Unpaid losses and loss expenses

Chubb establishes reserves for the estimated unpaid ultimate liability for losses and loss expenses under the terms of its policies and agreements. Reserves include estimates for both claims that have been reported and for IBNR claims, and include estimates of expenses associated with processing and settling these claims. Reserves are recorded in Unpaid losses and loss expenses in the consolidated balance sheets. While we believe that our reserves for unpaid losses and loss expenses at December 31, 2016 are adequate, new information or trends may lead to future developments in incurred loss and loss expenses significantly greater or less than the reserves provided. Any such revisions could result in future changes in estimates of losses or reinsurance recoverable and would be reflected in our results of operations in the period in which the estimates are changed.

a) Description of Reserving Methodologies

Our recorded reserves represent management's best estimate of the provision for unpaid claims as of the balance sheet date. Management's best estimate is developed after collaboration with actuarial, underwriting, claims, legal, and finance departments and culminates with the input of reserve committees. Each business unit reserve committee includes the participation of the relevant parties from actuarial, finance, claims, and unit senior management and has the responsibility for finalizing, recommending and approving the estimate to be used as management's best estimate. Reserves are further reviewed by Chubb's Chief Actuary and senior management. The objective of such a process is to determine a single estimate that we believe represents a better estimate than any other and which is viewed by management to be the best estimate of ultimate loss settlements.

This estimate is based on a combination of exposure and experience-based actuarial methods (described below) and other considerations such as claims reviews, reinsurance recovery assumptions and/or input from other knowledgeable parties such as underwriting. Exposure-based methods are most commonly used on relatively immature origin years (i.e., the year in which the losses were incurred — “accident year” or “report year”), while experience-based methods provide a view based on the projection of loss experience that has emerged as of the valuation date. Greater reliance is placed upon experience-based methods as the pool of emerging loss experience grows and where it is deemed sufficiently credible and reliable as the basis for the estimate. In comparing the held reserve for any given origin year to the actuarial projections, judgment is required as to the credibility, uncertainty and inherent limitations of applying actuarial techniques to historical data to project future loss experience. Examples of factors that impact such judgments include, but are not limited to, the following:


•	nature and complexity of underlying coverage provided and net limits of exposure provided;


•	segmentation of data to provide sufficient homogeneity and credibility for loss projection methods;


•	extent of credible internal historical loss data and reliance upon industry information as required;


•	historical variability of actual loss emergence compared with expected loss emergence;


•	extent of emerged loss experience relative to the remaining expected period of loss emergence;


•	rate monitor information for new and renewal business;


•	facts and circumstances of large claims;


•	impact of applicable reinsurance recoveries; and


•	nature and extent of underlying assumptions.

We have actuarial staff within each of our business units who analyze loss reserves (including loss expenses) and regularly project estimates of ultimate losses and the corresponding indications of the required IBNR reserve. Our reserving approach is a comprehensive ground-up process using data at a detailed level that reflects the specific types and coverages of the diverse products written by our various operations. The data presented in this disclosure was prepared on a more aggregated basis and with a focus on changes in incurred loss estimates over time as well as associated cash flows. We note that data prepared on this basis may not demonstrate the full spectrum of characteristics that are evident in the more detailed level studied internally.

We perform an actuarial reserve review for each product line at least once a year. For most product lines, one or more standard actuarial reserving methods may be used to determine estimates of ultimate losses and loss expenses, and from these estimates, a single actuarial central estimate is selected. The actuarial central estimate is an input to the reserve committee process described above. For the few product lines that do not lend themselves to standard actuarial reserving methods, appropriate techniques are applied to produce the actuarial central estimates. For example, run-off asbestos and environmental liability estimates are better suited to the application of account-specific exposure-based analyses to best evaluate their associated aggregate reserve levels.

b) Standard actuarial reserving methods

Standard actuarial reserving methods include, but are not limited to, expected loss ratio, paid and reported loss development, and Bornhuetter-Ferguson methods. A general description of these methods is provided below. In addition to these standard methods, depending upon the product line characteristics and available data, we may use other recognized actuarial methods and approaches. Implicit in the standard actuarial methods that we generally utilize is the need for two fundamental assumptions: first, the pattern by which losses are expected to emerge over time for each origin year, and second the expected loss ratio for each origin year.

The expected loss ratio for any particular origin year is selected after consideration of a number of factors, including historical loss ratios adjusted for rate changes, premium and loss trends, industry benchmarks, the results of policy level loss modeling at the time of underwriting, and/or other more subjective considerations for the product line (e.g., terms and conditions) and external environment as noted above. The expected loss ratio for a given origin year is initially established at the start of the origin year as part of the planning process. This analysis is performed in conjunction with underwriters and management. The expected loss ratio method arrives at an ultimate loss estimate by multiplying the expected ultimate loss ratio by the corresponding premium base. This method is most commonly used as the basis for the actuarial central estimate for immature origin periods on product lines where the actual paid or reported loss experience is not yet deemed sufficiently credible to serve as the principal basis for the selection of ultimate losses. The expected loss ratio for a given origin year may be modified over time if the underlying assumptions differ from the original assumptions (e.g., the assessment of prior year loss ratios, loss trend, rate changes, actual claims, or other information).

Our selected paid and reported development patterns provide a benchmark against which the actual emerging loss experience can be monitored. Where possible, development patterns are selected based on historical loss emergence by origin year. For product lines where the historical data is viewed to have low statistical credibility, the selected development patterns also reflect relevant industry benchmarks and/or experience from similar product lines written elsewhere within Chubb. This most commonly occurs for relatively new product lines that have limited historical data or for high severity/low frequency portfolios where our historical experience exhibits considerable volatility and/or lacks credibility. The paid and reported loss development methods convert the selected loss emergence pattern to a set of multiplicative factors which are then applied to actual paid or reported losses to arrive at an estimate of ultimate losses for each period. Due to their multiplicative nature, the paid and reported loss development methods will leverage differences between actual and expected loss emergence. These methods tend to be utilized for more mature origin periods and for those portfolios where the loss emergence has been relatively consistent over time.

The Bornhuetter-Ferguson method is a combination of the expected loss ratio method and the loss development method, where the loss development method is given more weight as the origin year matures. This approach allows a logical transition between the expected loss ratio method which is generally utilized at earlier maturities and the loss development methods which are typically utilized at later maturities. We usually apply this method using reported loss data although paid data may also be used.

Short-tail business

Short-tail business generally describes product lines for which losses are typically known and paid shortly after the loss actually occurs. This would include, for example, most property, personal accident, aviation hull, and automobile physical damage policies that we write. Due to the short reporting and development pattern for these product lines, the uncertainty associated with our estimate of ultimate losses for any particular accident period diminishes relatively quickly as actual loss experience emerges. We typically assign credibility to methods that incorporate actual loss emergence, such as the paid and reported loss development and Bornhuetter-Ferguson methods, sooner than would be the case for long-tail lines at a similar stage of development for a given origin year. The reserving process for short-tail losses arising from catastrophic events typically involves an assessment by the claims department, in conjunction with underwriters and actuaries, of our exposure and estimated losses immediately following an event and then subsequent revisions of the estimated losses as our insureds provide updated actual loss information.

Long-tail business

Long-tail business describes lines of business for which specific losses may not be known/reported for some period and for which claims can take significant time to settle/close. This includes most casualty lines such as general liability, D&O, and workers' compensation. There are various factors contributing to the uncertainty and volatility of long-tail business. Among these are:


•	The nature and complexity of underlying coverage provided and net limits of exposure provided;

•

Our historical loss data and experience is sometimes too immature and lacking in credibility to rely upon for reserving purposes. Where this is the case, in our reserve analysis we may utilize industry loss ratios or industry benchmark development patterns that we believe reflect the nature and coverage of the underwritten business and its future development, where available. For such product lines, actual loss experience may differ from industry loss statistics as well as loss experience for previous underwriting years;


•	The difficulty in estimating loss trends, claims inflation (e.g., medical and judicial) and underlying economic conditions;


•	The need for professional judgment to estimate loss development patterns beyond that represented by historical data using supplemental internal or industry data, extrapolation, or a blend of both;

•

The need to address shifts in mix over time when applying historical paid and reported loss development patterns from older origin years to more recent origin years. For example, changes over time in the processes and procedures for establishing case reserves can distort reported loss development patterns or changes in ceded reinsurance structures by origin year can alter the development of paid and reported losses;

•

Loss reserve analyses typically require loss or other data be grouped by common characteristics in some manner. If data from two combined lines of business exhibit different characteristics, such as loss payment patterns, the credibility of the reserve estimate could be affected. Additionally, since casualty lines of business can have significant intricacies in the terms and conditions afforded to the insured, there is an inherent risk as to the homogeneity of the underlying data used in performing reserve analyses; and


•	The applicability of the price change data used to estimate ultimate loss ratios for most recent origin years.

As described above, various factors are considered when determining appropriate data, assumptions, and methods used to establish the loss reserve estimates for long-tail product lines. These factors may also vary by origin year for given product lines. The derivation of loss development patterns from data and the selection of a tail factor to project ultimate losses from actual loss emergence require considerable judgment, particularly with respect to the extent to which historical loss experience is relied upon to support changes in key reserving assumptions.

c) Loss Development Tables

The following loss development tables present Chubb’s historic incurred and paid claims development through December 31, 2016, net of reinsurance, as well as the cumulative number of reported claims, IBNR balances, and other supplementary information.

The loss development data, presented in a triangular format below, represents nine broad product line groupings within the following four segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, Overseas General Insurance, and Global Reinsurance. The remaining short-duration contract portfolios provide limited insight when presented in this format and are included among the reconciling items at the end of this disclosure. The excluded segments are the North America Agricultural Insurance segment, which is short-tailed with final settlements driven largely by the variability of crop prices; and the Life Insurance segment, which is generally written using long-duration contracts. Also excluded is Corporate, which includes run-off liabilities such as asbestos and environmental and other mass tort exposures and which impact accident years older than those shown in the exhibits below.

Each product line grouping follows a similar format and reflects the following:


•	The incurred loss triangle includes both reported case reserves and IBNR liabilities.


•	Both the incurred and paid loss triangles include allocated loss adjustment expense (i.e., defense and investigative costs particular to individual claims) but exclude unallocated loss adjustment expense (i.e., the costs associated with internal claims staff and third party administrators).


•	The amounts in both triangles for the years ended December 31, 2007, to December 31, 2015 and average historical claim duration as of December 31, 2016, are presented as supplementary information.


•	All data presented in the triangles is net of reinsurance recoveries.


•	The IBNR reserves shown to the right of each incurred loss development exhibit reflect the net IBNR recorded as of December 31, 2016.

Historical dollar amounts are presented in this footnote on a constant-currency basis, which is achieved by assuming constant foreign exchange rates between periods in the loss triangles, translating prior period amounts using the same local currency exchange rates as the current year end. The impact of this conversion is to show the change between periods exclusive of the effect of fluctuations in exchange rates, which would otherwise distort the change in incurred loss and cash flow patterns shown. The change in incurred loss shown will differ from other U.S. GAAP disclosures of incurred prior period reserve development amounts, which include the effect of fluctuations in exchanges rates.

We have provided guidance in the following pages on key assumptions that should be considered when reviewing this disclosure. The tables are presented retrospectively with respect to acquisitions where these are material and doing so is practicable. Most notably, the Chubb Corp acquisition is presented retrospectively. The unaudited consolidated data is presented solely for informational purposes and is not necessarily indicative of the consolidated data that might have been observed had the transactions been completed prior to the date indicated.

Establishing an estimate for loss reserves requires management to incorporate many assumptions. The information contained in this disclosure allows readers to understand, at the level presented in the development tables, the change over time in incurred loss estimates reported by Chubb, as well as the nature of cash flows associated with those estimates. We have provided information relating to how loss reserve estimates are developed, which is achieved by performing studies among other estimation techniques, at a more detailed level than is presented in the disaggregated disclosures herein. We believe the information provided in the “Loss Development Tables” section of the disclosure is of limited use for independent analysis or application of standard actuarial estimations, and to attempt to do so should be interpreted with care.

Development Tables

The nine development tables presented below display disaggregated loss experience for product grouping as follows:


•	North America Commercial P&C Insurance segment loss experience is presented within four triangular tables: Workers' Compensation, Liability, Other Casualty, and non-Casualty lines.


•	North America Personal P&C Insurance segment loss experience is presented within one table, since most products are short- tail.


•	Overseas General Insurance segment loss experience is presented within two tables: Casualty and non-Casualty.


•	Global Reinsurance segment loss experience is presented within two tables: Property and non-Property.

As noted above, the North America Agricultural Insurance and Life Insurance segments and Corporate are excluded from the development tables, but are included as reconciling items. In addition, certain subsets of our business are excluded from the development tables owing to data limitations or unsuitability to the development table presentation, including:


•	We underwrite loss portfolio transfers at various times; by convention, all premium and losses associated with these transactions are recorded to the policy period of the transaction, even though the accident dates of the claims covered may be a decade or more in the past.


•	We underwrite certain high attachment, high limit, multiple-line and excess of aggregate coverages for large commercial clients. Changes in incurred loss and cash flow patterns are volatile and sufficiently different from those of typical insureds.


•	Reinsurance recoverable bad debt.


•	Purchase accounting adjustments related to unpaid losses and loss expenses for the Chubb Corp.

Cumulative Number of Reported Claims

Reported claim counts, on a cumulative basis, are provided to the far right of each paid loss development table. We generally consider a reported claim to be one claim per coverage per claimant, which is generally consistent with our U.S. statutory presentation. We exclude claims closed without payment. Use of the presented claim counts in analysis of company experience has significant limitations, including:


•	High deductible workers' compensation claim counts include claims below the applicable policy deductible.


•	Professional liability and certain other lines have a high proportion of claims reported which will be closed without any payment; shifts in total reported counts may not meaningfully impact reported and ultimate loss experience.


•	Claims for certain events and/or product lines, such as portions of assumed reinsurance and A&H business, are not reported on an individual basis, but rather in bulk and thus not available for inclusion in this disclosure. For certain A&H business, where bulk reporting affected only the oldest few accident years, presented claim counts for these years were estimated.


•	Each of the segments below typically has a mixture of primary and excess experience which has shifted over time.

Reported claim counts include open claims which have case reserves and exclude claims that have been incurred but not reported. As such the reported claims are consistent with reported losses, which can be calculated by subtracting incurred but not reported losses from incurred losses. However, they are inconsistent with losses in the incurred loss triangle, which includes incurred but not reported loss, and to losses in the paid loss triangle, which exclude case reserves.

North America Commercial P&C Insurance — Workers' Compensation

This product line has a substantial geographic spread and a broad mix across industries. Types of coverage include risk management business predominantly with high deductible policies, loss sensitive business (i.e., retrospectively-rated policies), business fronted for captives, as well as primary guaranteed cost coverages.



Net Incurred Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Net IBNR Reserves
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	1,068	$	1,042		$	1,026	$	1,018	$	976	$	943	$	944	$	934	$	933	$	913	$	171
2008			1,018			993		997		991		966		952		952		948		932		185
2009						960		933		933		928		908		902		889		877		220
2010								985		988		1,003		1,008		1,004		994		972		254
2011										957		963		978		982		984		954		276
2012												956		940		957		967		932		321
2013														1,013		1,031		1,043		1,047		374
2014																1,106		1,111		1,129		526
2015																		1,179		1,157		588
2016																				1,259		905
Total																				$	10,172



Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Reported Claims (in thousands)
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	121	$	281		$	386	$	451	$	502	$	550	$	580	$	606	$	625	$	641	351
2008			125			276		370		436		500		542		574		602		627		333
2009						108		260		347		412		463		506		535		559		283
2010								125		303		414		495		548		587		612		304
2011										119		294		410		480		529		560		287
2012												111		272		365		435		483		288
2013														107		286		415		499		301
2014																113		296		408		338
2015																		117		302		338
2016																				123		275
Total																				$	4,814



Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)	December 31, 2016
Accident years prior to 2007	$	2,226
All Accident years	$	7,584



Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2016
Age in Years	1		2		3		4		5		6		7		8		9		10
Percentage	12	%	17	%	11	%	8	%	6	%	4	%	3	%	3	%	2	%	2	%

North America Commercial P&C Insurance — Liability

This line consists of primary and excess liability exposures, including medical liability, and professional lines, including directors and officers (D&O) liability, errors and omissions (E&O) liability, employment practices liability (EPL), and fiduciary liability.

The primary and excess liability business represents the largest part of these exposures. The former includes both monoline and commercial package liability. The latter includes a substantial proportion of commercial umbrella, excess and high excess business, where loss activity can produce significant volatility in the loss triangles at later ages within an accident year (and sometimes across years) due to the size of the limits afforded and the complex nature of the underlying losses.

This line also includes management and professional liability products provided to a wide variety of clients, from national accounts to small firms to private and not-for-profit organizations, distributed through brokers, agents, wholesalers and MGAs. Many of these coverages, particularly D&O and E&O, are typically written on a claims-made form. While most of the coverages are underwritten on a primary basis, there are significant amounts of large line and excess exposure as well.



Net Incurred Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Net IBNR Reserves
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	3,682	$	3,760		$	3,719	$	3,755	$	3,692	$	3,447	$	3,318	$	3,300	$	3,253	$	3,105	$	249
2008			3,716			3,719		3,708		3,682		3,551		3,290		3,217		3,142		3,036		335
2009						3,682		3,630		3,599		3,556		3,454		3,205		3,130		3,060		447
2010								3,507		3,468		3,495		3,474		3,334		3,169		3,045		559
2011										3,437		3,498		3,525		3,539		3,472		3,360		856
2012												3,489		3,529		3,519		3,480		3,441		1,168
2013														3,490		3,479		3,481		3,477		1,588
2014																3,460		3,501		3,585		1,969
2015																		3,502		3,668		2,639
2016																				3,474		3,082
Total																				$	33,251



Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Reported Claims (in thousands)
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	76	$	447		$	922	$	1,488	$	1,980	$	2,301	$	2,497	$	2,618	$	2,700	$	2,757	21
2008			115			471		987		1,500		1,837		2,169		2,394		2,496		2,591		21
2009						86		425		979		1,460		1,813		2,118		2,307		2,461		21
2010								97		501		981		1,421		1,757		2,125		2,294		20
2011										111		538		1,069		1,638		2,045		2,310		21
2012												114		532		1,028		1,535		1,953		21
2013														101		468		1,089		1,489		22
2014																116		576		1,124		23
2015																		117		544		26
2016																				142		19
Total																				$	17,665



North America Commercial P&C Insurance — Liability (continued)
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)	December 31, 2016
Accident years prior to 2007	$	1,726
All Accident years	$	17,312



Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2016
Age in Years	1		2		3		4		5		6		7		8		9		10
Percentage	3	%	12	%	16	%	15	%	12	%	10	%	6	%	4	%	3	%	2	%

North America Commercial P&C Insurance — Other Casualty

This product line consists of the remaining commercial casualty coverages such as automobile liability, marine, and aviation. There is also a small portion of commercial multi-peril (CMP) business in accident years 2014 and prior. The paid and reported data are impacted by some catastrophe loss activity primarily on the CMP exposures just noted and, to a lesser extent, marine exposures. The ultimate loss experience for years ended December 31, 2008, 2011, and 2012 were impacted by natural catastrophes.



Net Incurred Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Net IBNR Reserves
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	726	$	682		$	659	$	630	$	611	$	611	$	599	$	591	$	597	$	596	$	24
2008			903			942		910		879		856		856		849		853		847		18
2009						718		710		665		640		593		557		548		546		16
2010								737		736		727		668		639		606		608		27
2011										696		717		703		675		659		651		40
2012												748		714		682		668		633		60
2013														619		640		632		621		121
2014																655		658		651		176
2015																		538		525		211
2016																				563		408
Total																				$	6,241



North America Commercial P&C Insurance — Other Casualty (continued)
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Reported Claims (in thousands)
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	112	$	274		$	379	$	452	$	489	$	527	$	540	$	547	$	558	$	564	24
2008			210			464		604		690		748		777		798		807		815		25
2009						106		281		378		432		471		500		511		520		20
2010								144		334		430		481		517		560		571		21
2011										131		335		455		522		561		585		23
2012												108		307		413		484		538		24
2013														115		292		372		452		21
2014																113		289		387		22
2015																		80		205		20
2016																				74		17
Total																				$	4,711



Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)	December 31, 2016
Accident years prior to 2007	$	241
All Accident years	$	1,771



Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2016
Age in Years	1		2		3		4		5		6		7		8		9		10
Percentage	19	%	29	%	16	%	11	%	7	%	5	%	2	%	1	%	1	%	1	%

North America Commercial P&C Insurance — Non-Casualty

This product line represents first party commercial product lines that are short-tailed in nature, such as property, inland marine, A&H, and surety/fidelity bonds. There is a wide diversity of products, primary and excess coverages, and policy sizes. During this ten-year period, this product line was also impacted by natural catastrophes in the same years as outlined above in Other Casualty.



North America Commercial P&C Insurance — Non-Casualty (continued)
Net Incurred Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Net IBNR Reserves
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	1,271	$	1,190		$	1,181	$	1,168	$	1,151	$	1,137	$	1,138	$	1,139	$	1,138	$	1,139	$	—
2008			1,927			1,880		1,852		1,836		1,845		1,849		1,859		1,846		1,845		29
2009						1,366		1,395		1,367		1,357		1,356		1,353		1,355		1,369		28
2010								1,509		1,568		1,486		1,442		1,432		1,424		1,420		15
2011										1,985		1,957		1,922		1,916		1,895		1,915		43
2012												2,069		1,971		1,938		1,909		1,901		53
2013														1,487		1,446		1,359		1,383		73
2014																1,755		1,755		1,681		103
2015																		1,839		1,828		281
2016																				2,012		828
Total																				$	16,493



Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Reported Claims (in thousands)
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	563	$	987		$	1,076	$	1,117	$	1,124	$	1,126	$	1,130	$	1,133	$	1,134	$	1,135	906
2008			929			1,607		1,708		1,766		1,797		1,800		1,807		1,813		1,813		995
2009						630		1,118		1,213		1,268		1,280		1,322		1,332		1,335		1,067
2010								703		1,231		1,335		1,374		1,394		1,400		1,401		1,054
2011										942		1,585		1,742		1,822		1,832		1,856		1,045
2012												727		1,612		1,745		1,810		1,830		1,027
2013														630		1,119		1,241		1,291		1,068
2014																833		1,405		1,539		1,095
2015																		712		1,334		1,164
2016																				852		1,098
Total																				$	14,386



Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)	December 31, 2016
Accident years prior to 2007	$	143
All Accident years	$	2,250



Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2016
Age in Years	1		2		3		4		5		6		7		8		9		10
Percentage	46	%	37	%	7	%	4	%	1	%	1	%	—	%	—	%	—	%	—	%

North America Personal P&C Insurance

Chubb provides personal lines coverages for high-net-worth individuals and families in North America including homeowners, automobile, valuable articles (including fine art), umbrella liability, and recreational marine insurance offered through independent regional agents and brokers. A portfolio acquired from Fireman’s Fund is presented on a prospective basis beginning in May of accident year 2015. Reserves associated with prior accident periods were acquired through a loss portfolio transfer, which does not allow for a retrospective presentation.



Net Incurred Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Net IBNR Reserves
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	1,549	$	1,538		$	1,460	$	1,431	$	1,416	$	1,411	$	1,402	$	1,400	$	1,398	$	1,398	$	6
2008			1,777			1,777		1,746		1,722		1,693		1,675		1,667		1,659		1,659		6
2009						1,608		1,595		1,565		1,551		1,543		1,536		1,536		1,532		9
2010								1,868		1,876		1,853		1,836		1,832		1,828		1,823		11
2011										2,205		2,207		2,183		2,171		2,162		2,158		17
2012												2,183		2,181		2,181		2,189		2,183		25
2013														1,855		1,883		1,891		1,894		29
2014																2,202		2,203		2,189		141
2015																		2,491		2,546		213
2016																				2,437		609
Total																				$	19,819



Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Reported Claims (in thousands)
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	843	$	1,182		$	1,267	$	1,328	$	1,353	$	1,370	$	1,377	$	1,384	$	1,387	$	1,387	127
2008			974			1,406		1,518		1,584		1,620		1,636		1,642		1,644		1,648		139
2009						886		1,234		1,345		1,437		1,484		1,501		1,511		1,519		125
2010								1,152		1,521		1,669		1,727		1,770		1,792		1,803		149
2011										1,358		1,833		1,969		2,049		2,103		2,127		168
2012												1,175		1,804		1,955		2,061		2,115		173
2013														1,040		1,500		1,683		1,782		126
2014																1,308		1,762		1,923		134
2015																		1,497		2,081		137
2016																				1,452		120
Total																				$	17,837



Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)	December 31, 2016
Accident years prior to 2007	$	39
All Accident years	$	2,021



North America Personal P&C Insurance (continued)
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2016
Age in Years	1		2		3		4		5		6		7		8		9		10
Percentage	59	%	24	%	7	%	4	%	2	%	1	%	1	%	—	%	—	%	—	%

Overseas General Insurance

Approximately 40 percent of Chubb International’s business is generated by European accounts. Business related to minor acquisitions in Overseas General Insurance is not material and therefore has been excluded from the tables below.

Overseas General Insurance — Casualty

This product line is comprised of D&O liability, E&O liability, financial institutions (including crime/fidelity coverages), and non-U.S. general liability as well as shorter-tailed casualty exposures such as aviation, surety, and political risk. Exposures are located around the world, including Europe, Latin America, and Asia. There is some U.S. exposure in Casualty from multinational accounts. The financial lines coverages are typically written on a claims-made form, while general liability coverages are typically on an occurrence basis and a mix of primary and excess business.



Net Incurred Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Net IBNR Reserves
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	1,136	$	1,174		$	1,180	$	1,163	$	1,080	$	1,021	$	932	$	888	$	867	$	848	$	21
2008			1,189			1,301		1,386		1,389		1,398		1,360		1,290		1,273		1,267		105
2009						1,214		1,357		1,400		1,414		1,411		1,300		1,195		1,191		124
2010								1,170		1,203		1,280		1,349		1,284		1,239		1,118		162
2011										1,239		1,232		1,222		1,217		1,140		1,062		240
2012												1,253		1,196		1,257		1,278		1,269		373
2013														1,229		1,219		1,231		1,274		537
2014																1,242		1,286		1,285		626
2015																		1,186		1,252		719
2016																				1,181		914
Total																				$	11,747



Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Reported Claims (in thousands)
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	95	$	287		$	425	$	550	$	631	$	680	$	715	$	743	$	776	$	787	37
2008			120			295		455		618		759		859		931		986		1,036		37
2009						119		330		505		642		734		791		860		950		36
2010								106		266		461		602		707		794		843		38
2011										88		240		382		511		610		686		39
2012												74		243		422		569		677		40
2013														87		260		413		555		41
2014																114		289		459		41
2015																		93		283		41
2016																				129		29
Total																				$	6,405



Overseas General Insurance — Casualty (continued)
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)	December 31, 2016
Accident years prior to 2007	$	339
All Accident years	$	5,681



Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2016
Age in Years	1		2		3		4		5		6		7		8		9		10
Percentage	9	%	15	%	14	%	12	%	9	%	7	%	5	%	5	%	4	%	1	%

Overseas General Insurance — Non-Casualty

This product line comprises commercial fire, marine (predominantly cargo), personal automobile (in Latin America, Asia Pacific and Japan), personal cell phones, personal residential (including high net worth), energy and construction. Latin America and Europe each make up about 35 percent of the Chubb International non-casualty book. In general, these lines have relatively stable payment and reporting patterns although they are impacted by natural catastrophes particularly in the 2008, 2010 and 2011 years.



Net Incurred Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Net IBNR Reserves
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	1,224	$	1,214		$	1,209	$	1,191	$	1,189	$	1,165	$	1,181	$	1,178	$	1,177	$	1,184	$	5
2008			1,364			1,360		1,318		1,294		1,302		1,287		1,284		1,280		1,269		14
2009						1,315		1,288		1,203		1,176		1,160		1,143		1,143		1,137		8
2010								1,434		1,449		1,424		1,424		1,413		1,400		1,392		30
2011										1,665		1,728		1,677		1,644		1,631		1,620		1
2012												1,472		1,473		1,442		1,401		1,400		43
2013														1,530		1,521		1,474		1,436		59
2014																1,601		1,664		1,622		63
2015																		1,705		1,812		192
2016																				1,685		424
Total																				$	14,557



Overseas General Insurance — Non-Casualty (continued)
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Reported Claims (in thousands)
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	426	$	861		$	1,032	$	1,091	$	1,124	$	1,140	$	1,147	$	1,152	$	1,159	$	1,164	183
2008			479			985		1,120		1,183		1,206		1,215		1,225		1,233		1,233		206
2009						449		882		1,010		1,073		1,096		1,106		1,113		1,116		234
2010								523		1,028		1,218		1,278		1,316		1,328		1,334		252
2011										631		1,272		1,465		1,519		1,549		1,563		268
2012												553		1,050		1,233		1,290		1,311		283
2013														569		1,088		1,272		1,301		281
2014																622		1,209		1,394		269
2015																		692		1,315		256
2016																				789		191
Total																				$	12,520



Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)	December 31, 2016
Accident years prior to 2007	$	65
All Accident years	$	2,102



Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2016
Age in Years	1		2		3		4		5		6		7		8		9		10
Percentage	39	%	37	%	12	%	4	%	2	%	1	%	1	%	—	%	—	%	—	%

Global Reinsurance

Chubb analyzes its Global Reinsurance business on a treaty year basis rather than on an accident year basis. Treaty year data was converted to an accident year basis for the purposes of this disclosure. Mix shifts are an important consideration in these product line groupings. As proportional business and excess of loss business have different earning and loss reporting and payment patterns, this change in mix will affect the cash flow patterns across the accident years. In addition, the shift from excess to proportional business over time will make the cash flow patterns of older and more recent years difficult to compare. In general, the proportional business will pay out more quickly than the excess of loss business, as such, using older years development patterns may overstate the ultimate loss estimates in more recent years.

Global Reinsurance — Property

This portfolio consists of property catastrophe, property proportional, and property per risk books, with U.S. exposure representing approximately 70 percent of the business within this segment. Although the mixture of business varies by year, property catastrophe represents approximately 70 percent in Treaty Years 2007 and after. Of the non-catastrophe book, approximately 75 percent is on proportional treaties in Treaty Year 2007 and after. This percentage has increased over time with the proportion being approximately 50 percent from 2007 growing to approximately 90 percent in Treaty Year 2015, with the remainder being written on an excess of loss basis. Also note, this product line is impacted by natural catastrophes, particularly in the 2011 and 2012 years.



Global Reinsurance — Property (continued)
Net Incurred Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Net IBNR Reserves
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	107	$	106		$	97	$	91	$	90	$	88	$	87	$	87	$	87	$	86	$	2
2008			223			214		206		206		206		208		210		209		208		—
2009						99		113		105		105		103		100		100		100		—
2010								155		179		173		172		178		179		180		6
2011										227		224		224		220		221		222		1
2012												175		154		149		142		141		4
2013														117		117		109		105		(2		)
2014																125		142		142		6
2015																		98		105		9
2016																				143		29
Total																				$	1,432



Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Reported Claims (in thousands)
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	23	$	65		$	77	$	81	$	84	$	85	$	85	$	86	$	86	$	86	0.215
2008			65			139		169		194		205		207		208		208		208		0.157
2009						41		79		90		95		96		98		98		98		0.107
2010								40		137		157		167		171		173		173		0.095
2011										75		151		175		198		214		217		0.103
2012												29		95		117		125		129		0.084
2013														38		85		98		103		0.097
2014																56		112		127		0.081
2015																		50		87		0.086
2016																				50		0.087
Total																				$	1,278



Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)	December 31, 2016
Accident years prior to 2007	$	—
All Accident years	$	154



Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2016
Age in Years	1		2		3		4		5		6		7		8		9		10
Percentage	33	%	41	%	12	%	8	%	4	%	1	%	—	%	—	%	—	%	—	%

Global Reinsurance — Non-Property

This product line includes proportional and excess casualty coverages with exposures located around the world. Reinsurance in general exhibits less stable development patterns than primary business. In particular U.S. casualty reinsurance is long-tailed and can be very volatile.



Net Incurred Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Net IBNR Reserves
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	655	$	670		$	670	$	641	$	620	$	606	$	581	$	570	$	564	$	558	$	70
2008			488			512		528		513		503		480		480		475		474		55
2009						356		404		404		409		401		383		365		354		35
2010								442		472		479		485		472		467		457		84
2011										449		461		474		472		467		458		67
2012												440		437		440		440		425		30
2013														359		363		362		361		54
2014																367		367		373		69
2015																		328		333		87
2016																				256		141
Total																				$	4,049



Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
	Years Ended December 31																					December 31 2016
(in millions of U.S. dollars)					Unaudited																	Reported Claims (in thousands)
Accident Year	2007		2008			2009		2010		2011		2012		2013		2014		2015		2016		2016
2007	$	52	$	122		$	200	$	267	$	318	$	363	$	393	$	417	$	437	$	445	1.470
2008			46			113		187		239		286		319		343		362		373		1.292
2009						49		109		151		191		224		246		265		278		0.921
2010								71		149		209		253		283		315		331		0.877
2011										80		171		227		270		304		330		0.796
2012												93		202		260		301		334		0.677
2013														72		158		206		247		0.417
2014																99		199		240		0.428
2015																		95		173		0.370
2016																				63		0.118
Total																				$	2,814



Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)	December 31, 2016
Accident years prior to 2007	$	357
All Accident years	$	1,592



Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2016
Age in Years	1		2		3		4		5		6		7		8		9		10
Percentage	18	%	19	%	13	%	11	%	8	%	7	%	5	%	4	%	3	%	2	%

The following table presents a reconciliation of the loss development tables above to the gross loss reserve liability in the consolidated balance sheet:



Reconciliation of Reserve Balances to Liability for Unpaid Loss and Loss Expenses
(in millions of U.S. dollars)	December 31, 2016
Net unpaid loss and allocated loss adjustment expense:
North America Commercial P&C Insurance — Workers' Compensation	$	7,584
North America Commercial P&C Insurance — Liability	17,312
North America Commercial P&C Insurance — Other Casualty	1,771
North America Commercial P&C Insurance — Non-Casualty	2,250
North America Personal P&C Insurance	2,021
Overseas General Insurance — Casualty	5,681
Overseas General Insurance — Non-Casualty	2,102
Global Reinsurance — Property	154
Global Reinsurance — Non-Property	1,592
Other ⁽¹⁾	4,837
Net unpaid loss and allocated loss adjustment expense	45,304
Ceded unpaid loss and allocated loss adjustment expense:
North America Commercial P&C Insurance — Workers' Compensation	$	1,872
North America Commercial P&C Insurance — Liability	4,273
North America Commercial P&C Insurance — Other Casualty	437
North America Commercial P&C Insurance — Non-Casualty	555
North America Personal P&C Insurance	168
Overseas General Insurance — Casualty	2,617
Overseas General Insurance — Non-Casualty	968
Global Reinsurance — Property	11
Global Reinsurance — Non-Property	114
Other ⁽¹⁾	1,825
Ceded unpaid loss and allocated loss adjustment expense	12,840
Net unpaid loss and loss expense on other than short-duration contracts ⁽²⁾	741
Unpaid unallocated loss adjustment expenses	1,655
Unpaid losses and loss expenses	$	60,540

⁽¹⁾ Other includes the North America Agricultural Insurance segment, run-off asbestos and environmental, the loss portfolio transfer of Fireman’s Fund personal lines run-off liabilities, and Alternative Risk Solutions. Excludes the Life Insurance segment reserves.

⁽²⁾ Primarily includes our international A&H business and Life Insurance segment reserves.

The following table presents a reconciliation of Unpaid losses and loss expenses:



		Year Ended December 31
(in millions of U.S. dollars)	2016				2015				2014
Gross unpaid losses and loss expenses, beginning of year		$	37,303			$	38,315			$	37,443
Reinsurance recoverable on unpaid losses ⁽¹⁾		(10,741		)		(11,307		)		(10,612		)
Net unpaid losses and loss expenses, beginning of year		26,562				27,008				26,831
Acquisition of subsidiaries		21,402				417				320
Total		47,964				27,425				27,151
Net losses and loss expenses incurred in respect of losses occurring in:
Current year		17,256				10,030				10,176
Prior years ⁽²⁾		(1,204		)		(546		)		(527		)
Total		16,052				9,484				9,649
Net losses and loss expenses paid in respect of losses occurring in:
Current year		5,899				4,053				3,975
Prior years		9,816				5,612				5,260
Total		15,715				9,665				9,235
Foreign currency revaluation and other		(469		)		(682		)		(557		)
Net unpaid losses and loss expenses, end of year		47,832				26,562				27,008
Reinsurance recoverable on unpaid losses ⁽¹⁾		12,708				10,741				11,307
Gross unpaid losses and loss expenses, end of year		$	60,540			$	37,303			$	38,315
⁽¹⁾ Net of provision for uncollectible reinsurance.
⁽²⁾ Relates to prior period loss reserve development only and excludes prior period development related to reinstatement premiums, expense adjustments, and earned premiums.

Net losses and loss expenses incurred includes $1,204 million, $546 million, and $527 million, of net favorable prior period development (PPD) in the years ended December 31, 2016, 2015, and 2014, respectively. Long-tail lines include lines such as workers' compensation, general liability, and professional liability; while short-tail lines include lines such as most property lines, energy, personal accident, aviation, marine (including associated liability-related exposures) and agriculture. Significant prior period movements by segment, principally driven by reserve reviews completed during each respective period, are discussed in more detail below. The remaining net development for long-tail lines and short-tail business for each segment and Corporate comprises numerous favorable and adverse movements across a number of lines and accident years, none of which is significant individually or in the aggregate.

North America Commercial P&C Insurance

2016

North America Commercial P&C Insurance experienced net favorable PPD of $778 million, driven by the following principal changes:


•	Net favorable development of $650 million in long-tail business, primarily from:


•	Net favorable development of $264 million in our commercial excess and umbrella portfolios, primarily in accident years 2010 and prior, driven by lower than expected reported loss activity and an increase in weighting towards experience-based methods; in general, the severity of claims has been less than expected;

•

Net favorable development of $220 million in our management liability portfolios, where paid and reported loss activity was lower than expected. The majority of this favorable activity impacted accident years 2011 and prior. Partially offsetting this were smaller amounts of adverse development in the more recent accident years, mostly as a result of higher severity claim costs compared to prior expectations in some lines;

•

Net favorable development of $141 million in our workers’ compensation lines with favorable development of $40 million in the 2015 accident year related to our annual assessment of multi-claimant events including industrial accidents. Favorable development of $92 million driven by accident years 2012 and prior was principally due to lower than expected loss experience and revision to the basis for selecting development patterns used in our loss projection methods for select portfolios; and


•	Favorable development of $58 million in our professional Errors & Omission (E&O) portfolios, primarily impacting the 2012 and prior accident years and arising from both lower than expected reported loss activity and re-assessments of remaining claim-specific liabilities for the older accident years.


•	Net favorable development of $128 million in short-tail business, primarily from:


•	Net favorable development of $79 million in our property and inland marine portfolios, primarily impacting the 2014 and 2015 accident years, resulting from lower than expected loss emergence; and


•	Net favorable development of $39 million in our credit-related businesses, including surety, trade credit and political risk, mainly due to favorable claim emergence in the 2012 and 2014 accident years.

2015

North America Commercial P&C Insurance experienced net favorable PPD of $264 million in 2015, driven by the following principal changes:


•	Net favorable development of $155 million in long-tail business, primarily from:


•	Net favorable development of $108 million in our management and professional liability portfolios, primarily impacting accident years 2010 and prior. Lower than expected paid and reported loss activity led to reductions in our estimates of ultimate loss for these accident years;


•	Favorable development of $32 million in our auto liability excess lines and $26 million in our general liability product lines primarily impacting the 2010 accident year, resulting from lower than expected loss emergence and an increase in weighting applied to experience-based methods;

•

Net favorable development of $21 million in our workers’ compensation lines with favorable development of $52 million in the 2014 accident year related to our annual assessment of multi-claimant events including industrial accidents. Consistent with prior years, we reviewed these potential exposures after the end of the accident year to allow for late reporting or identification of significant losses. Adverse development of $29 million was experienced on the 2009 and prior accident years due to a combination of claim-specific deteriorations and higher than expected loss emergence. There was also adverse development on the 2014 accident year due to revised account-level estimates, which were higher than our original aggregate expectations; and

•

Net adverse development of $33 million in our commercial umbrella and excess portfolios, primarily impacting accident years 2010 and 2011. Higher than expected reported loss activity, combined with an increase in weighting applied to experience-based methods, led to increased provisions in accident years 2010 and 2011, which was partly offset by the recognition of favorable emergence in the 2009 and prior accident years.


•	Net favorable development of $109 million in short-tail business, primarily from:


•	Favorable development of $34 million in our excess property business primarily impacting the 2013 accident year. Paid and reported loss activity was lower than expected leading to reductions in our estimate of ultimate loss; and


•	Favorable development of $37 million in our credit-related business due to lower than expected claims emergence primarily in the 2013 accident year.

2014

North America Commercial P&C Insurance experienced net favorable PPD of $378 million in 2014, representing 1.4 percent of the beginning consolidated net unpaid losses and loss expense reserves.

North America Personal P&C Insurance

North America Personal P&C Insurance incurred net adverse PPD of $27 million in 2016, in our homeowners and umbrella lines due to higher than expected loss emergence. Average loss severities were higher than expected, and to a lesser degree, reinsurance and other recoveries were lower than expected. Net adverse PPD of $25 million, in 2015, was the net result of several underlying favorable and adverse movements, none of which were significant individually or in the aggregate.

Net adverse PPD of $24 million in 2014, represented 0.1 percent of the beginning consolidated net unpaid losses and loss expense reserves.

North America Agricultural Insurance

North America Agricultural Insurance experienced net favorable development of $72 million and $45 million in 2016 and 2015, respectively, and net adverse development of $34 million in 2014. Actual claim development relates to our MPCI business and is favorable or (adverse) based on better or (worse) than expected crop yield results in certain states at the prior year-end period (i.e., 2016 results based on crop yield results at year-end 2015).

Overseas General Insurance

2016

Overseas General Insurance experienced net favorable PPD of $423 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:


•	Net favorable development of $191 million in long-tail business, primarily from:


•	Net favorable development of $165 million, primarily in casualty and financial lines, with favorable development of $257 million in accident years 2012 and prior, resulting from lower than expected loss emergence, and adverse development of $92 million in accident years 2013 to 2015, primarily due to large loss experience in our D&O portfolio in Asia and financial lines in Europe; and


•	Favorable development of $25 million on an individual legacy liability case reserve take-down. This release follows a legal analysis completed in 2016, based on court opinion in the year and discussions with defense counsel, which concluded that these reserves were no longer required.


•	Net favorable development of $232 million in short-tail business, primarily from:


•	Favorable development of $97 million in property (including technical lines), primarily from favorable Continental Europe loss emergence in accident years 2012 through 2014;


•	Favorable development of $43 million in energy lines, driven by favorable loss emergence in accident years 2010 through 2014, primarily in offshore where experience on multi-year construction accounts has been better than expected, as well as a claims review of catastrophe impacts on underwriting years 2004 through 2008;


•	Favorable development of $28 million in accident & health (A&H) lines, due to lower than expected loss emergence, primarily in Asia Pacific and Continental Europe in accident years 2013 through 2015; and


•	Favorable development of $28 million in aviation lines due to lower than expected loss emergence and case-specific reserve reductions impacting accident years 2012 and prior.

2015

Overseas General Insurance experienced net favorable PPD of $343 million in 2015, driven by the following principal changes:


•	Net favorable development of $166 million in long-tail business, primarily from:


•	Net favorable development of $140 million, primarily in casualty and financial lines with favorable development of $175 million in accident years 2011 and prior, resulting from lower than expected loss emergence, and adverse development of $35 million in accident years 2012 to 2014, primarily due to large loss experience in the U.K. and Europe; and


•	Favorable development of $26 million on an individual legacy liability case reserve take-down. This release follows a legal analysis completed in 2015, based on court opinion in the year and discussions with defense counsel, which concluded that these reserves were no longer required.


•	Favorable development of $177 million in short-tail business primarily from:


•	Favorable development of $90 million in property, technical, energy and marine lines from specific claims and additional credibility assigned to accident years 2013 and prior favorable indications;


•	Favorable development of $34 million in A&H business primarily in accident year 2013 and 2014 across all regions and products, none of which was individually significant; and


•	Favorable development of $26 million in consumer business primarily in Latin America and Asia Pacific, resulting from favorable development and additional credibility assigned to accident years 2012 and 2013.

2014

Overseas General Insurance experienced net favorable PPD of $391 million in 2014, representing 1.5 percent of the beginning consolidated net unpaid losses and loss expense reserves.

Global Reinsurance

2016

Global Reinsurance experienced net favorable PPD of $78 million, driven by the following principal changes:


•	Net favorable development of $42 million in casualty lines primarily impacting treaty years 2011 and prior, principally resulting from lower than expected loss emergence; and


•	Net favorable development of $30 million in professional liability lines primarily impacting treaty years 2011 and prior due to lower than expected loss emergence.

2015

Global Reinsurance experienced net favorable PPD of $119 million in 2015, driven by the following principal changes:


•	Favorable development of $54 million comprising $42 million in long-tail lines and $12 million in short-tail lines, on an individual legacy liability case reserve take-down. This release follows a legal analysis completed in 2015, based on court opinion and discussions with defense counsel, which concluded that these reserves were no longer required;


•	Favorable development of $33 million in professional liability lines, including medical malpractice business, primarily in treaty years 2010 and prior reflecting favorable paid and incurred loss trends and an increase in weighting applied to experience-based methods; and


•	Favorable development of $23 million in casualty lines, principally in treaty years 2009 and prior reflecting favorable paid and incurred loss trends and an increase in weighting applied to experience-based methods.

2014

Global Reinsurance experienced net favorable PPD of $63 million in 2014, representing 0.2 percent of the beginning consolidated net unpaid losses and loss expense reserves.

Corporate

2016

Corporate incurred adverse development was $189 million in long-tail lines, driven by the following principal changes:


•	Adverse development of $141 million in asbestos, environmental, and other run-off liabilities primarily arose as a result of the annual review of individual accounts and case specific exposures, with account changes driven by recent frequency and severity trends, certain case specific settlements and higher than expected defense spending; and


•	Adverse development of $48 million on unallocated loss adjustment expenses due to run-off operating expenses paid and incurred in 2016.

2015

Corporate incurred adverse PPD of $200 million in long-tail lines, driven by the following principal changes:

•

Adverse development of $170 million in our Westchester and Brandywine run-off operations, related to the completion of reserve reviews during 2015, impacting accident years 1996 and prior. The development primarily arose from case specific settlements and higher than expected remediation expense and defense costs for environmental claims and increases in indemnity and defense costs on a select number of modeled accounts for asbestos. Further, we experienced higher than expected loss emergence on certain portfolios in our assumed reinsurance book and in other run-off lines; and


•	Adverse development of $30 million on unallocated loss adjustment expenses due to run-off operating expenses paid and incurred during 2015.

2014

Corporate incurred adverse PPD of $247 million in 2014, representing 0.9 percent of the beginning consolidated net unpaid losses and loss expense reserves.

Asbestos and environmental (A&E)

Chubb's exposure to A&E claims principally arises out of liabilities acquired when it purchased Westchester Specialty in 1998, CIGNA's P&C business in 1999, and Chubb Corp in 2016. The following table presents a roll-forward of consolidated A&E loss reserves including allocated loss expense reserves for A&E exposures, and the provision for uncollectible paid and unpaid reinsurance recoverables:



	Asbestos						Environmental						Total
(in millions of U.S. dollars)	Gross			Net			Gross			Net			Gross			Net
Balance at December 31, 2015	$	1,351		$	831		$	199		$	149		$	1,550		$	980
Acquired reserves	488			468			371			354			859			822
Incurred activity	311			95			104			69			415			164			⁽¹⁾
Paid activity	(424		)	(275		)	(97		)	(82		)	(521		)	(357		)
Balance at December 31, 2016	$	1,726		$	1,119		$	577		$	490		$	2,303		$	1,609

⁽¹⁾Excludes unallocated loss expenses and the net activity reflects third-party reinsurance other than the aggregate excess of loss reinsurance provided by National Indemnity Company (NICO) to Westchester Specialty (see Westchester Specialty section below).

The A&E net loss reserves including allocated loss expense reserves and provision for uncollectible reinsurance at December 31, 2016 and 2015 shown in the table above is comprised of:



	December 31
(in millions of U.S. dollars)	2016		2015
Brandywine operations	$	760	$	782
Westchester Specialty	112		115
Chubb Corp	657		—
Other, mainly Overseas General Insurance	80		83
Total	$	1,609	$	980

The incurred activity of $164 million in 2016 and $162 million in 2015 were primarily the result of our annual internal, ground-up review of A&E liabilities.

Brandywine Run-off entities – The Restructuring Plan and uncertainties relating to Chubb's ultimate Brandywine exposure

In 1996, the Pennsylvania Insurance Commissioner approved a plan to restructure INA Financial Corporation and its subsidiaries (the Restructuring) which included the division of Insurance Company of North America (INA) into two separate corporations:

(1) An active insurance company that retained the INA name and continued to write P&C business; and

(2) An inactive run-off company, now called Century Indemnity Company (Century).

As a result of the division, predominantly all A&E and certain other liabilities of INA were ascribed to Century and extinguished, as a matter of Pennsylvania law, as liabilities of INA.

As part of the Restructuring, most A&E liabilities of various U.S. affiliates of INA were reinsured to Century. Century and certain other run-off companies having A&E and other liabilities were contributed to Brandywine Holdings.

The U.S.-based Chubb INA companies assumed two contractual obligations in respect of the Brandywine operations in connection with the Restructuring: a dividend retention fund obligation and a surplus maintenance obligation in the form of the excess of loss (XOL) agreement.

INA Financial Corporation established and funded a dividend retention fund (the Dividend Retention Fund) consisting of $50 million plus investment earnings. The full balance of the Dividend Retention Fund was contributed to Century as of December 31, 2002. Under the Restructuring Order, while any obligation to maintain the Dividend Retention Fund is in effect, to the extent dividends are paid by INA Holdings Corporation to its parent, INA Financial Corporation, and to the extent INA Financial Corporation then pays such dividends to INA Corporation, a portion of those dividends must be withheld to replenish the principal of the Dividend Retention Fund to $50 million. During 2011 and 2010, $35 million and $15 million, respectively, were withheld from such dividends and deposited into the Dividend Retention Fund as a result of dividends paid up to the INA Corporation. Capital contributions from the Dividend Retention Fund to Century are not required until the XOL Agreement has less than $200 million of capacity remaining on an incurred basis for statutory reporting purposes. The amount of the capital contribution shall be the lesser of the amount necessary to restore the XOL Agreement remaining capacity to $200 million or the Dividend Retention Fund balance. The Dividend Retention Fund may not be terminated without prior written approval from the Pennsylvania Insurance Commissioner.

In addition, a Chubb INA insurance subsidiary provided reinsurance coverage to Century in the amount of $800 million under an XOL, triggered if the statutory capital and surplus of Century falls below $25 million or if Century lacks liquid assets with which to pay claims as they become due.

Effective December 31, 2004, Chubb INA contributed $100 million to Century in exchange for a surplus note. After giving effect to the contribution and issuance of the surplus note, the statutory surplus of Century at December 31, 2016 was $25 million and $512 million in statutory-basis losses have been ceded to the XOL on an inception-to-date basis. Century reports the amount ceded under the XOL in accordance with statutory accounting principles, which differ from GAAP by, among other things, allowing Century to discount its liabilities, including certain asbestos related and environmental pollution liabilities and Century's reinsurance payable to active companies. For GAAP reporting purposes, intercompany reinsurance recoverables related to the XOL are eliminated upon consolidation.

While Chubb believes it has no legal obligation to fund Century losses above the XOL limit of coverage, Chubb's consolidated results would nevertheless continue to include any losses above the limit of coverage for so long as the Brandywine companies remain consolidated subsidiaries of Chubb.

Certain active Chubb companies are primarily liable for asbestos, environmental, and other exposures that they have reinsured to Century. Accordingly, if Century were to become insolvent and placed into rehabilitation or liquidation, some or all of the recoverables due to these active Chubb companies from Century could become uncollectible. At both December 31, 2016 and 2015, the aggregate reinsurance recoverables owed by Century to certain active Chubb companies were approximately $1.2 billion. Chubb believes the active company intercompany reinsurance recoverables, which relate to direct liabilities payable over many years, are not impaired. At December 31, 2016 and 2015, Century's carried gross reserves (including reserves assumed from the active Chubb companies) were $2.0 billion and $1.9 billion, respectively. Should Century's loss reserves experience adverse development in the future and should Century be placed into rehabilitation or liquidation, the reinsurance recoverables due from Century to certain active Chubb companies would be payable only after the payment in full of certain expenses and liabilities, including administrative expenses and direct policy liabilities. Thus, the intercompany reinsurance recoverables would be at risk to the extent of the shortage of assets remaining to pay these recoverables.

Westchester Specialty – impact of NICO contracts on Chubb’s run-off entities

As part of the Westchester Specialty acquisition in 1998, NICO provided a 75 percent pro-rata share of $1.0 billion of reinsurance protection on losses and loss adjustment expenses incurred on or before December 31, 1996, in excess of a retention of $721 million. At December 31, 2016, the remaining unused incurred limit under the Westchester NICO agreement was $438 million.