The following table shows the significant components of changes in our financial guaranty claim liability for the years  ended December 31, 2012, 2011 and 2010, excluding $2.0 million, $2.5 million and $4.3 million, respectively, related to our  trade credit reinsurance and surety business, which is excluded from the accounting standard regarding accounting for financial  guaranty insurance contracts by insurance enterprises. In 2012, we significantly increased our estimated gross claim liability associated with a project finance credit within our  public finance insured portfolio, with net par outstanding of  $69.9 million at December 31, 2012, based primarily on  refinancing risk upon the maturity or scheduled principal amortization of the insured obligations beginning in 2017. Revenues  for the project, however, serve as collateral for our insured risk and we have also projected a full recovery of the gross claim  over time, which has resulted in an increase in our potential recovery and a decrease in our discount amount for  2012. We paid  $23.5 million to settle our obligations related to our exposure to insured sovereign indebtedness of Greece in the third quarter  of 2012, which was the reason for the increase in paid claims related to prior years and change in existing claim liabilities in  2012. As of December 31, 2012, we have $2.9 billion of net par outstanding related to international public finance obligations,  including $171.8 million of sovereign risk. Our sovereign risk to the  six countries whose sovereign obligations have been under  stress due to economic uncertainty, potential restructuring and additional ratings downgrades was as follows: Spain  $47.5  million, Hungary $22.5 million, Italy $20.5 million and Portugal $0.9 million. We had no exposure to Ireland or Greece at  December 31, 2012.  Our financial guaranty loss reserve estimate involves significant judgment surrounding the estimated probability of the  likelihood, magnitude and timing of each potential loss based upon dif ferent loss scenarios. The probabilities, assumptions and  estimates we use to establish our financial guaranty loss reserves are subject to uncertainties, particularly given the current  economic and credit environments, including uncertainties regarding our public finance municipal exposures and international  sovereign risk exposures. We continue to monitor the uncertainties surrounding our portfolio and it is possible that the actual  losses paid could differ materially from our present estimates.  235 Year Ended December 31, (In thousands) 2012 2011 2010 Claim liability at January 1. . . . . . . . . . . . . . . . . . . . . . $ 60,550 $ 67,447 $ 121,833 Incurred losses and LAE: Increase in gross claim liability. . . . . . . . . . . . . . . 188,222 68,082 86,224 Increase in gross potential recoveries. . . . . . . . . . . (235,787) (76,105) (74,157) Decrease/(increase) in discount. . . . . . . . . . . . . . . 84,646 7,506 (1,939) Decrease/(increase) in unearned premiums. . . . . . 95 4,668 (1,085) Incurred losses and LAE. . . . . . . . . . . . . . . . . 37,176 4,151 9,044 Paid losses and LAE: Current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) — (1,636) Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,431) (11,048) (61,794) Paid losses and LAE . . . . . . . . . . . . . . . . . . . . (33,435) (11,048) (63,430) Claim liability at December 31. . . . . . . . . . . . . . . . . . . $ 64,291 $ 60,550 $ 67,447 Components of incurred losses and LAE: Claim liability established in current period. . . . . $ 9,063 $ 2,254 $ 1,714 Changes in existing claim liabilities. . . . . . . . . . . . 28,113 1,897 7,330 Total incurred losses and LAE. . . . . . . . . . . . . . . . . . . . $ 37,176 $ 4,151 $ 9,044 Components of decrease/(increase) in discount: Decrease/(increase) in discount related to claim liabilities established in current period. . . . . . . . . . $ 81,061 $ 177 $ (6,377) Decrease in discount related to existing claim liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,585 7,329 4,438 Total decrease/(increase) in discount. . . . . . . . . . . . . . . $ 84,646 $ 7,506 $ (1,939) Radian Group Inc. Notes to Consolidated Financial Statements - (Continued)