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RESERVE FOR LOSSES AND LOSS EXPENSES | 12 Months Ended
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Dec. 31, 2015
Insurance Loss Reserves [Abstract] |
RESERVE FOR LOSSES AND LOSS EXPENSES | Our reserve for losses and loss expenses comprise the following:
| As of December 31, | 2015 |  | 2014 |
| Reserve for reported losses and loss expenses | $ | 3,253,080 |  |  | $ | 3,285,675 |  |
| Reserve for losses incurred but not reported | 6,393,205 |  |  | 6,311,122 |  |
| Reserve for losses and loss expenses | $ | 9,646,285 |  |  | $ | 9,596,797 |  |
The following table presents a reconciliation of our beginning and ending gross reserve for losses and loss expenses and net reserve for unpaid losses and loss expenses for the years indicated:
| Year ended December 31, | 2015 |  | 2014 |  | 2013 |
| Gross reserve for losses and loss expenses, beginning of year | $ | 9,596,797 |  |  | $ | 9,582,140 |  |  | $ | 9,058,731 |  |
| Less reinsurance recoverable on unpaid losses, beginning of year | (1,890,280 | ) |  | (1,900,112 | ) |  | (1,825,617 | ) |
| Net reserve for unpaid losses and loss expenses, beginning of year | 7,706,517 |  |  | 7,682,028 |  |  | 7,233,114 |  |
| Net incurred losses and loss expenses related to: |  |  |  |  |  |
| Current year | 2,419,247 |  |  | 2,445,666 |  |  | 2,353,631 |  |
| Prior years | (243,048 | ) |  | (258,944 | ) |  | (219,436 | ) |
|  | 2,176,199 |  |  | 2,186,722 |  |  | 2,134,195 |  |
| Net paid losses and loss expenses related to: |  |  |  |  |  |
| Current year | (343,063 | ) |  | (387,197 | ) |  | (318,006 | ) |
| Prior years | (1,709,659 | ) |  | (1,544,664 | ) |  | (1,373,459 | ) |
|  | (2,052,722 | ) |  | (1,931,861 | ) |  | (1,691,465 | ) |
| Foreign exchange and other | (215,018 | ) |  | (230,372 | ) |  | 6,184 |  |
| Net reserve for unpaid losses and loss expenses, end of year | 7,614,976 |  |  | 7,706,517 |  |  | 7,682,028 |  |
| Reinsurance recoverable on unpaid losses, end of year | 2,031,309 |  |  | 1,890,280 |  |  | 1,900,112 |  |
| Gross reserve for losses and loss expenses, end of year | $ | 9,646,285 |  |  | $ | 9,596,797 |  |  | $ | 9,582,140 |  |
We write business with loss experience generally characterized as low frequency and high severity in nature, which can result in volatility in our financial results. During 2015, 2014 and 2013, respectively, we recognized aggregate net losses and loss expenses of $100 million, $93 million and $201 million in relation to catastrophe and weather-related events. Prior year reserve development arises from changes to loss and loss expense estimates related to loss events that occurred in previous calendar years. Such development is summarized by segment in the following table:
|  | Insurance |  | Reinsurance |  | Total |
| Year ended December 31, 2015 | $ | 23,447 |  |  | $ | 219,601 |  |  | $ | 243,048 |  |
| Year ended December 31, 2014 | 63,735 |  |  | 195,209 |  |  | 258,944 |  |
| Year ended December 31, 2013 | 50,355 |  |  | 169,081 |  |  | 219,436 |  |
Overall, the majority of the net favorable prior year reserve development in 2015, 2014 and 2013 related to short-tail lines of business. In 2015 net favorable prior year reserve development in the reinsurance liability, reinsurance professional, motor and credit and surety lines also contributed significantly to the total favorable reserve development which was partially offset by adverse development in insurance liability, credit and political risk and insurance professional lines. In addition to the short-tail lines favorable reserve development in 2014 and 2013, both years also reported significant favorable prior year reserve development in the reinsurance professional and reinsurance liability lines with motor also notably contributing to the 2014 reserve releases. The favorable prior year reserve development in both 2014 and 2013 was partially offset by adverse prior year reserve development in the insurance liability lines, with adverse prior year reserve development in insurance professional lines also significantly impacting 2013. The underlying exposures in our property, marine and aviation reserving classes within our insurance segment and the property reserving class within our reinsurance segment largely relate to short-tail business. Development from these classes contributed $152 million, $207 million and $162 million of the total net favorable prior year reserve development in 2015, 2014 and 2013, respectively, and primarily reflected the recognition of better than expected loss emergence. Our medium-tail business consists primarily of professional insurance and reinsurance, credit and political risk and credit and surety lines. Our reinsurance professional lines business recognized $38 million, $33 million and $22 million of net favorable prior year development in 2015, 2014 and 2013, respectively. The 2015, 2014 and 2013 favorable developments were driven by increased weight being given to experience-based actuarial methods in selecting our ultimate loss estimates for accident years 2010 and prior. In 2015 and 2013, the insurance professional lines recorded adverse prior year reserve development of $14 million and $51 million, respectively. The adverse development in 2015 was primarily the result of strengthening in our Australian book of business during the third quarter of 2015. The adverse development in 2013 reflected the strengthening of certain parts of our U.S. D&O lines in the 2011 and 2012 accident years and development on global financial crisis-related claims in our 2008 and 2009 accident years. Our credit and surety lines recorded net favorable prior year reserve development of $27 million in 2015, reflecting better than expected loss emergence. In 2015, net adverse development of $15 million was recognized in our in credit and political risk insurance lines, relating primarily to an increase in loss estimates for one specific claim. Our long-tail business consists primarily of liability and motor lines. In 2015, 2014 and 2013, our reinsurance liability lines and motor business contributed net favorable prior year reserve development of $82 million, $40 million and $91 million, respectively, primarily reflecting the greater weight management is giving to experience based indications which were generally favorable in 2015 for the accident years 2003 through 2010 and in 2014 and 2013 for the accident years 2004 through 2008. This favorable development was partially offset by adverse development in our insurance liability business of $27 million, $23 million and $24 million in 2015, 2014 and 2013, respectively, relating primarily to an increase in loss estimates for certain specific claim reserves, as well as a higher frequency of large auto liability claims which impacted the adverse reserve development in 2015. Our December 31, 2015 net reserve for losses and loss expenses includes estimated amounts for numerous catastrophe events. We caution that the magnitude and/or complexity of losses arising from certain of these events, in particular Storm Sandy, the Japanese earthquake and tsunami and the three New Zealand earthquakes and the Tianjin port explosion, inherently increase the level of uncertainty and, therefore, the level of management judgment involved in arriving at our estimated net reserves for losses and loss expenses. As a result, our actual losses for these events may ultimately differ materially from our current estimates.

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