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RESERVE FOR LOSSES AND LOSS EXPENSES | 3 Months Ended
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Mar. 31, 2018
Insurance Loss Reserves [Abstract] |
RESERVE FOR LOSSES AND LOSS EXPENSES | Reserve Roll-Forward The following table presents a reconciliation of the Company's beginning and ending gross reserve for losses and loss expenses and net reserve for unpaid losses and loss expenses for the periods indicated:
|  | Three months ended March 31, |
|  | 2018 |  | 2017 |
| Gross reserve for losses and loss expenses, beginning of period | $ | 12,997,553 |  |  | $ | 9,697,827 |  |
| Less reinsurance recoverable on unpaid losses, beginning of period | (3,159,514 | ) |  | (2,276,109 | ) |
| Net reserve for unpaid losses and loss expenses, beginning of period | 9,838,039 |  |  | 7,421,718 |  |
| Net incurred losses and loss expenses related to: |  |  |  |
| Current year | 715,652 |  |  | 631,735 |  |
| Prior years | (54,307 | ) |  | (24,793 | ) |
|  | 661,345 |  |  | 606,942 |  |
| Net paid losses and loss expenses related to: |  |  |  |
| Current year | (48,814 | ) |  | (31,047 | ) |
| Prior years | (675,393 | ) |  | (521,478 | ) |
|  | (724,207 | ) |  | (552,525 | ) |
| Foreign exchange and other | (726,781 | ) |  | 36,797 |  |
| Net reserve for unpaid losses and loss expenses, end of period | 9,048,396 |  |  | 7,512,932 |  |
| Reinsurance recoverable on unpaid losses, end of period | 2,986,247 |  |  | 2,029,031 |  |
| Gross reserve for losses and loss expenses, end of period | $ | 12,034,643 |  |  | $ | 9,541,963 |  |
The Company writes business with loss experience generally characterized as low frequency and high severity in nature, which can result in volatility in its financial results. During the three months ended March 31, 2018, the Company recognized aggregate net losses and loss expenses of $35 million (2017: $35 million) attributable to catastrophe and weather-related events. On January 1, 2018, AXIS Managing Agency Limited, the managing agent of Syndicate 2007 entered into an agreement for the RITC of the 2015 and prior years of account of Syndicate 2007. Under the terms of this agreement, the Company ceded $819 million of reserves for losses and loss expenses, which were included in Syndicate 2007's balance sheet at December 31, 2017, to a reinsurer. This agreement was accounted for as a novation reinsurance contract. During the three months ended March 31, 2018, the Company recognized a reduction in reserves for losses and loss expenses of $819 million representing the transfer of liabilities to the reinsurer, a reduction in investments and cash of $688 million representing the consideration paid to the reinsurer and a payable of $131 million representing the consideration due to the reinsurer. The transfer of the insurance business of AXIS Specialty Australia to a reinsurer was approved by the Irish High Court on February 1, 2017 and the Federal Court of Australia on February 10, 2017. Consequently, the insurance policies, assets and liabilities of AXIS Specialty Australia were transferred to the reinsurer with effect from February 13, 2017. This resulted in the reduction of reserves for losses and loss expenses by $223 million and a reduction in reinsurance recoverables on unpaid and paid losses by $223 million. Prior Year Development 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:
|  | Three months ended March 31, |
|  | 2018 |  | 2017 |
| Insurance | $ | 22,775 |  |  | $ | 7,865 |  |
| Reinsurance | 31,532 |  |  | 16,928 |  |
| Total | $ | 54,307 |  |  | $ | 24,793 |  |
The following tables reconcile reserve classes to the lines of business categories and the expected claim tails:
Insurance Segment |  |  |  |  |  |  |  |
|  | Reported Lines of Business
Reserve Classes | Tail | Property | Marine | Terrorism | Aviation | Credit and Political Risk | Professional Lines | Liability | Accident and Health | Discontinued lines - Novae
Property and Other | Short | X |  | X |  |  |  |  | X | X
Marine | Short |  | X |  |  |  |  |  |  |
Aviation | Short |  |  |  | X |  |  |  |  |
Credit and Political Risk | Medium |  |  |  |  | X |  |  |  |
Professional Lines | Medium |  |  |  |  |  | X |  |  | X
Liability | Long |  |  |  |  |  |  | X |  | X
Reinsurance Segment |  |  |  |  |  |  |  |  |  |
|  | Reported Lines of Business
Reserve Classes | Tail | Catastrophe | Property | Credit and Surety | Professional Lines | Motor | Liability | Engineering | Agriculture | Marine and Other | Accident and Health | Discontinued lines - Novae
Property and Other | Short | X | X |  |  |  |  | X | X | X | X | X
Credit and Surety | Medium |  |  | X |  |  |  |  |  |  |  |
Professional Lines | Medium |  |  |  | X |  |  |  |  |  |  |
Motor | Long |  |  |  |  | X |  |  |  |  |  | X
Liability | Long |  |  |  |  |  | X |  |  |  |  | X
Net favorable prior year reserve development for the three months ended March 31, 2018 included significant contributions from short and medium tail reserve classes. Net favorable prior year reserve development for the three months ended March 31, 2017 included significant contributions from medium and long tail reserve classes. Short-tail business Short-tail business includes the underlying exposures in property and other, marine and aviation reserve classes within the insurance segment, and the property and other reserve class within the reinsurance segment. For the three months ended March 31, 2018, these reserve classes contributed $38 million (2017: $4 million) of net favorable prior year reserve development, primarily due to the recognition of better than expected loss emergence. Medium-tail business Medium-tail business consists primarily of insurance and reinsurance professional reserve classes, credit and political risk insurance reserve class and credit and surety reinsurance reserve class. For the three months ended March 31, 2018, the reinsurance professional reserve class recognized $9 million (2017: $16 million) of net favorable prior year development. The net favorable prior year loss development on this reserve class continued to reflect the generally favorable experience on earlier accident years as the Company continued to transition to more experienced based methods. For the three months ended March 31, 2018, the insurance professional reserve class recognized net favorable prior year development of $4 million (2017: $7 million). The net favorable prior year loss development on this reserve class reflected the generally favorable experience on earlier accident years as the Company transitions to more experienced based methods. For the three months ended March 31, 2018, the credit and surety reinsurance reserve class recorded net favorable prior year reserve development of $5 million (2017: $nil) due to the recognition of generally better than expected loss emergence. Long-tail business Long-tail business consists primarily of liability and motor reserve classes. For the three months ended March 31, 2018, reinsurance liability reserve class contributed net favorable prior year reserve development of $2 million (2017: $24 million). The net favorable prior year reserve development for the three months ended March 31, 2017 primarily reflected the progressively increased weight given by management to experience based indications on older accident years, which has generally been favorable. For the three months ended March 31, 2018, the motor reinsurance reserve classes contributed net favorable prior year reserve development of $3 million (2017: net adverse prior year reserve development of $22 million). The net adverse prior year reserve development for the three months ended March 31, 2017 was primarily due to the decrease in the discount rate used to calculate lump sum awards in U.K. bodily injury cases, known as the Ogden Rate which changed from plus 2.5% to minus 0.75% effective March 20, 2017. For the three months ended March 31, 2018, the insurance liability reserve class recorded net adverse prior year development of $7 million (2017: $4 million) primarily related to reserve strengthening within the Company's U.S. excess casualty business reflecting slightly higher than expected prior year emerging loss experience. At March 31, 2018, net reserves for losses and loss expenses includes estimated amounts for numerous catastrophe events. The magnitude and/or complexity of losses arising from these events, in particular Hurricanes Harvey, Irma and Maria, the two earthquakes in Mexico and the wildfires in Northern and Southern California which occurred in 2017, inherently increase the level of uncertainty and, therefore, the level of management judgment involved in arriving at the estimated net reserves for losses and loss expenses. As a result, actual losses for these events may ultimately differ materially from our current estimates.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 40 -URI http://asc.fasb.org/subtopic&trid=2560295 + Details
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