Travelers 2006 Annual Report Download - page 48

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Glossary of Selected Insurance Terms
Accident year ................. The annual calendar accountingperiod inwhich loss events occurred,
regardless of when the losses are actually reported, booked or paid.
Adjusted unassigned surplus .... Unassigned surplus as of the most recent statutory annual report
reduced by twenty-five percent of that year’s unrealized appreciation
in value or revaluation of assets or unrealized profits on investments,
as defined in that report.
Admitted insurer.............. A company licensed to transact insurance business within a state.
Annuity ...................... A contract that pays a periodic benefit over the remaining life of a
person (the annuitant), the lives of two or more persons or for a
specified period of time.
Assigned risk pools............. Reinsurance pools which cover risks for those unable to purchase
insurance in the voluntary market. Possible reasons for this inability
include the risk being too great or the profit being too small under
the required insurance rate structure. The costs of the risks
associated with these pools are charged back to insurance carriers in
proportion to their direct writings.
Assumed reinsurance........... Insurance risks acquired from a ceding company.
Average value method.......... An actuarial method used to estimate ultimate losses for a given
cohort of claims such as an accident year/product line component. If
the paid-to-date losses are then subtracted from the estimated
ultimate losses, the result is an indication of the unpaid losses.
The basic premise of the method is that average claim values are
stable and predictable over time for a particular cohort of claims.
The method is utilized most often where ultimate claim counts are
known or reliably estimable fairly early after the start of an accident
year and average values are expected to be fairly predictable from
one year to the next.
Ultimate losses under the method equal the known or estimated
ultimate claimcounts times the estimated average value. Estimated
ultimate claimcounts are frequently based on a claim count
development method, essentially the same as the paid and case
incurred development methods mentioned elsewhere in this glossary
but using claim count rather than claim dollar data. The average
values can be based on historical trends from past closed claims, or
backed into from estimated ultimate losses divided by estimated
ultimate claim counts, or some other approach. When the average
values are calculated from ultimate loss estimates, the resulting
estimated averages may be supplemented with other data/analyses.