Unpaid losses and loss adjustment expenses

9 Months Ended

Sep. 30, 2024

Unpaid losses and loss adjustment expenses

Note 14. Unpaid losses and loss adjustment expenses

Reconciliations 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 nine-month periods ended September 30, 2024 and 2023 follow (in millions).


	2024			2023
Balance at the beginning of the year:
Gross liabilities	$	111,082		$	107,472
Reinsurance recoverable on unpaid losses		(4,893	)		(5,025	)
Net liabilities		106,189			102,447
Incurred losses and loss adjustment expenses:
Current accident year		43,166			44,537
Prior accident years		(992	)		(3,126	)
Total		42,174			41,411
Paid losses and loss adjustment expenses:
Current accident year		(16,011	)		(16,962	)
Prior accident years		(21,370	)		(22,171	)
Total		(37,381	)		(39,133	)
Foreign currency effect		206			68
Balance at September 30:
Net liabilities		111,188			104,793
Reinsurance recoverable on unpaid losses		4,648			5,031
Gross liabilities	$	115,836		$	109,824

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 relate to insured events occurring in the current year (“current accident year”) as well as events occurring in all prior years (“prior accident years”). Incurred and paid losses and loss adjustment expenses are net of reinsurance recoveries.

We recorded net reductions of estimated ultimate liabilities for prior accident years in the first nine months of $992 million in 2024 and $3.1 billion in 2023, which produced corresponding reductions in incurred losses and loss adjustment expenses in those periods. These reductions, as percentages of the net liabilities at the beginning of each year, were 0.9% in 2024 and 3.1% in 2023.

Estimated ultimate liabilities for prior accident years of our primary insurance businesses in the first nine months increased $222 million in 2024 and declined $1.6 billion in 2023. The increase in 2024 reflected higher projected claim losses for certain commercial auto, business owner and other casualty business, partly offset by lower than expected private passenger auto and medical professional liability losses. The reduction in liabilities in 2023 was driven by lower than expected private passenger auto losses. Estimated ultimate liabilities for prior accident years of our reinsurance businesses declined $1.2 billion in the first nine months of 2024, mostly attributable to lower than expected property losses, and $1.5 billion in 2023 attributable to reductions in both property and casualty losses.