The following table is a reconciliation of our unpaid losses and settlement expenses (LAE) for the first nine months of 2021 and 2020:

	For the Nine Months
	Ended September 30,
(in thousands)	2021			2020
Unpaid losses and LAE at beginning of year
Gross	$	1,750,049		$	1,574,352
Ceded		(443,729	)		(384,517	)
Net	$	1,306,320		$	1,189,835

Adoption impact of ASU 2016-13 on reinsurance balances recoverable	$	—		$	(1,345	)

Increase (decrease) in incurred losses and LAE
Current accident year	$	452,542		$	409,867
Prior accident years		(96,968	)		(70,048	)
Total incurred	$	355,574		$	339,819

Loss and LAE payments for claims incurred
Current accident year	$	(58,411	)	$	(49,337	)
Prior accident years		(172,120	)		(192,056	)
Total paid	$	(230,531	)	$	(241,393	)

Net unpaid losses and LAE at September 30	$	1,431,363		$	1,286,916

Unpaid losses and LAE at September 30
Gross	$	2,033,517		$	1,686,876
Ceded		(602,154	)		(399,960	)
Net	$	1,431,363		$	1,286,916

We adopted ASU 2016-13, Financial Instruments – Credit Losses, on January 1, 2020, which required financial assets, including reinsurance balances recoverable, to be presented at the net amount expected to be collected. We maintained an allowance for uncollectible reinsurance balances prior to the adoption of this update. However, in order to comply with the updated requirements, we released $1.3 million of the allowance on uncollectible reinsurance balances upon adoption. The implementation guidance required the cumulative-effect adjustment be made to the beginning balance of retained earnings, rather than through net earnings like historical changes have and ongoing modifications will continue to be recorded.

For the first nine months of 2021, incurred losses and LAE included $97.0 million of favorable development on prior years’ loss reserves. General liability, transportation, professional services, small commercial, commercial excess, personal umbrella and marine were drivers of the favorable development. No products experienced significant adverse development.

For the first nine months of 2020, incurred losses and LAE included $70.0 million of favorable development on prior years’ loss reserves. The majority of products experienced modest amounts of favorable development on prior accident years, with notable contributions from transportation, general liability, executive products, marine and surety. No products experienced significant adverse development.

Actuarial models base future emergence on historic experience, with adjustments for current trends, and the appropriateness of these assumptions involved more uncertainty as of September 30, 2021. We expect the timing of loss emergence and ultimate loss ratios for certain coverages we underwrite will be affected as a result of the spread of COVID-19 and the related economic impact. The industry is experiencing new issues, including the postponement of civil court cases, the extension of various statutes of limitations and changes in settlement trends. Our recorded reserves include consideration of these factors, but the duration and degree to which these issues persist, along with potential legislative, regulatory or judicial actions, could result in loss reserve deficiencies and reduce earnings in future periods.