Travelers 2004 Annual Report Download - page 87

The following table displays activity for asbestos losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2004 2003 2002
Beginning reserves:
Direct ........................................................... $3,782 $4,287 $1,046
Ceded ........................................................... (805) (883) (226)
Net ............................................................. 2,977 3,404 820
Reserves acquired:
Direct ........................................................... 502 ——
Ceded ........................................................... (191) ——
Net ............................................................. 311 ——
Incurred losses and loss expenses:
Direct (1) ........................................................ 941 — 3,660
Ceded ........................................................... (13) — (715)
Net ............................................................. 928 — 2,945
Accretion of discount:
Direct ........................................................... 17 25 —
Ceded ........................................................... ———
Net ............................................................. 17 25 —
Losses paid:
Direct ........................................................... 467 530 419
Ceded ........................................................... (166) (78) (58)
Net ............................................................. 301 452 361
Ending reserves:
Direct ........................................................... 4,775 3,782 4,287
Ceded ........................................................... (843) (805) (883)
Net ............................................................. $3,932 $2,977 $3,404
(1) Includes $800 million related to incurred asbestos losses subject to the Citigroup indemnification agreement
in 2002.
See “—Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.”
ENVIRONMENTAL CLAIMS AND LITIGATION
The Company continues to receive claims from policyholders who allege that they are liable for injury or
damage arising out of their alleged disposition of toxic substances. Mostly, these claims are due to various
legislative as well as regulatory efforts aimed at environmental remediation. For instance, the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), enacted in 1980 and later modified,
enables private parties as well as federal and state governments to take action with respect to releases and
threatened releases of hazardous substances. This federal statute permits the recovery of response costs from
some liable parties and may require liable parties to undertake their own remedial action. Liability under
CERCLA may be joint and several with other responsible parties.
The Company has been, and continues to be, involved in litigation involving insurance coverage issues
pertaining to environmental claims. The Company believes that some court decisions have interpreted the
insurance coverage to be broader than the original intent of the insurers and policyholders. These decisions often
pertain to insurance policies that were issued by the Company prior to the mid-1970s. These decisions continue
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