Losses and Loss Expenses

The following table represents a reconciliation of the beginning and ending balances of unpaid losses and loss expenses, including an analysis of the Company's paid and unpaid losses and loss expenses incurred for the years indicated:



(U.S. dollars in thousands)	2018			2017
Unpaid losses and loss expenses at the beginning of the year	$	29,696,779		$	25,939,571
Unpaid losses and loss expenses recoverable at the beginning of the year (1)	7,239,446			5,480,300
Net unpaid losses and loss expenses at the beginning of the year	$	22,457,333		$	20,459,271
Increase (decrease) in net losses and loss expenses incurred in respect of losses occurring in:
Current year	1,631,142			1,559,452
Prior year	(9,136		)	24,004
Total net incurred losses and loss expenses	$	1,622,006		$	1,583,456
Foreign exchange and other	262,571			56,244
Less net losses and loss expenses paid in respect of losses occurring in:
Current year	128,691			106,472
Prior year	1,774,194			1,222,119
Total net paid losses	$	1,902,885		$	1,328,591
Net unpaid losses and loss expenses at March 31	22,439,025			20,770,380
Unpaid losses and loss expenses recoverable at March 31 (1)	7,262,543			5,674,744
Unpaid losses and loss expenses at March 31	$	29,701,568		$	26,445,124

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(1)	P&C business only, net of provision for uncollectible reinsurance.

The following table presents the net (favorable) adverse prior year loss development of the Company's loss and loss expense reserves for its P&C operations by operating segment for each of the years indicated:



	Three Months Ended
	March 31,
(U.S. dollars in thousands)	2018			2017
Insurance segment	$	(5,295	)	$	(4,642	)
Reinsurance segment	(3,841		)	28,646
Total	$	(9,136	)	$	24,004

The significant developments in prior year loss reserve estimates for each of the years indicated within the Company's Insurance and Reinsurance segments are discussed below.

Insurance Segment

The following table summarizes the net (favorable) adverse prior year reserve development by product type relating to the Insurance segment for the three months ended March 31, 2018 and 2017:



	Three Months Ended
	March 31,
(U.S. dollars in thousands)	2018			2017
Professional	$	(1,830	)	$	(5	)
Casualty	(5,115		)	(4,770		)
Property	1,257			81
Specialty	393			52
Total	$	(5,295	)	$	(4,642	)

Net favorable prior year reserve development was $5.3 million for the three months ended March 31, 2018 for the Insurance segment. Although movements were small by product type, this was a result of offsetting movements in catastrophe losses, with strengthening on recent 2017 catastrophes offset by releases on more mature events.

Net favorable prior year reserve development totaled $4.6 million for the Insurance segment for the three months ended March 31, 2017. This development was mainly attributable to casualty lines of business.

Reinsurance Segment

The following table summarizes the net (favorable) adverse prior year reserve development by line of business relating to the Reinsurance segment for the three months ended March 31, 2018 and 2017:



	Three Months Ended
	March 31,
(U.S. dollars in thousands)	2018			2017
Property and other short-tail lines	$	(18,994	)	$	(54,916	)
Casualty and other long-tail lines	15,153			83,562
Total	$	(3,841	)	$	28,646

Net favorable prior year reserve development was $3.8 million for the three months ended March 31, 2018 for the Reinsurance segment, mainly attributable to the following:

▪

Net favorable prior year development for the short-tail lines totaled $19.0 million primarily due to better than expected development on attritional losses on the Property, Marine and Crop books, releases on older catastrophe losses and the general catastrophe IBNR held at the end of the prior year being partially offset by strengthening on Hurricane Irma, the Northern California wildfires and some older large losses.


▪	Net unfavorable prior year development for the long-tail lines totaled $15.2 million driven primarily by unfavorable experience on the 2014 underwriting year for the London professional indemnity and European motor casualty books.

Net unfavorable prior year reserve development totaled $28.6 million for the three months ended March 31, 2017. The net adverse prior year development was primarily due to the impact of the decrease to the discount rate used to calculate lump sum awards in U.K. bodily injury cases. This adverse development was partially offset by better than expected attritional experience in property catastrophe, property treaty and specialty lines.

There is no assurance that conditions and trends that have affected the development of liabilities in the past will continue. Accordingly, it may not be appropriate to extrapolate future redundancies or deficiencies based on the Company's historical results.