Travelers 2006 Annual Report Download - page 110

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development related toexisting policyholders, new claims frompolicyholders 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. International is 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 London insurance market. Details of exposures under thereinsurance 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) 2006 2005 2004
Beginning reserves:
Direct........................................... $ 5 ,103 $ 4 ,775 $3,782
Ceded.......................................... (739) (843 ) (805 )
Net............................................. 4,364 3,932 2,977
Reserves acquired:
Direct........................................... — — 502
Ceded.......................................... — — (191 )
Net............................................. — — 311
Incurred losses and loss expenses:
Direct........................................... 196 833 941
Ceded.......................................... (41) (3) (13 )
Net............................................. 155 830 928
Accretion of discount:
Direct. .......................................... 1 1 17
Ceded.......................................... —
— —
Net............................................. 1
1 17
Losses paid:
Direct........................................... 523 506 467
Ceded.......................................... (54) (107 ) (166 )
Net............................................. 469 399 301
Ending reserves:
Direct........................................... 4,777 5,103 4,775
Ceded.......................................... (726) (739 ) (843 )
Net............................................. $ 4 ,051 $ 4 ,364 $3,932
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 liableparties and may require liable parties to undertake their own
remedial action. Liability under CERCLA may be joint and several with other responsible parties.