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Reserves for Losses and Loss Adjustment Expenses
 9 Months Ended
Sep. 30, 2018
Insurance [Abstract]  
Reserves for Losses and Loss Adjustment Expenses
Reserves for Losses and Loss Adjustment Expenses
The following table provides a reconciliation of reserves for losses and loss adjustment expenses (“LAE”):
 
 
For the Nine Months Ended September 30,
(in millions)
 
2018
 
2017
Net reserves beginning of the year
 
$
2,488.0

 
$
2,180.2

Net Maybrooke reserves acquired
 
—

 
131.8

Net Ariscom reserves acquired
 
49.4

 
—

Add:
 
 
 
 
Losses and LAE incurred during current calendar year, net of reinsurance:
 
 
 
 
Current accident year
 
764.3

 
775.1

Prior accident years
 
(4.1
)
 
4.4

Losses and LAE incurred during calendar year, net of reinsurance
 
760.2

 
779.5

Deduct:
 
 
 
 
Losses and LAE payments made during current calendar year, net of reinsurance:
 
 
 
 
Current accident year
 
223.2

 
165.6

Prior accident years
 
469.0

 
413.7

Losses and LAE payments made during current calendar year, net of reinsurance:
 
692.2

 
579.3

Change in participation interest (1)
 
(29.4
)
 
(23.2
)
Foreign exchange adjustments
 
(20.8
)
 
18.9

Net reserves - end of period
 
2,555.2

 
2,507.9

Add:
 
 
 
 
Reinsurance recoverables on unpaid losses and LAE, end of period
 
1,736.5

 
1,798.0

Gross reserves - end of period
 
$
4,291.7

 
$
4,305.9

(1) 
Amount represents the change in reserves due to changing our participation in Syndicates 1200 and 1910.
Reserves for losses and LAE represent the estimated indemnity cost and related adjustment expenses necessary to investigate and settle claims. Such estimates are based upon individual case estimates for reported claims, estimates from ceding companies for reinsurance assumed and actuarial estimates for losses that have been incurred but not yet reported to the insurer. Any change in probable ultimate liabilities is reflected in current operating results.
The impact from the (favorable) unfavorable development of prior accident years’ loss and LAE reserves on each reporting segment is presented below: 
 
 
For the Nine Months Ended September 30,
(in millions)
 
2018
 
2017
U.S. Operations
 
$
(14.8
)
 
$
(28.7
)
International Operations
 
(0.8
)
 
17.0

Run-off Lines
 
11.5

 
16.1

Total unfavorable (favorable) prior-year development
 
$
(4.1
)
 
$
4.4


The following describes the primary factors behind each segment’s prior accident year reserve development for the nine months ended September 30, 2018 and 2017:
Nine months ended September 30, 2018:
•
U.S. Operations: Favorable development in liability and surety lines, partially offset by unfavorable development in commercial multi-peril lines.
•
International Operations: Favorable development in property partially offset by unfavorable development within specialty and liability lines.  
•
Run-off Lines: Unfavorable development in liability lines as well as asbestos and environmental.
Nine months ended September 30, 2017:
•
U.S. Operations: Favorable development for the workers compensation, surety and commercial automobile lines.
•
International Operations: Unfavorable development in the property and liability lines, primarily due to the first quarter 2017 Ogden rate change and claims from Hurricane Matthew.
•
Run-off Lines: Unfavorable development in asbestos and other run-off segments partially offset by favorable development in risk management liability.
In the opinion of management, our reserves represent the best estimate of our ultimate liabilities, based on currently known facts, current law, current technology and assumptions considered reasonable where facts are not known. Due to the significant uncertainties and related management judgments, there can be no assurance that future favorable or unfavorable loss development, which may be material, will not occur.