39,948			39,823

Estimated claims and claim adjustment expenses for claims arising in the current year	13,261			11,708
Estimated decrease in claims and claim adjustment expenses for claims arising in prior years	(197		)	(430		)

Total increases	13,064			11,278

Claims and claim adjustment expense payments for claims arising in:
Current year	4,799			4,334
Prior years	6,831			6,778

Total payments	11,630			11,112

Unrealized foreign exchange loss	215			12

Net reserves at end of period	41,597			40,001
Plus reinsurance recoverables on unpaid losses	8,136			8,146

Claims and claim adjustment expense reserves at end of period	$	49,733		$	48,147

Gross claims and claim adjustment expense reserves at September 30, 2017 increased by $1.80 billion from December 31, 2016, primarily reflecting the impacts of (i) catastrophe losses in the third quarter of 2017 and (ii) higher volumes of insured exposures and loss cost trends for the current accident year, partially offset by the impacts of (iii) payments related to operations in runoff and (iv) net favorable prior year reserve development.

Reinsurance recoverables on unpaid losses at September 30, 2017 increased by $155 million from December 31, 2016, primarily reflecting the impacts of catastrophe losses and the asbestos reserve increase in the third quarter of 2017, partially offset by cash collections in the first nine months of 2017, including the settlement of certain disputes as discussed in more detail in note 13.

Prior Year Reserve Development

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

For the nine months ended September 30, 2017 and 2016, estimated claims and claim adjustment expenses incurred included $197 million and $430 million, respectively, of net favorable development for claims arising in prior years, including $299 million and $507 million, respectively, of net favorable prior year reserve development impacting the Company’s results of operations and $38 million of accretion of discount in each period.

Business Insurance. 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 and (ii) the general liability product line (excluding the increase to asbestos reserves) for both primary and excess coverages for accident years 2007 and prior as well as accident year 2016, 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 accident years 2013 through 2016. Net favorable prior year reserve development in the third quarter of 2016 totaled $4 million, primarily driven by better than expected loss experience in the segment’s domestic operations in (i) the general liability product line (excluding the increase to asbestos reserves) for both primary and excess coverages for accident years 2006 and prior as well as accident years 2014 and 2015, (ii) the workers’ compensation product line for accident years 2006 and prior as well as accident year 2015 and (iii) the commercial auto product line for accident years 2011 and prior, largely offset by (iv) a $225 million increase to asbestos reserves.

Net favorable prior year reserve development in the first nine months of 2017 totaled $195 million, primarily driven by net favorable prior year reserve development in the segment’s domestic operations due to better than expected loss experience in (i) the workers’ compensation product line for multiple accident years, (ii) the general liability product line (excluding an increase 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) a $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 commercial automobile product line for accident years 2013 through 2016. The net favorable prior year reserve development in the segment’s domestic operations 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. Net favorable prior year reserve development in the first nine months of 2016 totaled $203 million, primarily driven by net favorable prior year reserve development in the segment’s domestic operations due to better than expected loss experience in (i) the workers’ compensation product line for accident years 2006 and prior as well as accident year 2015, (ii) the general liability product line (excluding an increase to asbestos and environmental reserves) for both primary and excess coverages for multiple accident years and (iii) the commercial automobile product line for accident years 2011 and prior, partially offset by (iv) a $225 million increase to asbestos reserves and (v) an $82 million increase to environmental reserves, as well as net favorable prior year reserve development in the segment’s international operations in Europe and Canada.

Bond & Specialty Insurance. Net favorable prior year reserve development in the third quarter of 2017 totaled $6 million. Net favorable prior year reserve development in the third quarter of 2016 totaled $46 million, primarily driven by better than expected loss experience in the segment’s domestic operations in the fidelity and surety product line for accident years 2009 through 2015. Net favorable prior year reserve development in first nine months of 2017 totaled $98 million, primarily driven by better than expected loss experience in the segment’s domestic operations in the general liability product line for accident years 2012, 2014 and 2015. Net favorable prior year reserve development in the first nine months of 2016 totaled $271 million, primarily driven by better than expected loss experience in the segment’s domestic operations in (i) the fidelity and surety product line for accident years 2009 through 2015 and (ii) the general liability product line for accident years 2007 through 2011.

Personal Insurance. There was no net prior year reserve development in the third quarter of 2017. Net unfavorable prior year reserve development in the third quarter of 2016 totaled $11 million, primarily driven by higher than expected loss experience in the segment’s domestic operations in the Homeowners and Other product line for liability coverages for accident years 2013 and 2014. Net favorable prior year reserve development in the first nine months of 2017 totaled $6 million. Net favorable prior year reserve development in the first nine months of 2016 totaled $33 million, primarily driven by better than expected loss experience in the segment’s international operations in Canada.

Subsequent Event

The Company expects to incur significant catastrophe losses in the fourth quarter of 2017 resulting from wildfires that began in early October in California. The fires are ongoing and efforts to contain the fires are continuing; the Company does not currently have an estimate of its ultimate losses related to the fires.