Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses of short-duration insurance contracts with respect to underlying loss events that occurred prior to the contract inception date. Claims payments may commence immediately after the contract date or, when applicable, once a contractual retention amount has been reached. Reconciliations of the changes in estimated liabilities for retroactive reinsurance unpaid losses and loss adjustment expenses (“claim liabilities”) and related deferred charges reinsurance assumed for each of the nine-month periods ending September 30, 2021 and 2020 follow (in millions).

	2021						2020
	Unpaid losses and loss adjustment expenses			Deferred charges reinsurance assumed			Unpaid losses and loss adjustment expenses			Deferred charges reinsurance assumed
Balances at beginning of year	$	40,966		$	(12,441	)	$	42,441		$	(13,747	)
Incurred losses and loss adjustment expenses:
Current year contracts		82			—			—			—
Prior years’ contracts		(9	)		709			131			735
Total		73			709			131			735
Paid losses and loss adjustment expenses		(1,318	)		—			(786	)		—
Balances at September 30	$	39,721		$	(11,732	)	$	41,786		$	(13,012	)
Incurred losses and loss adjustment expenses, net of deferred charges	$	782					$	866

In the preceding table, classifications of incurred losses and loss adjustment expenses are based on the inception dates of the contracts, which reflect when our exposure to losses begins. Incurred losses and loss adjustment expenses for prior years’ contracts were $700 million in 2021 and $866 million in 2020, which consisted of recurring amortization of deferred charges and the effects of changes in the expected timing and amount of future loss payments. Berkshire’s subsidiary, National Indemnity Company (“NICO”), is party to a contract with certain subsidiaries of American International Group, Inc. (collectively, “AIG”), in which NICO’s ultimate liability is contractually limited to $20 billion. Claim payments to AIG commenced in 2021. Our estimated unpaid claim liabilities with regard to the AIG contract were approximately $16.8 billion at September 30, 2021, reflecting paid claims of $837 million during the first nine months of 2021, and $17.7 billion at December 31, 2020. Deferred charges related to the AIG contract were approximately $5.0 billion at September 30, 2021 and $5.4 billion at December 31, 2020.