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Unpaid losses and loss expenses
 6 Months Ended
Jun. 30, 2018
Liability for Claims and Claims Adjustment Expense [Abstract]  
Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]
Unpaid losses and loss expenses

The following table presents a reconciliation of beginning and ending Unpaid losses and loss expenses:
 
Six Months Ended June 30
 
(in millions of U.S. dollars)
2018

 
2017

Gross unpaid losses and loss expenses – beginning of period
$
63,179

 
$
60,540

Reinsurance recoverable on unpaid losses - beginning of period (1)
(14,014
)
 
(12,708
)
Net unpaid losses and loss expenses – beginning of period
49,165

 
47,832

Net losses and loss expenses incurred in respect of losses occurring in:
 
 
 
Current year
9,026

 
8,396

Prior years (2)
(437
)
 
(461
)
Total
8,589

 
7,935

Net losses and loss expenses paid in respect of losses occurring in:
 
 
 
Current year
2,346

 
2,271

Prior years
6,269

 
5,758

Total
8,615

 
8,029

Foreign currency revaluation and other
(96
)
 
171

Net unpaid losses and loss expenses – end of period
49,043

 
47,909

Reinsurance recoverable on unpaid losses (3)
13,735

 
12,485

Gross unpaid losses and loss expenses – end of period
$
62,778

 
$
60,394

(1) 
Net of provision for uncollectible reinsurance of $321 million and $300 million at December 31, 2017 and 2016, respectively.
(2) 
Relates to prior period loss reserve development only and excludes prior period development related to reinstatement premiums, expense adjustments, and earned premiums totaling $37 million and $60 million for the six months ended June 30, 2018 and 2017, respectively.
(3) 
Net of provision for uncollectible reinsurance of $319 million and $335 million at June 30, 2018 and 2017, respectively.

The decrease in net unpaid losses and loss expenses from December 31, 2017 was primarily due to payments related to the 2017 catastrophic events.

Prior Period Development
Prior period development arises from changes to loss estimates recognized in the current year that relate to loss events that occurred in previous calendar years and excludes the effect of losses from the development of earned premium from previous accident years. Significant prior period movements by segment, principally driven by reserve reviews completed during each respective period, are discussed in more detail below. The remaining net development for long-tail lines and short-tail business for each segment and Corporate comprises numerous favorable and adverse movements across a number of lines and accident years, none of which is significant individually or in the aggregate.

Long-tail lines include lines such as workers' compensation, general liability, and professional liability; while short-tail lines include lines such as most property lines, energy, personal accident, and agriculture. During the third quarter of 2017, we determined that the loss development classification for certain businesses, previously grouped within the short-tail column in the table below, would be more appropriately grouped within the long-tail column to better align with the classification of these businesses within our loss development triangles in our Form 10-K. We also determined that the loss development for certain other businesses should be reclassified from long-tail to short-tail. We updated the 2017 amounts below to conform to the current period presentation and reclassified $2 million of net favorable development and $3 million of net adverse development into long-tail from short-tail for the three and six months ended June 30, 2017, respectively. These changes to the previously disclosed amounts have no impact to our financial condition and results of operations.

Favorable prior period development for the three months ended June 30, 2018 of $191 million included $236 million of
favorable development, of which $136 million was long-tail lines, principally for the 2014 and prior accident years, $64 million
was short-tail lines, and $36 million was related to the 2017 catastrophe events. The favorable development was offset by $45 million of adverse development related to our run-off non-A&E casualty exposures.

Favorable prior period development for the six months ended June 30, 2018 of $400 million included $455 million of
favorable development, of which $125 million was long-tail lines, principally for 2014 and prior accident years, $188 million was short-tail lines, principally related to our Crop insurance business, and $142 million was related to the 2017 catastrophe events. The favorable development was offset by $55 million of adverse development related to our run-off non-A&E casualty exposures.

 
Three Months Ended June 30
 
 
Six Months Ended June 30
 
(in millions of U.S. dollars)
Long-tail    

 
Short-tail

 
Total

 
Long-tail    

 
Short-tail

 
Total

2018
 
 
 
 
 
 
 
 
 
 
 
North America Commercial P&C Insurance
$
(104
)
 
$
(51
)
 
$
(155
)
 
$
(96
)
 
$
(160
)
 
$
(256
)
North America Personal P&C Insurance
—

 
7

 
7

 
—

 
1

 
1

North America Agricultural Insurance
—

 
—

 
—

 
—

 
(76
)
 
(76
)
Overseas General Insurance
(2
)
 
(70
)
 
(72
)
 
(2
)
 
(92
)
 
(94
)
Global Reinsurance
(30
)
 
14

 
(16
)
 
(30
)
 
—

 
(30
)
Corporate
45

 
—

 
45

 
55

 
—

 
55

Total
$
(91
)
 
$
(100
)
 
$
(191
)
 
$
(73
)
 
$
(327
)
 
$
(400
)
2017
 
 
 
 
 
 
 
 
 
 
 
North America Commercial P&C Insurance
$
(83
)
 
$
(48
)
 
$
(131
)
 
$
(177
)
 
$
(133
)
 
$
(310
)
North America Personal P&C Insurance
—

 
37

 
37

 
—

 
34

 
34

North America Agricultural Insurance
—

 
—

 
—

 
—

 
(79
)
 
(79
)
Overseas General Insurance
—

 
(88
)
 
(88
)
 
32

 
(108
)
 
(76
)
Global Reinsurance
(36
)
 
5

 
(31
)
 
(28
)
 
5

 
(23
)
Corporate
43

 
—

 
43

 
53

 
—

 
53

Total
$
(76
)
 
$
(94
)
 
$
(170
)
 
$
(120
)
 
$
(281
)
 
$
(401
)



North America Commercial P&C Insurance
2018
For the three months ended June 30, 2018, net favorable PPD was $155 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:

•
Net favorable development of $104 million in long-tail business, primarily from:

•
Net favorable development of $118 million in our workers’ compensation lines with favorable development of $56 million in the 2017 accident year mainly related to our annual assessment of multi-claimant events including industrial accidents. Consistent with prior years, we reviewed these potential exposures after the close of the accident year to allow for late reporting or identification of significant losses. The remaining favorable development is mainly in accident years 2011 and prior, and was principally due to lower than expected loss experience; and

•
Net adverse development of $14 million, mainly in our automobile liability, commercial-multi peril (CMP) liability, products and general liability lines, driven by adverse paid and reported loss activity relative to prior expectations in accident years 2015 through 2017, partly offset by favorable emergence in older accident years.

•
Net favorable development of $51 million in short-tail business, primarily from:

•
Net favorable development of $40 million in our commercial property and marine businesses due to favorable claim development on the 2017 natural catastrophes.

For the six months ended June 30, 2018, net favorable PPD was $256 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:

•
Net favorable development of $96 million in long-tail business, primarily from:

•
Net favorable development of $138 million in our workers’ compensation lines mainly due to the same factors experienced for the three months ended June 30, 2018, as described above;

•
Net favorable development of $29 million in our commercial excess and umbrella portfolios, driven by the 2012 and prior accident years where the cumulative emergence over time has been less than expected overall and an increase in weighting towards experience-based methods, partly offset by several large settlements; additionally there was adverse claim activity in the 2014 and 2015 accident years which led to reserve strengthening in those years;

•
Net favorable development of $3 million on several lines of business due to favorable claim development on the 2017 natural catastrophes; and

•
Net adverse development of $74 million, mainly in our automobile liability, commercial-multi peril (CMP) liability, products and general liability lines, due to the same factors experienced for the three months ended June 30, 2018, as described above.

•
Net favorable development of $160 million in short-tail business, primarily from:

•
Net favorable development of $115 million in our commercial property and marine businesses due to favorable claim development on the 2017 natural catastrophes; and

•
Net favorable development of $45 million in other short-tail business, including $19 million in surety and also including several smaller net favorable movements from lower than expected case activity in other classes, such as accident and commercial automobile physical damage, none of which were significant individually or in the aggregate.

2017
For the three months ended June 30, 2017, net favorable PPD was $131 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:

•
Net favorable development of $83 million in long-tail business, primarily from:

•
Net favorable development of $75 million in our workers’ compensation lines with favorable development of $57 million in the 2016 accident year related to our annual assessment of multi-claimant events including industrial accidents. Consistent with prior years, we reviewed these potential exposures after the close of the accident year to allow for late reporting or identification of significant losses. Favorable development of $38 million in accident years 2015 and prior was principally due to lower than expected loss experience and revision to development patterns used in our loss projection methods for select portfolios; and

•
Net favorable development of $48 million in short-tail business, primarily from favorable development of $45 million in our commercial property portfolios, driven by lower than expected loss emergence in the 2014 and 2016 accident years.

For the six months ended June 30, 2017, net favorable PPD was $310 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:

•
Net favorable development of $177 million in long-tail business, primarily from:

•
Net favorable development of $79 million in our workers’ compensation lines due to the same factors experienced for the three months ended June 30, 2017, as described above;

•
Net favorable development of $74 million in our commercial excess and umbrella portfolios, primarily in accident years 2010 and prior, driven by lower than expected reported loss activity, and an increase in weighting towards experience-based methods; and

•
Net favorable development of $25 million in our professional Errors and Omissions (E&O) portfolios, primarily in the 2012 and 2013 accident years, arising from lower than expected reported loss activity, partially offset by claim-specific adverse development.

•
Net favorable development of $133 million in short-tail business, primarily from:

•
Net favorable development of $45 million in our surety business, primarily due to lower than expected claims severity in the 2015 accident year;

•
Favorable development of $57 million in our property lines, primarily in our commercial property portfolios, due to the same factors experienced for the three months ended June 30, 2017 as described above; and

•
Net favorable development of $19 million in our accident & health (A&H) business, primarily due to lower than expected loss emergence in the 2015 and 2016 accident years.

North America Personal P&C Insurance
2018
For the three and six months ended June 30, 2018, net adverse PPD was $7 million and $1 million, respectively, which were the net results of some modest net adverse and favorable movements by class and accident year, including favorable development of $5 million and $11 million, respectively, on the 2017 natural catastrophes.

2017
For the three and six months ended June 30, 2017, net adverse PPD was $37 million and $34 million, respectively, driven primarily by higher than expected case incurred development in our automobile, recreational marine and homeowners lines, mainly in accident years 2012 through 2016.

North America Agricultural Insurance
There was no PPD for the three months ended June 30, 2018 and 2017.

For the six months ended June 30, 2018 and 2017, net favorable PPD was $76 million and $79 million, respectively. Actual claim development relates to our Multiple Peril Crop Insurance (MPCI) business and is favorable due to better than expected crop yield results in certain states at the prior year-end period (i.e., 2018 results based on crop yield results at year-end 2017).

Overseas General Insurance
2018
For the three months ended June 30, 2018, net favorable PPD was $72 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:

•
Net favorable development of $2 million in long-tail business.

•
Net favorable development of $70 million in short-tail business, primarily from:

•
Net favorable development of $40 million in property and marine (excluding technical lines), primarily in accident years 2014 through 2016, driven mainly by favorable loss emergence across all regions, including favorable claim-specific loss settlements; and

•
Net favorable development of $30 million, including $17 million in personal business and $16 million in A&H business.

For the six months ended June 30, 2018, net favorable PPD was $94 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:

•
Net favorable development of $2 million in long-tail business.

•
Net favorable development of $92 million in short-tail business, due primarily to the same factors experienced for the three months ended June 30, 2018 as described above, and due to $12 million of favorable claim development on the 2017 natural catastrophes.

2017
For the three months ended June 30, 2017, net favorable PPD was $88 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:

•
Net favorable development of $88 million in short-tail business, primarily from:

•
Favorable development of $37 million in property and marine (excluding technical lines), primarily in accident years 2013 through 2015, driven mainly by favorable U.K. and Continental Europe loss emergence, including favorable claim-specific loss settlements;

•
Favorable development of $26 million in technical and energy lines, primarily from favorable loss emergence in accident years 2014 through 2016 primarily in offshore where experience has been better than expected; and

•
Favorable development of $19 million in A&H lines, primarily from favorable loss emergence in Asia Pacific and Continental Europe in accident years 2014 through 2016.

For the six months ended June 30, 2017, net favorable PPD was $76 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:

•
Net favorable development of $108 million in short-tail business, due primarily to the same factors experienced for the three months ended June 30, 2017 as described above; and

•
Net adverse development of $32 million in long-tail business, primarily in our casualty lines, driven by a change in the discount rate in the U.K. (Ogden rate) impacting the 2016 and prior accident years.

Global Reinsurance
2018
For the three months ended June 30, 2018, net favorable PPD was $16 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:

•
Net favorable development of $30 million in long-tail business, primarily from $32 million favorable development in our casualty and professional liability lines, primarily impacting treaty years 2013 and prior, principally resulting from lower than expected loss emergence.

•
Net adverse development of $14 million in short-tail business, which included $9 million of adverse claim development on the 2017 natural catastrophes.

For the six months ended June 30, 2018, net favorable PPD was $30 million, which was the net result of several underlying favorable and adverse movements, primarily from long-tail business lines discussed above, and in short-tail business due to $1 million of net favorable claim development on the 2017 natural catastrophes.

2017
For the three months ended June 30, 2017, net favorable PPD was $31 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal change:

•
Net favorable development of $36 million in our casualty and professional liability lines, primarily impacting treaty years 2011 and prior, principally resulting from lower than expected loss emergence.

For the six months ended June 30, 2017, net favorable PPD was $23 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal change:

•
Net favorable development of $27 million, comprising $36 million in our casualty and professional liability lines as described above, as well as adverse development of $9 million in our motor and excess liability lines, driven by a change in the discount rate in the U.K. (Ogden rate) primarily impacting the 2015 and prior treaty years.

Corporate
2018
For the three and six months ended June 30, 2018, net adverse development was $45 million and $55 million, respectively, from the non A&E run-off casualty exposures, driven by recent net adverse settlements on a limited number of claims and reinsurance collection activity. The net adverse development also included charges relating to unallocated loss adjustment expenses due to run-off operating expenses of $10 million and $20 million, respectively.

2017
For the three and six months ended June 30, 2017, adverse development was $43 million and $53 million, respectively, due principally to development of $35 million on non A&E run-off casualty exposures due to higher than expected loss activity, and unallocated loss adjustment expenses due to run-off operating expenses paid and incurred in the respective periods of $8 million and $18 million, respectively.