Travelers 2004 Annual Report Download - page 51

Deductible ........................ Theamount of loss that an insured retains.
Deferred acquisition costs ............ Primarily commissions and premium taxes that vary with and are
primarily related to the production of new contracts and are deferred
and amortized to achieve a matching of revenues and expenses when
reported in financial statements prepared in accordance with GAAP.
Direct written premiums ............. Theamounts charged by an insurer to insureds in exchange for
coverages provided in accordance with the terms of an insurance
contract. The amounts exclude the impact of all reinsurance
premiums, either assumed or ceded.
Earned premiums or premiums
earned ......................... That portion of property casualty premiums written that applies to the
expired portion of the policy term. Earned premiums are recognized
as revenues under both Statutory Accounting Practices (SAP) and
GAAP.
Excess liability .................... Additional casualty coverage above a layer of insurance exposures.
Excess of loss reinsurance ............ Reinsurance that indemnifies the reinsured against all or a specified
portion of losses over a specified dollar amount or “retention.”
Expense ratio ...................... See“Underwriting expense ratio.”
Facultative reinsurance .............. Thereinsurance of all or a portion of the insurance provided by a
single policy. Each policy reinsured is separately negotiated.
Fidelity and surety programs .......... Fidelity insurance coverage protects an insured for loss due to
embezzlement or misappropriation of funds by an employee. Surety is
a three-party agreement in which the insurer agrees to pay a second
party or make complete an obligation in response to the default, acts
or omissions of an insured.
Guaranteed cost products ............ Aninsurance policy where the premiums charged will not be adjusted
for actual loss experience during the covered period.
Guaranty fund ..................... State-regulated mechanism which is financed by assessing insurers
doing business in those states. Should insolvencies occur, these funds
are available to meet some or all of the insolvent insurer’s obligations
to policyholders.
Incurred but not reported (IBNR)
reserves ........................ Reserves for estimated losses and LAE that have been incurred but
not yet reported to the insurer.
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