A reconciliation of the changes in unpaid losses and loss adjustment expenses (“claim liabilities”), excluding liabilities under retroactive reinsurance contracts (see Note 15), for each of the six-month periods ending June 30, 2023 and 2022 follows (in millions).


	2023			2022
Balances at beginning of year:
Gross liabilities	$	107,472		$	86,664
Reinsurance recoverable on unpaid losses		(5,025	)		(2,960	)
Net liabilities		102,447			83,704
Incurred losses and loss adjustment expenses:
Current accident year		29,827			27,427
Prior accident years		(1,948	)		(887	)
Total		27,879			26,540
Paid losses and loss adjustment expenses:
Current accident year		(9,968	)		(10,085	)
Prior accident years		(16,664	)		(13,820	)
Total		(26,632	)		(23,905	)
Foreign currency effect		267			(568	)
Balances at June 30:
Net liabilities		103,961			85,771
Reinsurance recoverable on unpaid losses		5,069			2,789
Gross liabilities	$	109,030		$	88,560

Our claim liabilities under property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. Incurred losses and loss adjustment expenses shown in the preceding table were recorded in earnings and related to insured events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”). Incurred and paid losses and loss adjustment expenses are net of reinsurance recoveries.

In the first six months, we recorded net reductions of estimated ultimate liabilities for prior accident years of $1.9 billion in 2023 and $887 million in 2022, which produced corresponding reductions in incurred losses and loss adjustment expenses. These reductions, as percentages of the net liabilities at the beginning of each year, were 1.9% in 2023 and 1.1% in 2022.

We reduced estimated ultimate liabilities for prior accident years of primary insurance businesses in the first six months by $1.1 billion in 2023 and $313 million in 2022. In 2023, the reductions were driven by private passenger auto claims, whereas the decreases in 2022 were primarily attributable to private passenger auto, medical professional liability and workers’ compensation claims, partly offset by increases with respect to other casualty claims. In the first six months, estimated ultimate liabilities for prior accident years of property and casualty reinsurance businesses were reduced $883 million in 2023 and $574 million in 2022.