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Unpaid losses and loss expenses | 9 Months Ended
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Sep. 30, 2018
Liability for Claims and Claims Adjustment Expense [Abstract] |
Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block] | Unpaid losses and loss expenses The following table presents a reconciliation of beginning and ending Unpaid losses and loss expenses:
| Nine Months Ended September 30 |
(in millions of U.S. dollars) | 2018 |  |  | 2017 |
Gross unpaid losses and loss expenses – beginning of period | $ | 63,179 |  |  | $ | 60,540 |
Reinsurance recoverable on unpaid losses - beginning of period (1) | (14,014 | ) |  | (12,708 | )
Net unpaid losses and loss expenses – beginning of period | 49,165 |  |  | 47,832 |
Net losses and loss expenses incurred in respect of losses occurring in: |  |  |
Current year | 14,186 |  |  | 14,963 |
Prior years (2) | (729 | ) |  | (781 | )
Total | 13,457 |  |  | 14,182 |
Net losses and loss expenses paid in respect of losses occurring in: |  |  |
Current year | 4,522 |  |  | 3,937 |
Prior years | 8,596 |  |  | 8,389 |
Total | 13,118 |  |  | 12,326 |
Foreign currency revaluation and other | (440 | ) |  | 596 |
Net unpaid losses and loss expenses – end of period | 49,064 |  |  | 50,283 |
Reinsurance recoverable on unpaid losses (1) | 13,965 |  |  | 13,870 |
Gross unpaid losses and loss expenses – end of period | $ | 63,029 |  |  | $ | 64,153 |
(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 totaling $86 million and $110 million for the nine months ended September 30, 2018 and 2017, respectively.
The decrease in net unpaid losses and loss expenses from December 31, 2017 was primarily due to favorable prior period development, foreign exchange movement, and payments related to the 2017 catastrophic events, partially offset by crop activity and the impact of the catastrophic events during the year. Prior Period Development Prior period development (PPD) arises from changes to loss estimates recognized in the current year that relate to loss events that occurred in previous calendar years and excludes the effect of losses from the development of earned premium from previous accident years. 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. 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, and agriculture. During the third quarter of 2017, we determined that the loss development classification for certain businesses, previously grouped within the short-tail column in the table below, would be more appropriately grouped within the long-tail column to better align with the classification of these businesses within our loss development triangles in our Form 10-K. We also determined that the loss development for certain other businesses should be reclassified from long-tail to short-tail. We updated the 2017 amounts below to conform to the current period presentation. These changes to the previously disclosed amounts have no impact to our financial condition and results of operations. Net favorable prior period development for the three months ended September 30, 2018 was $243 million, which included $80 million of net adverse development related to homeowners and valuables, where losses trended higher than expected, and $54 million of adverse development related to environmental liabilities. The remaining favorable development of $377 million comprised 80 percent long-tail lines, principally for the 2014 and prior accident years, and 20 percent short-tail lines, principally related to the 2017 catastrophe events. Net favorable prior period development for the nine months ended September 30, 2018 of $643 million, was evenly split between long-tail lines, principally for the 2014 and prior accident years, and short-tail lines, principally related to the 2017 catastrophe events.
| Three Months Ended September 30 |  |  | Nine Months Ended September 30 |
(in millions of U.S. dollars) | Long-tail |  |  | Short-tail |  |  | Total |  |  | Long-tail |  |  | Short-tail |  |  | Total |
2018 |  |  |  |  |  |  |  |  |  |  |
North America Commercial P&C Insurance | $ | (170 | ) |  | $ | (46 | ) |  | $ | (216 | ) |  | $ | (266 | ) |  | $ | (206 | ) |  | $ | (472 | )
North America Personal P&C Insurance | — |  |  | 58 |  |  | 58 |  |  | — |  |  | 59 |  |  | 59 |
North America Agricultural Insurance | — |  |  | (1 | ) |  | (1 | ) |  | — |  |  | (77 | ) |  | (77 | )
Overseas General Insurance | (49 | ) |  | (23 | ) |  | (72 | ) |  | (51 | ) |  | (115 | ) |  | (166 | )
Global Reinsurance | (39 | ) |  | 15 |  |  | (24 | ) |  | (69 | ) |  | 15 |  |  | (54 | )
Corporate | 12 |  |  | — |  |  | 12 |  |  | 67 |  |  | — |  |  | 67 |
Total | $ | (246 | ) |  | $ | 3 |  |  | $ | (243 | ) |  | $ | (319 | ) |  | $ | (324 | ) |  | $ | (643 | )
2017 |  |  |  |  |  |  |  |  |  |  |
North America Commercial P&C Insurance | $ | (230 | ) |  | $ | (6 | ) |  | $ | (236 | ) |  | $ | (407 | ) |  | $ | (139 | ) |  | $ | (546 | )
North America Personal P&C Insurance | — |  |  | 32 |  |  | 32 |  |  | — |  |  | 66 |  |  | 66 |
North America Agricultural Insurance | — |  |  | (4 | ) |  | (4 | ) |  | — |  |  | (83 | ) |  | (83 | )
Overseas General Insurance | (106 | ) |  | (2 | ) |  | (108 | ) |  | (74 | ) |  | (110 | ) |  | (184 | )
Global Reinsurance | (41 | ) |  | — |  |  | (41 | ) |  | (69 | ) |  | 5 |  |  | (64 | )
Corporate | 87 |  |  | — |  |  | 87 |  |  | 140 |  |  | — |  |  | 140 |
Total | $ | (290 | ) |  | $ | 20 |  |  | $ | (270 | ) |  | $ | (410 | ) |  | $ | (261 | ) |  | $ | (671 | )
North America Commercial P&C Insurance 2018 For the three months ended September 30, 2018, net favorable PPD was $216 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $170 million in long-tail business, primarily from:
• | Favorable development of $93 million in commercial excess and umbrella portfolios primarily in accident years 2012 and prior driven by lower than expected reported loss activity, and an increase in weighting towards experience-based methods;
• | Favorable development of $45 million in workers' compensation lines mainly impacting accident years 2014 and prior, driven by lower than expected paid and reported loss activity, and related updates to development patterns used in our loss projection methods for select portfolios; and
• | Net favorable development of $28 million in our foreign casualty lines, primarily impacting accident years 2014 and prior, driven by reported loss activity that was generally lower than expected.
• | Net favorable development of $46 million in short-tail business, primarily from:
• | Net favorable development of $41 million in commercial property and marine businesses due to favorable claim development, including $42 million favorable development on the 2017 natural catastrophes.
For the nine months ended September 30, 2018, net favorable PPD was $472 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $266 million in long-tail business, primarily from:
• | Net favorable development of $183 million in our workers’ compensation lines with favorable development of $56 million in the 2017 accident year mainly 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. The net remaining favorable development of $127 million was principally due to lower than expected loss experience, mainly impacting accident years 2014 and prior;
• | Net favorable development of $123 million in our commercial excess and umbrella portfolios, primarily in accident years 2012 and prior. This was driven by lower than expected reported loss activity, and an increase in weighting towards experience-based methods, partially offset by higher than expected claim activity in the 2014 and 2015 accident years which led to reserve strengthening in those years;
• | Favorable development of $28 million in our foreign casualty lines due to the same factors as experienced for the three months ended September 30, 2018 as described above;
• | Net favorable development of $3 million on several lines of business due to favorable claim development on the 2017 natural catastrophes; and
• | Net adverse development of $71 million, mainly in our automobile liability, commercial-multi peril (CMP) liability, products and general liability lines, driven by adverse paid and reported loss activity relative to prior expectations in accident years 2015 through 2017, partly offset by favorable emergence in older accident years.
• | Net favorable development of $206 million in short-tail business, primarily from:
• | Net favorable development of $156 million in our commercial property and marine businesses due to favorable claim development, including $157 million favorable development on the 2017 natural catastrophes; and
• | Net favorable development of $50 million in other short-tail business, including $19 million in surety and also including several smaller net favorable movements from lower than expected case activity in other classes, such as accident and commercial automobile physical damage, none of which were significant individually or in the aggregate.
2017 For the three months ended September 30, 2017, net favorable PPD was $236 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $230 million in long-tail business, primarily from:
• | Favorable development of $140 million in commercial excess and umbrella portfolios primarily in accident years 2011 and prior driven by lower paid and reported loss activity relative to prior expectations as well as an increase in weighting towards experience-based methods;
• | Favorable development of $46 million in workers' compensation business mainly impacting accident years 2013 and prior, driven by lower than expected paid and reported loss activity, and revisions to development patterns used in our loss projection methods for select portfolios; and
• | Net favorable development of $28 million on several large multi-line prospective deals primarily impacting the 2012 and 2013 accident years, due to lower than expected reported loss activity. These structured deals typically cover large clients for multiple product lines and with varying loss limitations; this development is net of premium adjustments of $26 million tied to the loss performance of the particular deals.
• | Net favorable development of $6 million in short-tail business across a number of accident years, none of which were significant individually or in the aggregate.
For the nine months ended September 30, 2017, net favorable PPD was $546 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $407 million in long-tail business, primarily from:
• | Net favorable development of $214 million in our commercial excess and umbrella portfolios, primarily in accident years 2011 and prior, driven by lower than expected reported loss activity, and an increase in weighting towards experience-based methods;
• | Net favorable development of $125 million in our workers’ compensation businesses 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. Net favorable development of $68 million was principally due to lower than expected loss experience and revisions to development patterns used in our loss projection methods, mainly impacting accident years 2013 and prior, and partly offset by smaller adverse development in the more recent prior accident years;
• | Favorable development of $28 million in large multi-line accounts due primarily to the same factors experienced for the three months ended September 30, 2017; and
• | Net favorable development of $27 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 $139 million in short-tail business, primarily from:
• | Favorable development of $65 million in property lines, primarily in our commercial property portfolios, driven by lower than expected loss emergence in the 2014 and 2016 accident years;
• | Net favorable development of $45 million in our surety business, primarily due to lower than expected claims severity in the 2015 accident year; and
• | Net favorable development of $19 million in our accident & health (A&H) business, primarily due to lower than expected loss emergence in the 2015 and 2016 accident years.
North America Personal P&C Insurance 2018 For the three months ended September 30, 2018, net adverse PPD was $58 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net adverse development of 80 million in our homeowners and valuables lines, primarily impacting the 2017 accident year. Overall, non-catastrophe losses were $137 million higher than expected, partially offset by favorable claim development of $57 million on the 2017 natural catastrophes. The higher than expected non-catastrophe homeowners losses were primarily severity driven and included water related claims, large fire losses, and non-catastrophe weather claims; and
• | Net favorable development of $24 million in our personal excess lines primarily impacting the 2015 accident year, due to lower than expected loss emergence and an increase in weighting towards experience-based methods.
For the nine months ended September 30, 2018, net adverse PPD was $59 million, primarily due to the same factors as experienced for the three months ended September 30, 2018 as described above, including $68 million of favorable claim development on the 2017 natural catastrophes. 2017 For the three months ended September 30, 2017, net adverse PPD was $32 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net adverse development of $98 million in our homeowners lines, primarily impacting the 2016 accident year, due to higher than expected loss severity; and
• | Net favorable development of $58 million in our personal excess lines primarily impacting the 2014 accident year, due to lower than expected loss experience and an increase weighting towards experience-based methods.
For the nine months ended September 30, 2017, net adverse PPD was $66 million, including adverse development of $105 million in our homeowners lines and favorable development of $58 million in our personal excess lines as described above. North America Agricultural Insurance 2018 For the three months ended September 30, 2018, net favorable PPD was $1 million, primarily due to favorable claim development on the 2017 natural catastrophes. For the nine months ended September 30, 2018, net favorable PPD was $77 million, including $1 million favorable claim development on the 2017 natural catastrophes. 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., 2018 results based on crop yield results at year-end 2017). 2017 For the three months ended September 30, 2017, net favorable PPD was $4 million across a number of accident years, none of which were significant individually or in the aggregate. For the nine months ended September 30, 2017, net favorable PPD was $83 million. The majority of the claim development relates to our 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 2018 For the three months ended September 30, 2018, net favorable PPD was $72 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $49 million in long-tail business, primarily from:
• | Net favorable development of $54 million in casualty lines, with favorable development of $92 million in accident years 2014 and prior, resulting from lower than expected loss emergence across primary and excess lines in the U.K., Continental Europe and Asia Pacific, partially offset by adverse development of $38 million in accident years 2015 through 2017, primarily due to large loss experience in U.K. excess lines and wholesale business, and adverse development in certain Latin America excess lines;
• | Favorable development of $33 million, primarily including $12 million in political risks, $10 million in aviation and $10 million in environmental; and
• | Net adverse development of $38 million in financial lines, with favorable development of $93 million in accident years 2014 and prior, resulting from lower than expected loss emergence including favorable development due to specific large claim reductions in Asia financial institutions including wholesale bankers Directors and Officers (D&O) and bankers professional indemnity, and adverse development of $131 million in accident years 2015 through 2017, primarily due to adverse large loss experience in specific D&O and financial institutions portfolios in Australia, Continental Europe and the U.K.
• | Net favorable development of $23 million in short-tail business, primarily from:
• | Favorable development of $21 million in marine, primarily across accident years 2012 through 2015 driven mainly by favorable loss emergence in Latin America including favorable salvage/subrogation recoveries; and
• | Adverse development of $4 million from claim development on the 2017 natural catastrophes.
For the nine months ended September 30, 2018, net favorable PPD was $166 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $51 million in long-tail business, driven by the same factors as experienced for the three months ended September 30, 2018 as described above.
• | Net favorable development of $115 million in short-tail business, primarily from:
• | Net favorable development of $50 million in property and marine (excluding technical lines), primarily in accident years 2014 through 2016, driven mainly by favorable loss emergence across all regions, including favorable claim-specific loss settlements and salvage/subrogation recoveries;
• | Favorable development of $8 million from claim development on the 2017 natural catastrophes; and
• | Net favorable development of $57 million, primarily including $17 million in personal business, $17 million in surety, $16 million in A&H business, and $13 million in energy lines.
2017 For the three months ended September 30, 2017, net favorable PPD was $108 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $106 million in long-tail business, primarily from:
• | Net favorable development of $40 million in casualty lines, with favorable development of $69 million in accident years 2013 and prior, resulting from lower than expected loss emergence, partially offset by adverse development of $29 million in accident years 2014 through 2016, primarily due to large loss experience in U.K. excess lines and wholesale business; and
• | Net favorable development of $34 million in financial lines, with favorable development of $124 million in accident years 2013 and prior, resulting from lower than expected loss emergence including favorable development on specific, litigated claims, and adverse development of $90 million in accident years 2014 through 2016, primarily due to large loss experience in specific Directors and Officers (D&O) portfolios in the U.K., Continental Europe, and Australia and Financial Institutions lines in the U.K. and Continental Europe.
For the nine months ended September 30, 2017, net favorable PPD was $184 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $74 million in long-tail business, primarily from:
• | Favorable development of $34 million in financial lines, driven by the same factors as experienced for the three months ended September 30, 2017 as described above; and
• | Net favorable development of $9 million in casualty lines, driven by the same factors as experienced for the three months ended September 30, 2017, as described above, partially offset by adverse development of $32 million driven by a change in the discount rate in the U.K. (Ogden rate) impacting the 2016 and prior accident years.
• | Net favorable development of $110 million in short-tail business, primarily from:
• | Favorable development of $43 million in technical and energy lines, primarily from favorable loss emergence in accident years 2014 through 2016 primarily in offshore and power generation where experience has been better than expected;
• | 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; and
• | Favorable development of $20 million in A&H lines, primarily from favorable loss emergence in Asia Pacific and Continental Europe in accident years 2014 through 2016.
Global Reinsurance 2018 For the three months ended September 30, 2018, net favorable PPD was $24 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $39 million in long-tail business, in our professional liability, medical malpractice, and workers' compensation lines primarily from treaty years 2013 and prior principally resulting from lower than expected loss emergence; and
• | Net adverse development of $15 million in short-tail business, due to claim development on the 2017 natural catastrophes.
For the nine months ended September 30, 2018, net favorable PPD was $54 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $69 million in long-tail business, primarily in our casualty, professional liability, medical malpractice, and workers' compensation lines primarily from treaty years 2013 and prior principally resulting from lower than expected loss emergence; and
• | Net adverse development of $15 million in short-tail business, which included $14 million of net adverse claim development on the 2017 natural catastrophes.
2017 For the three months ended September 30, 2017, net favorable PPD was $41 million, which was the net result of several underlying favorable and adverse movements, and was driven by net favorable development of $29 million in our professional liability and medical malpractice lines primarily from treaty years 2013 and prior, principally resulting from lower than expected loss emergence in the U.S. portfolio. For the nine months ended September 30, 2017, net favorable PPD was $64 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes:
• | Net favorable development of $69 million in long-tail business, primarily from:
• | Favorable development of $66 million in our casualty, professional liability and medical malpractice lines, primarily driven by the same factors as experienced for the three months ended September 30, 2017 as described above; and
• | Net adverse development of $10 million in our motor and excess liability lines, primarily due to adverse development of $9 million driven by a change in the discount rate in the U.K. (Ogden rate) primarily impacting the 2015 and prior treaty years.
Corporate 2018 For the three months ended September 30, 2018, net adverse development was $12 million, driven principally by adverse development in environmental liabilities of 54 million due to case specific settlements and higher than expected remediation expense and defense costs, generally impacting larger modeled accounts. This adverse development was partially offset by a favorable adjustment in our estimate of reinsurance recoverables. For the nine months ended September 30, 2018, net adverse development was $67 million, driven principally by adverse development on non A&E run-off casualty exposures and by the adverse development in environmental liabilities as described above. 2017 For the three months ended September 30, 2017, adverse development was $87 million, driven principally by development of $77 million in environmental liabilities and $9 million for unallocated loss adjustment expenses due to run-off operating expenses paid and incurred in the respective periods, impacting the 1995 and prior accident years. The development in environmental liabilities was due to case specific settlements and both higher than expected remediation expense and defense costs. These higher costs impacted both large modeled accounts as well as smaller accounts. For the nine months ended September 30, 2017, adverse development was $140 million, driven principally by development of environmental liabilities as described above, $35 million of development on non-A&E run-off casualty exposures due to higher than expected loss activity, and $28 million of unallocated loss adjustment expenses due to run-off operating expenses paid and incurred in the respective period.

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- Definition The entire disclosure for liabilities related to future policy benefits and unpaid claims and claim adjustments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 40 -URI http://asc.fasb.org/subtopic&trid=2560295 + Details
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