Travelers 2007 Annual Report Download - page 56

Retention rate ............. Current period renewal premiums, accounts or policies as a
percentage of total premiums, accounts or policies available for
renewal.
Retrospective premiums ...... Premiums related to retrospectively rated policies.
Retrospective rating ......... A plan or method which permits adjustment of the final premium
or commission on the basis of actual loss experience, subject to
certain minimum and maximum limits.
Return on equity ........... The ratio of net income to average equity.
Risk-based capital (RBC) ..... A measure adopted by the NAIC and enacted by states for
determining the minimum statutory capital and surplus
requirements of insurers. Insurers having total adjusted capital less
than that required by the RBC calculation will be subject to varying
degrees of regulatory action depending on the level of capital
inadequacy.
Risk retention group ......... An alternative form of insurance in which members of a similar
profession or business band together to self insure their risks.
Run-off business ............ An operation which has been determined to be nonstrategic;
includes non-renewals of inforce policies and a cessation of writing
new business, where allowed by law.
Salvage .................. The amount of money an insurer recovers through the sale of
property transferred to the insurer as a result of a loss payment.
S-curve method ............ A mathematical function which depicts an initial slow change,
followed by a rapid change and then ending in a slow change again.
This results in an ‘‘S’’ shaped line when depicted graphically. The
actuarial application of these curves fit the reported data to-date for
a particular cohort of claims to an S-curve to project future activity
for that cohort.
Second-injury fund .......... The employer of an injured, impaired worker is responsible only for
the workers’ compensation benefit for the most recent injury; the
second-injury fund would cover the cost of any additional benefits
for aggravation of a prior condition. The cost is shared by the
insurance industry and self-insureds, funded through assessments to
insurance companies and self-insureds based on either premiums or
losses.
Self-insured retentions ....... That portion of the risk retained by a person for its own account.
Servicing carrier ............ An insurance company that provides, for a fee, various services
including policy issuance, claims adjusting and customer service for
insureds in a reinsurance pool.
Statutory accounting practices
(SAP).................. The practices and procedures prescribed or permitted by domiciliary
state insurance regulatory authorities in the United States for
recording transactions and preparing financial statements. Statutory
accounting practices generally reflect a modified going concern basis
of accounting.
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