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Retroactive reinsurance contracts | 12 Months Ended
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Dec. 31, 2023
Insurance [Abstract] |
Retroactive reinsurance contracts | (17) Retroactive reinsurance contracts Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses of short-duration insurance contracts with respect to underlying loss events that occurred prior to the contract inception date, which may include significant levels of asbestos, environmental and other mass tort claims. Retroactive reinsurance contracts are generally subject to aggregate policy limits and thus, our exposure to such claims under these contracts is likewise limited. Reconciliations of the changes in estimated liabilities for retroactive reinsurance unpaid losses and loss adjustment expenses for each of the three years ended December 31, 2023 follow (in millions).
| 2023 |  |  | 2022 |  |  | 2021 |
Balance at the beginning of the year | $ | 35,415 |  |  | $ | 37,855 |  |  | $ | 40,623 |
Incurred losses and loss adjustment expenses: |  |  |  |  |  |  |  |
Current year contracts |  | — |  |  |  | — |  |  |  | 153 |
Prior years’ contracts |  | 1,109 |  |  |  | 86 |  |  |  | (974 | )
Total |  | 1,109 |  |  |  | 86 |  |  |  | (821 | )
Paid losses and loss adjustment expenses |  | (1,934 | ) |  |  | (2,358 | ) |  |  | (1,889 | )
Foreign currency effect |  | 57 |  |  |  | (168 | ) |  |  | (58 | )
Balance at December 31 | $ | 34,647 |  |  | $ | 35,415 |  |  | $ | 37,855 |
Incurred losses and loss adjustment expenses above | $ | 1,109 |  |  | $ | 86 |  |  | $ | (821 | )
Deferred charge amortization and adjustments |  | 375 |  |  |  | 769 |  |  |  | 1,802 |
Incurred losses and loss adjustment expenses included in the Consolidated Statements of Earnings | $ | 1,484 |  |  | $ | 855 |  |  | $ | 981 |
In the preceding table, the classification of incurred losses and loss adjustment expenses is based on the inception dates of the contracts, which reflect when our exposure to losses began. We believe that analysis of losses incurred and paid by accident year of the underlying event is irrelevant given that our exposure to losses incepts when the contract incepts and that the classification of reported claims and case development liabilities has little or no practical analytical value. Incurred losses and loss adjustment expenses in the Consolidated Statements of Earnings include changes in estimated liabilities and related deferred charge asset amortization and adjustments arising from the changes in estimated timing and amount of future loss payments. In 2023, we increased estimated ultimate liabilities under certain contracts by $1.1 billion, which after adjustments to related deferred charge assets, produced an increase in incurred losses and loss adjustment expenses of approximately $650 million. The increase derived from higher estimates for asbestos, environmental and other casualty claims. Unamortized deferred charges on retroactive reinsurance contracts were $9.5 billion at December 31, 2023 and $9.9 billion at December 31, 2022. In establishing retroactive reinsurance claim liabilities, we analyze historical aggregate loss payment patterns and project losses into the future under various probability-weighted scenarios. We expect the claim-tail to be very long for many contracts, with some lasting several decades. We monitor claim payment activity and review ceding company reports and other information concerning the underlying losses. We revise the expected timing and amounts of ultimate losses periodically or when significant events are revealed. We monitor evolving case law and its effect on asbestos, environmental and other mass tort claims. Changing laws or government regulations, as well as newly identified toxins and injury events, newly reported claims, new theories of liability, new contract interpretations and other factors could result in increases in these liabilities, which could be material to our results of operations. We are unable to reliably estimate the amount of additional net loss or the range of net loss that is reasonably possible. Our e stimates of ultimate liabilities for asbestos and environmental exposures under our contracts were approximately $12.2 billion at December 31, 2023 and $12.1 billion at December 31, 2022.

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