5. Unpaid losses and loss expenses

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



	Six Months Ended June 30
(in millions of U.S. dollars)	2017				2016
Gross unpaid losses and loss expenses – beginning of period		$	60,540		$	37,303
Reinsurance recoverable on unpaid losses ⁽¹⁾		(12,708		)	(10,741		)
Net unpaid losses and loss expenses – beginning of period		47,832			26,562
Acquisition of subsidiaries		—			21,398
Total		47,832			47,960
Net losses and loss expenses incurred in respect of losses occurring in:
Current year		8,396			8,529
Prior years ⁽²⁾		(461		)	(601		)
Total		7,935			7,928
Net losses and loss expenses paid in respect of losses occurring in:
Current year		2,271			1,964
Prior years		5,758			5,541
Total		8,029			7,505
Foreign currency revaluation and other		171			40
Net unpaid losses and loss expenses – end of period		47,909			48,423
Reinsurance recoverable on unpaid losses ⁽¹⁾		12,485			12,396
Gross unpaid losses and loss expenses – end of period		$	60,394		$	60,819

⁽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 of $60 million and $53 million for the six months ended June 30, 2017 and 2016, respectively.

Prior Period Development

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

2017

For the three months ended June 30, 2017, net favorable PPD was $131 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:


•	Net favorable development of $101 million in long-tail business, primarily from:

•

Net favorable development of $83 million in our workers’ compensation lines with favorable development of $57 million in the 2016 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 close of the accident year to allow for late reporting or identification of significant losses. Favorable development of $40 million in accident years 2015 and prior was principally due to lower than expected loss experience and revision to development patterns used in our loss projection methods for select portfolios; and


•	Net favorable development of $37 million in our commercial-multi peril (CMP) and monoline general liability lines, driven by favorable paid and reported loss activity relative to prior expectations, principally in accident years 2008 through 2013.


•	Net favorable development of $30 million in short-tail business, primarily from favorable development of $29 million in our commercial property portfolios, driven by lower than expected loss emergence in the 2014 and 2016 accident years.

For the six months ended June 30, 2017, net favorable PPD was $310 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:


•	Net favorable development of $200 million in long-tail business, primarily from:


•	Net favorable development of $84 million in our workers’ compensation lines due to the same factors experienced for the three months ended June 30, 2017, as described above;


•	Net favorable development of $74 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;


•	Net favorable development of $37 million in our commercial-multi peril (CMP) and monoline general liability lines, due to the same factors experienced for the three months ended June 30, 2017, as described above; and


•	Net favorable development of $25 million in our professional Errors and Omissions (E&O) portfolios, primarily in the 2012 and 2013 accident years, arising from lower than expected reported loss activity, partially offset by claim-specific adverse development.


•	Net favorable development of $110 million in short-tail business, primarily from:


•	Net favorable development of $45 million in our credit-related business, primarily due to lower than expected claims severity in the 2015 accident year;


•	Favorable development of $33 million in our property lines, primarily in our commercial property portfolios, due to the same factors experienced for the three months ended June 30, 2017 as described above; and


•	Net favorable development of $24 million in our accident & health (A&H) business, primarily due to lower than expected loss emergence in the 2015 and 2016 accident years.

2016

For the three months ended June 30, 2016, net favorable PPD was $168 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:


•	Net favorable development of $167 million in long-tail business, primarily from:

•

Net favorable development of $114 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. Consistent with prior years, we reviewed these potential exposures after the close of the accident year to allow for late reporting or identification of significant losses. Favorable development of $59 million driven by accident years 2011 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. Adverse development in accident years 2012 through 2015 was due to a small number of large claims in our excess business;


•	Net favorable development of $50 million in our commercial-multi peril (CMP) and monoline general liability lines, driven by favorable paid and reported loss activity relative to prior expectations, principally in accident years 2007 through 2014; and


•	Net favorable development of $20 million in our professional E&O portfolios, in the 2003 accident year due to a favorable development on a specific claim.

For the six months ended June 30, 2016, net favorable PPD was $346 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:


•	Net favorable development of $309 million in long-tail business, primarily from:


•	Favorable development of $145 million in our commercial excess and umbrella portfolios, driven by continued lower than expected reported loss activity in accident years 2010 and prior; in general, the severity of claims has been less than previously expected;


•	Net favorable development of $114 million on our workers’ compensation lines due to the same factors experienced for the three months ended June 30, 2016, as described above;


•	Favorable development of $63 million in our professional 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; and


•	Net favorable development of $24 million in our primary casualty and general liability portfolios was driven by $50 million favorable development in our CMP and monoline general liability lines as described above, and $26 million adverse development due to higher than expected reported loss activity, mainly associated with construction defect coverages.


•	Net favorable development of $37 million in short-tail business, primarily from favorable development of $24 million in our surety business, due to favorable claim emergence in the 2013 accident year.

North America Personal P&C Insurance

2017

For the three and six months ended June 30, 2017, net adverse PPD was $37 million and $34 million, respectively, driven primarily by higher than expected case incurred development in our automobile, recreational marine and homeowners lines, mainly in accident years 2012 through 2016.

2016

For the three and six months ended June 30, 2016, net favorable PPD was $15 million and $18 million, respectively, which were the net result of several underlying favorable and adverse movements, none of which were significant individually or in the aggregate.

North America Agricultural Insurance

There was no PPD in both the three months ended June 30, 2017 and 2016.

For the six months ended June 30, 2017 and 2016, net favorable PPD was $79 million and $41 million, respectively. Actual claim development relates to our Multiple Peril Crop Insurance (MPCI) business and is favorable due to better than expected crop yield results in certain states at the prior year-end period (i.e., 2017 results based on crop yield results at year-end 2016).

Overseas General Insurance

2017

For the three months ended June 30, 2017, net favorable PPD was $88 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:


•	Net favorable development of $88 million in short-tail business, primarily from:


•	Favorable development of $37 million in property and marine (excluding technical lines), primarily in accident years 2013 through 2015,driven mainly by favorable U.K. and Continental Europe loss emergence, including favorable claim-specific loss settlements;


•	Favorable development of $26 million in technical and energy lines, primarily from favorable loss emergence in accident years 2014 through 2016 primarily in offshore where experience has been better than expected; and


•	Favorable development of $19 million in A&H lines, primarily from favorable loss emergence in Asia Pacific and Continental Europe in accident years 2014 through 2016.

For the six months ended June 30, 2017, net favorable PPD was $76 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:


•	Net favorable development of $108 million in short-tail business, due primarily to the same factors experienced for the three months ended June 30, 2017 as described above; and


•	Net adverse development of $32 million in long-tail business, primarily in our casualty lines, driven by a change in the discount rate in the U.K. (Ogden rate) impacting the 2016 and prior accident years.

2016

For the three months ended June 30, 2016, net favorable PPD was $85 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:


•	Net favorable development of $84 million in short-tail business, primarily from:


•	Favorable development of $38 million in property (excluding technical lines), primarily from favorable Continental Europe loss emergence in accident years 2013 through 2015; and


•	Favorable development of $32 million in energy lines, primarily from a claims review of catastrophe impacts on underwriting years 2004 through 2008, as well as favorable loss emergence in accident years 2010 through 2013, primarily in offshore where experience has been better than expected.

For the six months ended June 30, 2016, net favorable PPD was $115 million, due primarily to the same factors experienced for the three months ended June 30, 2016 as described above.

Global Reinsurance

2017

For the three months ended June 30, 2017, net favorable PPD was $31 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal change:


•	Net favorable development of $36 million in our casualty and professional liability lines, primarily impacting treaty years 2011 and prior, principally resulting from lower than expected loss emergence.

For the six months ended June 30, 2017, net favorable PPD was $23 million, which was the net result of several underlying favorable and adverse movements driven by the following principal change:


•	Net favorable development of $27 million, comprising $36 million in our casualty and professional liability lines as described above, as well as adverse development of $9 million in our motor and excess liability lines, driven by a change in the discount rate in the U.K. (Ogden rate) primarily impacting the 2015 and prior treaty years.

2016

For the three and six months ended June 30, 2016, net favorable PPD was $47 million and $50 million, respectively, which were the net result of several underlying favorable and adverse movements, driven by the following principal change:


•	Favorable development of $41 million in casualty lines primarily impacting treaty years 2011 and prior, principally resulting from lower than expected loss emergence.

Corporate

2017

For the three and six months ended June 30, 2017, adverse development was $43 million and $53 million, respectively, due principally to development of $35 million on run-off non A&E casualty exposures due to higher than expected loss activity, and unallocated loss adjustment expenses due to run-off operating expenses paid and incurred in the respective periods of $8 million and $18 million, respectively.

2016

For the three and six months ended June 30, 2016, net adverse development was $14 million and $22 million, respectively, due principally to unallocated loss adjustment expenses due to run-off operating expenses paid and incurred in the respective periods.