Reconciliations of the changes in unpaid losses and loss adjustment expenses (“LAE”) liabilities (“claim liabilities”), excluding liabilities under retroactive reinsurance contracts (see Note 14), follow (in millions).


	2026			2025
Balance at the beginning of the year:
Gross liabilities	$	120,713		$	115,151
Reinsurance recoverable on unpaid losses		(4,456	)		(4,593	)
Net liabilities		116,257			110,558
Losses and LAE incurred:
Current accident year		29,517			28,607
Prior accident years		(1,467	)		(240	)
Total		28,050			28,367
Losses and LAE paid:
Current accident year		(9,571	)		(9,253	)
Prior accident years		(16,121	)		(16,283	)
Total		(25,692	)		(25,536	)
Foreign currency effect		25			712
Balance at June 30:
Net liabilities		118,640			114,101
Reinsurance recoverable on unpaid losses		4,235			4,687
Gross liabilities	$	122,875		$	118,788

Our claim liabilities under property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim events that have occurred as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. Losses and LAE incurred and paid in the preceding table related to events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”). Losses and LAE incurred and paid are net of reinsurance recoveries. We experienced no significant catastrophe events (losses exceeding $150 million per event) in the first six months of 2026, while current accident year incurred losses in the first six months of 2025 included $1.1 billion from wildfires in Southern California.

We reduced estimated ultimate claim liabilities for prior accident years’ claims by $1.5 billion in the first six months of 2026 and $240 million in 2025, which produced corresponding reductions to losses and LAE incurred. These reductions, as percentages of the net liabilities at the beginning of each year, were relatively insignificant in each period.

Our primary insurance businesses reduced prior accident years’ ultimate claims estimates by $598 million in the first six months of 2026 compared to increases of $266 million in the first six months of 2025. The reductions in 2026 were primarily attributable to lower-than-expected property losses, and to a lesser extent, casualty losses. The increases in 2025 were primarily due to increases in estimated losses for casualty exposures, partially offset by reductions in property loss estimates.

Our reinsurance businesses reduced estimated ultimate claim liabilities for prior accident years in the first six months of 2026 by $869 million versus $506 million in the first six months of 2025. The reductions in each period reflected lower-than-expected property loss estimates, partially offset by increases in estimated losses for casualty exposures.