With the advent of widespread use of airbags as restraint systems for both driver and passenger, a new challenge has appeared for the design engineer. Numerical models of various degrees of complexity have been developed to model the interaction between airbags and occupants, ranging from simplified models such as the airbags included in rigid body dynamic models, to more sophisticated, fully three-dimensional ones based on Finite Elements (FE).However, some key questions of airbag design such as interaction of the unfolding bag with out-of-position occupants and effects of different airbag folding patterns remained unanswered, and their design still requires extensive test series. In this paper, the approach developed at Engineering Systems International over the past two years to solve the problem of numerical simulation of fully folded bags is presented in the larger context of the PAM-SAFE program for analysis of occupant safety. Several examples are presented which illustrate the successful handling of FE mesh folding, improved contact algorithms that can tract the complete unfolding process and early interaction with occupants. Models of driver side airbags showing good correlation with test results, as well as simulation of a child dummy interacting with a deploying passenger side airbag are presented.