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 periods indicated:




Nine months ended September 30,	2016			2015

Gross reserve for losses and loss expenses, beginning of period	$	9,646,285		$	9,596,797
Less reinsurance recoverable on unpaid losses, beginning of period	(2,031,309		)	(1,890,280		)
Net reserve for unpaid losses and loss expenses, beginning of period	7,614,976			7,706,517

Net incurred losses and loss expenses related to:
Current year	1,887,715			1,818,672
Prior years	(224,131		)	(165,804		)
	1,663,584			1,652,868
Net paid losses and loss expenses related to:
Current year	(233,124		)	(185,953		)
Prior years	(1,334,772		)	(1,293,776		)
	(1,567,896		)	(1,479,729		)

Foreign exchange and other	(112,649		)	(183,360		)

Net reserve for unpaid losses and loss expenses, end of period	7,598,015			7,696,296
Reinsurance recoverable on unpaid losses, end of period	2,276,792			2,007,287
Gross reserve for losses and loss expenses, end of period	$	9,874,807		$	9,703,583

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 the nine months ended September 30, 2016 and 2015, we recognized aggregate net losses and loss expenses, net of reinstatement premiums of $145 million and $90 million, respectively, in relation to catastrophe and weather-related events.

During April 2016, the Company entered into a quota share and adverse development cover reinsurance agreement, a retroactive contract which was deemed to have met the established criteria for retroactive reinsurance accounting. Foreign exchange and other includes reinsurance recoverables of $159 million related to this reinsurance agreement.

Prior year reserve development arises from changes to loss and loss expense estimates recognized in the current year but relating to losses incurred in previous calendar years. Such development is summarized by segment in the following table:



	Three months ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015

Insurance	$	20,688	$	2,444	$	43,181	$	21,225
Reinsurance	55,331		42,681		180,950		144,579
Total	$	76,019	$	45,125	$	224,131	$	165,804

The majority of the net favorable prior year reserve development in each period related to short-tail reserve classes. Net favorable prior year reserve development for professional, reinsurance liability and motor reserve classes also contributed in the three and nine months ended September 30, 2016.

Our short tail business includes the underlying exposures in the property and other, marine and aviation reserving classes within our insurance segment and the property and other reserving class within our reinsurance segment. Development from these classes contributed $41 million and $38 million of the total net favorable prior year reserve development for the three months ended September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, these short-tail lines contributed $116 million and $112 million, respectively, of net favorable prior year reserve development. The net favorable prior year reserve development for these classes primarily reflected the recognition of better than expected loss emergence.

Our medium-tail business consists primarily of professional insurance and reinsurance reserve classes, credit and political risk insurance reserve class and the credit and surety reinsurance reserve class. In the three and nine months ended September 30, 2016, the professional reserve classes contributed net favorable prior year reserve development of $12 million and $28 million, respectively. In the nine months ended September 30, 2015, the reinsurance professional reserve class contributed $25 million of net favorable development. The net favorable prior year development on these reserve classes continued to reflect the generally favorable experience on earlier accident years as we continued to transition to more experience based methods on these years. As our loss experience has generally been better than expected, this resulted in the recognition of net favorable prior year reserve development. In the three and nine months ended September 30, 2015, the insurance professional reserve class recorded net adverse prior year reserve development of $15 million and $16 million, respectively. This adverse development was primarily the result of strengthening in our Australian book of business during the third quarter of 2015.

In the three and nine months ended September 30, 2015, the credit and surety reserve class recorded net favorable prior year reserve development of $7 million and $19 million, respectively. This net favorable prior year reserve development reflected the recognition of generally better than expected loss emergence.

In the nine months ended September 30, 2015, we recorded net adverse prior year reserve development of $15 million in our credit and political risk reserve class relating to an increase in our loss portfolio estimates.

Our long-tail business consists primarily of liability and motor reserve classes. Our motor and liability reinsurance reserve classes contributed additional net favorable prior year reserve development of $17 million and $20 million in the three months ended September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, these long-tail reserve classes contributed $72 million and $64 million, respectively. The net favorable prior year reserve development for the motor reserve class related to favorable loss emergence trends on several classes of business spanning multiple accident years. The net favorable prior year reserve development for the liability reinsurance reserve class primarily reflected the progressively increased weight given by management to experience based indications on older accident years, which has generally been favorable. In the three and nine months ended September 30, 2015, we recorded net adverse prior year reserve development of $6 million and $23 million, respectively, in our insurance liability reserve class related primarily to an increase in loss estimates for specific individual claim reserves, as well as a higher frequency of large auto liability claims.

Our September 30, 2016 net reserves 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 the Fort McMurray wildfires, Storm Sandy, the 2011 Japanese earthquake and tsunami, the three New Zealand earthquakes and the Tianjin port explosion, inherently increases 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.