The following table presents a reconciliation of our beginning and ending gross reserve for losses and loss expenses and net reserve for unpaid losses and loss expenses for the periods indicated:




Six months ended June 30,	2014			2013

Gross reserve for losses and loss expenses, beginning of period	$	9,582,140		$	9,058,731
Less reinsurance recoverable on unpaid losses, beginning of period	(1,900,112		)	(1,825,617		)
Net reserve for unpaid losses and loss expenses, beginning of period	7,682,028			7,233,114

Net incurred losses and loss expenses related to:
Current year	1,238,883			1,177,926
Prior years	(128,847		)	(96,613		)
	1,110,036			1,081,313
Net paid losses and loss expenses related to:
Current year	(93,218		)	(54,732		)
Prior years	(857,004		)	(732,135		)
	(950,222		)	(786,867		)

Foreign exchange and other	35,122			(130,536		)

Net reserve for unpaid losses and loss expenses, end of period	7,876,964			7,397,024
Reinsurance recoverable on unpaid losses, end of period	1,929,024			1,945,793
Gross reserve for losses and loss expenses, end of period	$	9,805,988		$	9,342,817

Prior year reserve development arises from changes to loss and loss expense estimates recognized in the current year but relating to losses incurred in previous calendar years. Such development is summarized by segment in the following table:



	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013

Insurance	$	32,963	$	6,693	$	44,571	$	12,290
Reinsurance	52,391		35,422		84,276		84,323
Total	$	85,354	$	42,115	$	128,847	$	96,613

The majority of the net favorable prior year reserve development in each period related to short-tail lines of business. Net favorable prior year reserve development for liability reinsurance and professional lines reinsurance business also contributed in the three and six months ended June 30, 2014 and 2013.

The underlying exposures in the property, marine and aviation reserving classes within our insurance segment and the property reserving class within our reinsurance segment largely relate to short-tail business. Development from these classes contributed $73 million and $32 million of the total net favorable prior year reserve development for the three months ended June 30, 2014 and 2013, respectively. For the six months ended June 30, 2014 and 2013, these short-tail lines contributed $101 million and $62 million, respectively, of net favorable prior year reserve development. The net favorable development for these classes primarily reflected the recognition of better than expected loss emergence.

In the first quarter of 2013, we began to give weight to actuarial methods that reflect our actual experience for liability reinsurance business, as we believe that our older accident years are now at a stage of expected development where such methods will produce meaningful actuarial indications. Favorable development was recognized of $6 million and $22 million for the three months ended June 30, 2014 and 2013, respectively, and $12 million and $38 million for the six months ended June 30, 2014 and 2013, respectively, primarily reflecting the greater weight management is giving to experience based indications and our experience which has been favorable for the 2004 through 2008 accident years.

Our professional lines reinsurance business contributed further net favorable prior year reserve development of $6 million and $12 million in the three and six months ended June 30, 2014, respectively. This prior year reserve development was driven by increased weight being given to experience based actuarial methods in selecting our ultimate loss estimates for accident years 2008 and prior. As our loss experience has generally been better than expected, this resulted in the recognition of favorable development.

The frequency and severity of natural catastrophe and weather activity was high in recent years and our June 30, 2014 net reserve for losses and loss expenses continues to include estimated amounts for numerous events. We caution that the magnitude and/or complexity of losses arising from certain of these events, in particular Storm Sandy, the 2011 Japanese earthquake and tsunami and 2010 and 2011 New Zealand earthquakes, inherently increase the level of uncertainty and, therefore, the level of management judgment involved in arriving at our estimated net reserves for losses and loss expenses. As a result, our actual losses for these events may ultimately differ materially from our current estimates.