Travelers 2003 Annual Report Download - page 71

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69
Claims and Litigation.
Total reinsurance recoverables were $11.174 billion at December 31, 2003 and included $2.018 billion from servicing
carrier arrangements with various involuntary assigned risk pools and $2.411 billion of structured settlement annuities.
Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the
reinsured business.
Travelers evaluates and monitors the financial condition of its reinsurers under voluntary reinsurance arrangements to
minimize its exposure to significant losses from reinsurer insolvencies. In addition, in the ordinary course of business,
Travelers may become involved in coverage disputes with its reinsurers. In recent quarters, Travelers has experienced
an increase in the frequency of these reinsurance coverage disputes. Some of these disputes could result in lawsuits
and arbitrations brought by or against the reinsurers to determine the company’s rights and obligations under the
various reinsurance agreements. Travelers employs dedicated specialists and aggressive strategies to manage
reinsurance collections and disputes.
Travelers reports its reinsurance recoverables net of an allowance for estimated uncollectible reinsurance recoverables.
The allowance is based upon Travelers ongoing review of amounts outstanding, length of collection periods, changes
in reinsurer credit standing, applicable coverage defenses and other relevant factors. Accordingly, the establishment of
reinsurance recoverables and the related allowance for uncollectible reinsurance recoverables is also an inherently
uncertain process involving estimates. During 2003, Travelers increased the allowance by a net amount of $57.3
million in connection with Travelers ongoing review process. The allowance for estimated uncollectible reinsurance
recoverables was $386.4 million at December 31, 2003. Changes in these estimates could result in additional income
statement charges.