The Hartford 2008 Annual Report Download - page 59

Table of Contents
We may experience unfavorable judicial or legislative developments that could have a material adverse effect on our
results of operations, financial condition and liquidity.
The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending
or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought
against it. The Hartford accounts for such activity through the establishment of unpaid loss and loss adjustment expense
reserves. The Company is also involved in legal actions that do not arise in the ordinary course of business, some of which
assert claims for substantial amounts. Pervasive or dramatic changes in the judicial environment relating to matters such as
trends in the size of jury awards, developments in the law relating to the liability of insurers or tort defendants, and rulings
concerning the availability or amount of certain types of damages could cause our ultimate liabilities to change from our
current expectations. Similarly, changes in federal or state tort litigation laws or other applicable laws could have the same
effect. It is not possible to predict changes in the judicial and legislative environment and their impact on the future
development of the adequacy of our loss reserves, particularly reserves for longer-tailed lines of business, including asbestos
and environmental reserves. Similarly, changes in the judicial and legislative environment can adversely affect our ability to
price our products. To the extent that judicial or legislative developments cause our ultimate liabilities to increase from our
current expectations, they could have a material adverse effect on the Company’s consolidated results of operations,
financial condition and liquidity.
Potential changes in domestic and foreign regulation may increase our business costs and required capital levels, which
could have a material adverse effect on our business, consolidated operating results, financial condition and liquidity.
We are subject to extensive laws and regulations. These laws and regulations are complex and subject to change. Moreover,
they are administered and enforced by a number of different governmental authorities and non-governmental self-regulatory
agencies, including foreign regulators, state insurance regulators, state securities administrators, the Securities and Exchange
Commission, the New York Stock Exchange, the Financial Industry Regulatory Authority, the U.S. Department of Justice,
the Office of Thrift Supervision, if our application for the U.S. Treasury Department’s Capital Purchase Program is
approved, and state attorneys general, each of which exercises a degree of interpretive latitude. Consequently, we are subject
to the risk that compliance with any particular regulator’s or enforcement authority’s interpretation of a legal issue may not
result in compliance with another regulator’s or enforcement authority’s interpretation of the same issue, particularly when
compliance is judged in hindsight. In addition, there is risk that any particular regulator’s or enforcement authority’s
interpretation of a legal issue may change over time to our detriment, or that changes in the overall legal environment, even
absent any change of interpretation by any particular regulator or enforcement authority, may cause us to change our views
regarding the actions we need to take from a legal risk management perspective, which could necessitate changes to our
practices that may, in some cases, limit our ability to grow and improve the profitability of our business.
State insurance laws regulate most aspects of our U.S. insurance businesses, and our insurance subsidiaries are regulated by
the insurance departments of the states in which they are domiciled, licensed or authorized to conduct business. U.S. state
laws grant insurance regulatory authorities broad administrative powers with respect to, among other things:
• licensing companies and agents to transact business;
• calculating the value of assets to determine compliance with statutory requirements;
• mandating certain insurance benefits;
• regulating certain premium rates;
• reviewing and approving policy forms;
• regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales
practices, distribution arrangements and payment of inducements;
• establishing statutory capital and reserve requirements and solvency standards;
• fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting rates on life
insurance policies and annuity contracts;
• approving changes in control of insurance companies;
• restricting the payment of dividends and other transactions between affiliates;
• establishing assessments and surcharges for guaranty funds, second-injury funds and other mandatory pooling
arrangements;
• requiring insurers to dividend to policy holders any excess profits; and
• regulating the types, amounts and valuation of investments.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009