Travelers 2006 Annual Report Download - page 51

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Combined ratio................ The sum of the loss and LAE ratio, the underwritingexpense ratio
and, where applicable, the ratio of dividends topolicyholders to net
premiums earned. A combined ratio under 100% generally indicates
an underwriting profit. A combined ratio over 100% generally
indicates an underwriting loss.
Commercial multi-peril policies.. Refers to policies which cover both property and third-party liability
exposures.
Commutation agreement....... An agreement between a reinsurer and a ceding company whereby
the reinsurer pays an agreedupon amount in exchange for a
complete discharge of all obligations, including future obligations,
between theparties for reinsurance losses incurred.
Deductible .................... The amount of loss that an insured retains.
Deferred acquisition costs ...... Primarily commissions and premium-related 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 U.S. Generally Accepted Accounting Principles
(GAAP).
Deficiency.................... With regard to reserves for a given liability, a deficiency exists when
it is estimated or determined that the reserves are insufficient to pay
the ultimate settlement value of the related liabilities. Where the
deficiency is the result of an estimate, the estimated amount of
deficiency (or even the finding of whether or not a deficiency exists)
may change as new information becomes available.
Direct written premiums ........ The amounts 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.”
Expenseratio ................. See “Underwriting expense ratio.”
Facultative reinsurance......... The reinsurance 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 coverageprotects 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.