Travelers 2005 Annual Report Download - page 101

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products or services sold by the policyholder. In addition to incurred but not reported (IBNR) amounts
contained in the reserves for home office and field office policyholders, the Company has established a
reserve for further adverse development related to existing policyholders, new claims from policyholders
reporting claims for the first time and policyholders for which there is, or may be, litigation and direct
actions against the Company.
Assumed reinsurance exposure primarily consists of reinsurance of excess coverage, including various
pool participations. The Company’s international operations are exposed to U.S. asbestos liabilities
through participations in excess insurance policies, quota share and excess of loss reinsurance policies, and
retrocession policies, underwritten in the Londoninsurance market. Details of exposures under the
reinsurance and retrocession policies are identified only when the Company is advised by the retrocedant.
The following table displays activity for asbestos losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2005 2004 2003
Beginning reserves:
Direct........................................... $4,775 $3,782 $4,287
Ceded........................................... (843) (805 ) (883 )
Net ............................................. 3,932 2,977 3,404
Reserves acquired:
Direct........................................... —502 —
Ceded........................................... —(191) —
Net ............................................. —311 —
Incurred losses and loss expenses:
Direct ........................................... 833 941 —
Ceded........................................... (3) (13 ) —
Net ............................................. 830 928 —
Accretion of discount:
Direct........................................... 1 17 25
Ceded........................................... — — —
Net ............................................. 1 17 25
Losses paid:
Direct ........................................... 506 467 530
Ceded........................................... (107) (166 ) (78 )
Net ............................................. 399 301 452
Ending reserves:
Direct........................................... 5,103 4,775 3,782
Ceded........................................... (739) (843 ) (805 )
Net ............................................. $4,364 $3,932 $2,977
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