Non-GAAP Operating Return on Average Common Equity ("Non-GAAP Operating ROACE"): Management uses non-GAAP operating return on average common shareholders' equity as a measure of profitability that focuses on the return to common shareholders. It is calculated using non-GAAP operating (loss) earnings available to common shareholders (as defined above) divided by average common shareholders' equity. Management has set, as a target, a long-term average of 15% non-GAAP Operating ROACE, which management believes provides an attractive return to shareholders for the risk assumed from our business.
Based on a range of reasonable reserve estimates, we believe that if our final loss ratio were to vary from the expected loss ratios in each of our operating segments, Diversified Reinsurance and AmTrust Reinsurance, our required reserves after reinsurance recoverable could increase by approximately $89.6 million or 2.6% and $141.7 million or 4.1%, respectively, of our consolidated net loss and LAE reserves, as at December 31, 2017.
a decrease in our Other category adverse prior year development of $10.2 million during the period compared to $14.6 million in the comparative period in 2016 due to decline in incurred losses in the run-off of the NGHC Quota Share offset by the increase in incurred losses in our remaining run-off litigated U.S. E&S property claims.
The following is a discussion on the results of our operations for the years ended December 31, 2017, 2016 and 2015:
The increase in net premiums written for the year ended December 31, 2017 compared to the same period in 2016 was due to the reduction in the utilization of retrocessional capacity for both segments in 2017 which increased net premiums written by $112.9 million on a consolidated basis. The retention ratio of gross written premiums increased to 98.1% for the year ended December 31, 2017 compared to 93.8% for the same period in 2016. In addition, gross premiums written decreased by $15.3 million or 0.5%, primarily in our AmTrust Reinsurance segment. Please refer to the analysis below of our Diversified Reinsurance and AmTrust Reinsurance segments for further details.
Net premiums earned increased by $164.6 million or 6.4% for the year ended December 31, 2017 compared to the same period in 2016. The table below compares net premiums earned by our reportable segments, reconciled to the total consolidated net premiums earned, for the years ended December 31, 2017 and 2016:
Net premiums earned in the AmTrust Reinsurance segment for the year ended December 31, 2017 compared to the same period in 2016 increased by $66.0 million or 3.6% similar to the reasons outlined in the net premiums written section above. Please refer to the analysis of our AmTrust Reinsurance segment on page 68 for further discussion.
The AmTrust Reinsurance segment reported an underwriting loss of $207.1 million for the year ended December 31, 2017 compared to underwriting income of $30.1 million for the year ended December 31, 2016 and $79.2 million for the year ended December 31, 2015. The underwriting results and associated ratios for the AmTrust Reinsurance segment for the years ended December 31, 2017, 2016 and 2015 were as follows:
The investment of our funds is designed to ensure safety of principal while generating current income. Accordingly, our funds are invested in liquid, investment-grade fixed income securities which are designated as either AFS or HTM. In 2017 and 2016, the Company designated certain corporate and municipal bonds previously classified as AFS to HTM to reflect our intention of holding these bonds until maturity. See "Notes to Consolidated Financial Statements Note 4. Investments" included under Item 8 "Financial Statements and Supplementary Data" of this Form 10-K.
The following table summarizes the Company's other material balance sheet changes at December 31, 2017 and 2016:
We conduct business in a variety of foreign (non-U.S.) currencies, the principal exposures being the euro, the British pound, the Australian dollar, the Canadian dollar and the Swedish krona. Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates. Our reporting currency is the U.S. dollar, and exchange rate fluctuations relative to the U.S. dollar may materially impact our results and financial position. Our principal exposure to foreign currency risk is our obligation to settle claims in foreign currencies. In addition, in order to minimize this risk, we maintain and expect to continue to maintain a portion of our investment portfolio in investments denominated in currencies other than the U.S. dollar. We may employ various strategies (including hedging) to manage our exposure to foreign currency exchange risk. To the extent that these exposures are not fully hedged or the hedges are ineffective, our results of operations or equity may be adversely effected. At December 31, 2017, no such hedges or hedging strategies were in force or had been entered into. We measure monetary assets and liabilities denominated in foreign currencies at period end exchange rates, with the resulting foreign exchange gains and losses recognized in the Consolidated Statements of Income. Revenues and expenses in foreign currencies are converted at average exchange rates during the period. The effect of the translation adjustments for foreign operations is included in AOCI.