Travelers 2006 Annual Report Download - page 52

40
Ground-up method............ A method to estimate ultimate claim costs for a given cohort of
claims such as an accident year/product line component. It involves
analyzing the exposure at an individual insured level and then
through the use of deterministic or stochastic scenarios and/or
simulations, estimating the ultimate losses for those insureds. The
total losses for the cohort are then the sum of the losses for each
individual insured.
In practice, the method is sometimes simplified by performing the
individual insured analysis only for the larger insureds, with the costs
for the smaller insureds estimated via sampling approaches
(extrapolated to the rest of the smaller insured population) or
aggregate approaches (using assumptions consistent with the ground-
up larger insured analysis).
Guaranteed cost products.......An insurance policy where the premiums charged will not be
adjusted for actual loss experience during the covered period.
Guaranty fund. ................ State-regulated mechanism which is financed by assessing insurers
doing business in those states. Should insolvencies occur, these funds
are available to meet some or all of the insolvent insurer’s obligations
to policyholders.
Incurred but not reported
(IBNR) reserves ............. Reserves for estimated losses and LAE that have been incurred but
not yet reported to the insurer. This includes amounts for unreported
claims, development on known cases, and re-opened claims.
Inland marine................. A broad type of insurancegenerally covering articles that may be
transported from one place to another, as well as bridges, tunnels
and other instrumentalities of transportation. It includes goods in
transit, generally other than transoceanic, and may include policies
for movable objects such as personal effects, personal property,
jewelry, furs, fine art and others.
IRIS ratios.................... Financial ratios calculated by the NAIC to assist state insurance
departments in monitoring the financial condition of insurance
companies.
Large deductible policy ......... An insurance policy where the customer assumes at least $25,000 or
more of each loss. Typically, the insurer is responsible for paying the
entire loss under those policies and then seeks reimbursement from
the insured for the deductible amount.
Lloyd’s ....................... An insurance marketplace based in London, England, where brokers,
representing clients with insurable risks, deal with Lloyd’s
underwriters, who representinvestors. The investors are grouped
together into syndicates that provide capital to insure the risks.
Loss.......................... An occurrence that is the basis for submission and/or paym ent of a
claim. Losses may be covered, limited or excluded from coverage,
depending on the terms of the policy.
Loss adjustment
expenses (LAE) ............. The expenses of settling claims, includinglegal and other fees and
the portion of general expenses allocated to claim settlement costs.