Travelers 2007 Annual Report Download - page 146

from demand surge. The 2005 change was driven by additional loss development from the 2004 Florida
hurricanes.
International and other
International and other includes products written by International and other products not discussed
above. The principal component of ‘‘other’’ claim reserves is assumed reinsurance written on an
excess-of-loss basis, which may include reinsurance of non-U.S. exposures, and is primarily runoff
business.
International and other claim liabilities result from a mix of coverages, currencies and jurisdictions/
countries. The common characteristic is the need to customize the analysis to the individual
component, and the inability to rely on data characterizations and reporting requirements in the U.S.
statutory reporting framework.
Due to changes in the business mix for this line over time, the recently incurred claim liabilities
are relatively short term (due to both the products and the jurisdictions involved, e.g., the Republic of
Ireland and the United Kingdom), while the older liabilities include some from runoff operations that
are extremely long tail (e.g., U.S. excess liabilities reinsured through the London market, and several
underwriting pools in runoff). The speed of claim reporting and claim settlement is a function of the
specific coverage provided, the jurisdiction, the distribution system (e.g., underwriting pool versus
direct), and the proximity of the insurance sale to the insured hazard (e.g., insured and insurer located
in different countries). In particular, liabilities arising from the underwriting pools in runoff may result
in significant reporting lags, settlement lags and claim complexity, due to the need to coordinate with
other pool members or co-insurers through a broker or lead-insurer for claim settlement purposes.
International and other reserves are generally analyzed by program/pool, country and general
coverage category (e.g., U.S. Liability—excess of loss reinsurance, or General Liability—
Municipalities—by country). The business is also generally split by direct versus assumed reinsurance
for a given coverage/jurisdiction. Where the underlying insured hazard is outside the United States, the
underlying coverages are generally similar to those described under the General Liability and
Automobile discussion above, but under a different legal system. Where the underlying hazard is within
the U.S., the coverage involved is typically that of General Liability, but on an excess or excess-of-loss
reinsurance basis. Excess exposure requires the insured to ‘‘prove’’ not only claims under the policy, but
also the prior payment of claims reaching up to the excess policy’s attachment point.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the
required International and other reserves (beyond those included in the general discussion section)
include:
International and other risk factors
Changes in claim handling procedures, including those of the primary carriers
Changes in policy provisions or court interpretation of such provision
New theories of liability
Trends in jury awards
Changes in the propensity to sue
Changes in statutes of limitations
Changes in the underlying court system
Distortions from losses resulting from large single accounts or single issues
Changes in tort law
Changes in claim adjuster office structure (causing distortions in the data)
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