Travelers 2007 Annual Report Download - page 139

Commercial multi-peril reserves (excluding asbestos and environmental reserves) represent
approximately 7% of the Company’s total loss reserves.
As discussed above, this line combines general liability and property coverages and it has been
impacted in the past by many of the same events as those two lines.
The Company’s change in reserve estimate for this product line was 8% for 2007, 4% for 2006
and 6% for 2005. The 2007 and 2006 changes were attributable to better than expected results due
to, among other factors, increasingly favorable legal and judicial environments as well as enhanced risk
control, underwriting and claim process initiatives. The 2005 change was the result of increasingly
favorable legal and judicial environments, coupled with better than expected results from changes in
policy provisions as well as underwriting and pricing criteria.
Commercial Automobile
The commercial automobile product line is a mix of property and liability coverages and, therefore,
includes both short and long tail coverages. The payments that are made quickly typically pertain to
auto physical damage (property) claims and property damage (liability) claims. The payments that take
longer to finalize and are more difficult to estimate relate to bodily injury claims. In general, claim
reporting lags are minor, claim complexity is not a major issue, and the line is viewed as high
frequency, low to moderate severity. Overall, the claim liabilities for this line create a moderate
estimation risk.
Commercial automobile reserves are typically analyzed in four components; bodily injury liability,
property damage liability, collision claims and comprehensive claims. These last two components have
minimum reserve risk and fast payouts and, accordingly, separate risk factors are not presented.
The Company utilizes the traditional actuarial methods mentioned in the general discussion above
in estimating claim liabilities for this line. This is supplemented with detailed custom analyses where
needed.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the
required commercial automobile reserves (beyond those included in the general discussion section)
include:
Bodily injury and property damage liability risk factors
Trends in jury awards
Changes in the underlying court system
Changes in case law
Litigation trends
Frequency of claims with payment capped by policy limits
Change in average severity of accidents, or proportion of severe accidents
Changes in auto safety technology
Subrogation opportunities
Changes in claim handling philosophies
Frequency of visits to health providers
Number of medical procedures given during visits to health providers
Types of health providers used
Types of medical treatments received
Changes in cost of medical treatments
Degree of patient responsiveness to treatment
127