Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “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. A reconciliation of the changes in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 14), for each of the three-month periods ending March 31, 2022 and 2021 follows (in millions).

	2022			2021
Balances at beginning of year:
Gross liabilities	$	86,664		$	79,854
Reinsurance recoverable on unpaid losses		(2,960	)		(2,912	)
Net liabilities		83,704			76,942
Incurred losses and loss adjustment expenses:
Current accident year		13,375			11,363
Prior accident years		(251	)		(646	)
Total		13,124			10,717
Paid losses and loss adjustment expenses:
Current accident year		(3,908	)		(3,214	)
Prior accident years		(8,091	)		(6,454	)
Total		(11,999	)		(9,668	)
Foreign currency effect		(106	)		(94	)
Balances at March 31:
Net liabilities		84,723			77,897
Reinsurance recoverable on unpaid losses		2,944			3,064
Gross liabilities	$	87,667		$	80,961

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. We recorded net reductions of estimated ultimate liabilities for prior accident years of $251 million in the first quarter of 2022 and $646 million in 2021, 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 0.3% in 2022 and 0.8% in 2021.

Estimated ultimate liabilities for prior accident years from primary insurance were reduced by $114 million in the first quarter of 2022 and $699 million in 2021. The reductions in 2022 derived primarily from private passenger automobile, medical professional liability and workers’ compensation claims, partly offset by increases in ultimate liabilities for other casualty claims. The decrease in incurred losses for prior accident years in 2021 was primarily due to reductions in private passenger automobile estimates, and to a lesser extent in medical professional liability and workers’ compensation estimates. Estimated ultimate liabilities for prior years related to property and casualty reinsurance decreased $137 million in the first quarter of 2022 and increased $53 million in 2021.