Radian Group Inc. Notes to Consolidated Financial Statements - (Continued) Our mortgage insurance loss reserves declined in 2012, primarily as a result of a decrease in our total inventory of  defaults, as the volume of paid claims, cures and insurance rescissions and claim denials outpaced new default notices received.  Additionally, we experienced adverse reserve development on prior year defaults, as described below . Total paid claims  declined for 2012 from 2011, driven primarily by an increase in the number of claims received that we are still reviewing for  non-compliance with our insurance policies, which has lengthened the claim resolution period and resulted in an increase in  rescissions and denials, as well as by delays created by foreclosure slowdowns, servicer issues and loan modification programs.  We cannot be certain of the ultimate impact of these programs on our business or results of operations, or the timing of this  impact. Reserves established for new default notices received in  2012 were the primary driver of our total incurred loss for  2012. The losses incurred in 2012 were also impacted by adverse reserve development on prior year defaults, primarily relating  to the impact from the aging of underlying defaulted loans partially of fset by higher actual insurance rescissions and claim  denials than previously assumed in our loss reserve estimates. Our results for  2012 were impacted by a $46.8 million decrease  in our estimated reinsurance recoverable from our Smart Home transactions resulting from recent trends of lower claims paid  and higher insurance rescissions and claim denials than were previously estimated to occur , which has in turn reduced the  estimated amounts recoverable.  Of the $166.8 million adverse development experienced in 2011 associated with default notices reported in prior years,  $120.3 million related to an increase in both our actual and estimated reinstatements and resubmissions of policies and claims  previously rescinded or denied in prior years, while the balance related primarily to the greater than anticipated impact from the  aging of underlying defaulted loans on our default to claim rate.   The most significant driver of the  $557.8 million prior year adverse development in 2010 related to the impact from the  aging of underlying defaulted loans, which increased our weighted average default to claim rate beyond the extent we expected  at December 31, 2009. The protracted amount of time it took for servicers to resolve certain aged loans extended the period of  uncertainty with regard to our ultimate claim liability beyond what we predicted at the time the reserves were established.  To a  lesser extent, the increase in our default to claim rate in  2010 was also impacted by a decrease in our expected levels of  insurance rescissions and claim denials associated with prior year defaults, as compared to expected levels at  December 31,  2009. This change in our estimate was a result of changes in observed trends during  2010. In addition, an increase in our  severity estimates, primarily due to refinements in estimates on pool insurance defaults, negatively impacted our reserves  related to defaults reported in prior years. Our reserve for losses includes the impact of our estimate of future rescissions and denials, which remain elevated  compared to levels experienced before 2009. The elevated levels of our rate of insurance rescissions and claim denials have  reduced our paid losses and have resulted in a significant reduction in our loss reserves.  The impact of our estimate of future  rescissions and denials reduced our loss reserves as of  December 31, 2012 and 2011 by approximately $455.0 million and  $631.0 million, respectively. Conversely, the impact of our estimate of future reinstatements of previously rescinded policies  and denied claims increased our loss reserves as of  December 31, 2012 and 2011 by approximately $303.0 million and $129.0  million, respectively, as further described below. The amount of estimated rescissions and denials incorporated into our reserve  analysis at any point in time is af fected by a number of factors, including not only our estimated rate of rescissions and denials  on future claims, but also the volume and attributes of our defaulted insured loans, our estimated default to claim rate and our  estimated claim severity, among other assumptions. We expect the amount of estimated rescissions and denials embedded  within our reserve analysis to decrease over time, as the defaults related to the poor underwriting periods of 2005 through 2008  decline as a proportion of our total default portfolio and as we realize the results through actual rescissions and denials, or the  commutations of insured loans. In the event that we experience a more rapid than expected decrease in the level of future  insurance rescissions and claim denials from the current levels, it could have a material adverse ef fect on our paid losses and  loss reserves.  224