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Liability for Unpaid Claims and Claim Adjustment Expenses
 12 Months Ended
Dec. 31, 2022
Insurance [Abstract]  
Liability for Unpaid Claims and Claims Adjustment Expenses Disclosure
Changes in the liability for unpaid claims and claim adjustment expenses are as follows:
202220212020
(in millions of dollars)
Balance at January 1$23,664.7 $24,180.2 $23,076.7 
   Less Reinsurance Recoverable8,697.8 8,378.9 2,246.8 
Net Balance at January 114,966.9 15,801.3 20,829.9 
Incurred Related to
   Current Year6,721.3 7,252.6 6,327.8 
   Prior Years
      Interest595.6 683.4 997.8 
      All Other Incurred(646.0)(719.5)878.7 
      Foreign Currency(235.9)(23.4)65.9 
Total Incurred6,435.0 7,193.1 8,270.2 
Paid Related to
   Current Year(3,062.9)(3,263.4)(2,727.0)
   Prior Years(3,786.0)(3,774.1)(4,430.3)
Total Paid(6,848.9)(7,037.5)(7,157.3)
Reserves Ceded Pursuant to Reinsurance Transaction— (990.0)(6,141.5)
Net Balance at December 3114,553.0 14,966.9 15,801.3 
   Plus Reinsurance Recoverable8,279.8 8,697.8 8,378.9 
Balance at December 31$22,832.8 $23,664.7 $24,180.2 

The majority of the net balances are related to disability claims with long-tail payouts on which interest earned on assets backing liabilities is an integral part of pricing and reserving. Interest accrued on prior year reserves has been calculated on the opening reserve balance less one-half of the year’s claim payments relative to prior years at our average reserve discount rate for the respective periods.

"Incurred Related to Prior Years - All Other Incurred" shown in the preceding chart reflects the current year development of the prior year unpaid claims and claim adjustment expenses. For all years presented this line item includes reserve assumption updates as discussed in the following paragraphs. For 2021 and 2020, this amount includes the increase in benefits and change in reserves for future benefits resulting from the realization of previously unrealized investment gains and losses as a result of both phases of the Closed Block individual disability reinsurance transaction. Excluding the reserve assumption updates and impacts from the reinsurance transaction, the variability exhibited year over year is primarily caused by the level of claim resolutions in the period relative to the long-term expectations reflected in the reserves, primarily in our Unum US group long-term disability and Closed Block long-term care product lines. Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over the life of the block of business and will vary from actual experience in any one period, both favorably and unfavorably.
Reserve Assumption Updates

During 2022, we completed our annual review of policy and claim reserve adequacy, which incorporated our most recent experience and included a review of all material assumptions. Based on our analysis, during 2022, we updated our reserve assumptions to reflect our current estimate of future benefits obligations and determined that our claim reserves in our Unum US group long-term disability product line and our waiver of premium reserves for our Unum US group life product line should be reduced by $121.0 million and $34.0 million, respectively, due primarily to sustained improvement in claim recovery trends since our last assumption update, partially offset by lower social security benefit offsets for our group long-term disability product line. As a result, a reduction of approximately $155.0 million, which can be primarily attributed to prior year incurred claims, impacts the results shown in the preceding chart. We also increased our claim reserves for the reinsured portion of our Closed Block individual disability product line by $193.9 million resulting primarily from updates to mortality assumptions for the advanced age portion of our claimant population. This increase is entirely related to the block that was ceded as a part of the Closed Block individual disability reinsurance transaction with Commonwealth Annuity and Life Insurance Company (Commonwealth). As a result, the increase in the Closed Block individual disability claim reserves had no impact on the net activity shown in the preceding chart.

During 2021, we completed our annual review of policy and claim reserve adequacy, which incorporated our most recent experience and included a review of all material assumptions. Based on our analysis, during 2021, we updated our reserve assumptions and determined that our claim reserves should be reduced by $215.0 million in our Unum US group long-term disability product line due primarily to sustained improvement in claim recovery trends since our last assumption update. We also increased our claim reserves for our Closed Block long-term care and individual disability product lines by $2.1 million and $6.4 million, respectively, to reflect our current estimate of future benefit obligations. As a result, a net reduction of approximately $206.5 million, which can be primarily attributed to prior year incurred claims, impacts the results shown in the preceding chart. We also increased policy reserves in our Closed Block group pension product line by $25.1 million as a result of this review which did not affect the results shown in the preceding chart.

During 2020, we completed our annual review of policy reserve adequacy, which incorporated our most recent experience and included a review of all material assumptions. Based on our analysis, during 2020, we updated our interest rate and premium rate increase reserve assumptions and determined that our Closed Block long-term care policy and claim reserves should be increased by $151.5 million, of which $7.0 million was related to our liability for unpaid claims and claims adjustment expenses, which can be primarily attributed to prior year incurred claims, thereby impacting the results shown in the preceding chart. We also increased policy reserves in our Closed Block group pension product line by $17.5 million as a result of this review which did not affect the results shown in the preceding chart.

Closed Block Individual Disability Reinsurance Transaction

In connection with the first phase of the Closed Block individual disability reinsurance transaction that closed in December 2020, we recorded a reinsurance recoverable of $6,141.5 million representing the ceded reserves related to the cohort of policies on claim status as of July 1, 2020 (DLR cohort) and an increase in benefits and change in reserves for future benefits of $1,284.5 million resulting from the realization of previously unrealized investment gains and losses recorded in accumulated other comprehensive income (loss). In connection with the second phase of the Closed Block individual disability transaction that closed in March 2021, we recorded a reinsurance recoverable of $990.0 million representing the ceded reserves related to the cohort of policies on claim status as of January 1, 2021 and an increase in benefits and change in reserves for future benefits of $133.1 million resulting from the realization of previously unrealized investment gains and losses recorded in accumulated other comprehensive income (loss). These impacts are reflected in the chart shown above and the reconciliation shown below. See Note 12 for further discussion regarding the total impacts of the Closed Block individual disability reinsurance transaction.
Reconciliation

A reconciliation of policy and contract benefits and reserves for future policy and contract benefits as reported in our consolidated balance sheets to the liability for unpaid claims and claim adjustment expenses is as follows:
December 31
202220212020
(in millions of dollars)
Policy and Contract Benefits$1,839.8 $1,907.7 $1,855.4 
Reserves for Future Policy and Contract Benefits42,330.2 48,007.5 49,653.0 
Total44,170.0 49,915.2 51,508.4 
Less:
   Life Reserves for Future Policy and Contract Benefits8,428.5 8,457.1 8,371.7 
   Accident and Health Active Life Reserves13,475.4 13,133.9 12,730.9 
Adjustment Related to Unrealized Investment Gains (Losses)(566.7)4,659.5 6,225.6 
Liability for Unpaid Claims and Claim Adjustment Expenses$22,832.8 $23,664.7 $24,180.2 
The adjustment related to unrealized investment gains and losses reflects the changes that would be necessary to policyholder liabilities if the unrealized investment gains and losses related to the corresponding available-for-sale securities had been realized. Changes in this adjustment are reported as a component of other comprehensive income or loss.