6. Reserves for Unpaid Losses and Loss Adjustment Expenses

Activity in the consolidated reserves for unpaid losses and LAE is summarized as follows (in thousands):


		March 31,		March 31,
		2017		2016

Balance at January 1	$	481,567	$	450,878
Less reinsurance recoverable		123,237		102,791
Net balance at January 1		358,330		348,087

Incurred related to:
Current year		62,331		57,112
Prior years		(489)		(1,717)
Total incurred		61,842		55,395

Paid related to:
Current year		12,583		11,819
Prior years		47,533		48,128
Total paid		60,116		59,947

Net balance at March 31		360,056		343,535
Plus reinsurance recoverable		126,915		105,594
Balance at March 31	$	486,971	$	449,129

The $0.5 million net favorable development and $1.7 million net favorable development in prior accident years recognized during the three months ended March 31, 2017 and 2016, respectively, represent normal changes in our loss reserve estimates. In the first quarter of 2017 and 2016, the aggregate loss reserve estimates for prior years were decreased to reflect favorable loss development when the available information indicated a reasonable likelihood that the ultimate losses would be less than the previous estimates. Generally, changes in reserves are caused by variations between actual experience and previous expectations and by reduced emphasis on the Bornhuetter-Ferguson method due to the aging of the accident years.

The $0.5 million decrease in prior period reserves for unpaid losses and LAE recognized during the three months ended March 31, 2017 was attributable to $1.0 million net favorable development on claims incurred in the 2016 accident year and $0.1 million net favorable development on claims incurred in the 2014 and prior accident years, partially offset by $0.6 million net unfavorable development on claims incurred in the 2015 accident year. Our Standard Commercial P&C and Specialty Commercial operating units accounted for $1.5 million and $0.3 million of the net favorable development recognized during the first quarter of 2017. These net favorable developments were partially offset by net unfavorable development of $0.7 million in our Specialty Personal Lines operating unit and $0.6 million in our MGA Commercial Products operating unit.

The decrease in reserves of $1.5 million in our Standard Commercial P&C operating unit in the first quarter of 2017 was primarily related to net favorable development of $2.2 million in our general liability and commercial auto lines of business in the 2016 and prior accident years, partially offset by net unfavorable development of $0.7 million in our occupational accident line of business primarily in the 2015 and prior accident years. The decrease in reserves of $0.3 million in our Specialty Commercial operating unit was primarily related to $0.2 million net favorable development in our medical professional liability products and $0.1 million net favorable development in our commercial primary/excess liability line of business in the 2016 accident year. The increase in reserves of $0.7 million for our Specialty Personal Lines operating unit was primarily attributable to the 2016 accident year. The increase in reserves of $0.6 million for our MGA Commercial operating unit was primarily related to our commercial auto lines of business in the 2015 and 2010 and prior accident years, partially offset by net favorable development in the 2016 and 2014 accident years.

The $1.7 million decrease in prior period reserves for unpaid losses and LAE recognized during the three months ended March 31, 2016 was attributable to $3.6 million net favorable development on claims incurred in the 2015 accident year, $0.2 million of net favorable development in the 2014 accident year and $0.7 million in the 2011 and prior accident years, partially offset by $1.7 million net unfavorable development in the 2013 accident year and $1.1 million net unfavorable development in the 2012 accident year. Our MGA Commercial Products operating unit, Standard Commercial P&C operating unit, Workers Compensation operating unit and Specialty Commercial operating unit accounted for $2.2 million, $0.2 million, $0.2 million and $0.1 million, respectively, of the decrease in reserves recognized during the first quarter of 2016. These favorable developments were offset by $1.0 million of net unfavorable development in our Personal Lines Segment.

The decrease in reserves of $2.2 million for our MGA Commercial Products operating unit in the first quarter of 2016 was primarily driven by favorable claims development in both our general liability and commercial auto liability lines of business in the 2015, 2014 and 2011 and prior accident years, partially offset by net unfavorable development in the 2013 and 2012 accident years in both our general liability and commercial auto liability lines of business. The net favorable development of $0.2 million in our Standard Commercial P&C operating unit consisted of $0.8 million net favorable development in our commercial property and general liability lines of business, partially offset by $0.6 million of net unfavorable development in our occupational accident line of business. The net favorable development of $0.2 million in our Workers Compensation operating unit was primarily attributable to the 2015 accident year. The net favorable development of $0.1 million in our Specialty Commercial operating unit was primarily attributable to our primary/excess and umbrella line of business. These net favorable developments were partially offset by net unfavorable development of $1.0 million in our Specialty Personal Lines operating unit attributable to the 2015 and prior accident years.