Travelers 2008 Annual Report Download - page 111

The following table displays activity for environmental losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2008 2007 2006
Beginning reserves:
Direct ........................................ $478 $413 $494
Ceded ........................................ 12 5 (69)
Net .......................................... 490 418 425
Incurred losses and loss expenses:
Direct ........................................ 85 182 108
Ceded ........................................ —312
Net .......................................... 85 185 120
Losses paid:
Direct ........................................ 123 117 189
Ceded ........................................ 5(4) (62)
Net .......................................... 128 113 127
Sale of subsidiary:
Direct ........................................ 40 ——
Ceded ........................................ (7) ——
Net .......................................... 33 ——
Ending reserves:
Direct ........................................ 400 478 413
Ceded ........................................ 14 12 5
Net .......................................... $414 $490 $418
UNCERTAINTY REGARDING ADEQUACY OF ASBESTOS AND ENVIRONMENTAL RESERVES
As a result of the processes and procedures described above, management believes that the
reserves carried for asbestos and environmental claims at December 31, 2008 are appropriately
established based upon known facts, current law and management’s judgment. However, the
uncertainties surrounding the final resolution of these claims continue, and it is difficult to determine
the ultimate exposure for asbestos and environmental claims and related litigation. As a result, these
reserves are subject to revision as new information becomes available and as claims develop. The
continuing uncertainties include, without limitation, the risks and lack of predictability inherent in
complex litigation, any impact from the bankruptcy protection sought by various asbestos producers and
other asbestos defendants, a further increase or decrease in asbestos and environmental claims beyond
that which is anticipated, the role of any umbrella or excess policies the Company has issued, the
resolution or adjudication of disputes pertaining to the amount of available coverage for asbestos and
environmental claims in a manner inconsistent with the Company’s previous assessment of these claims,
the number and outcome of direct actions against the Company, future developments pertaining to the
Company’s ability to recover reinsurance for asbestos and environmental claims and the unavailability
of other insurance sources potentially available to policyholders, whether through exhaustion of policy
limits or through the insolvency of other participating insurers. In addition, uncertainties arise from the
insolvency or bankruptcy of policyholders and other defendants, although in recent years the Company
has noted a decrease in the number and volatility of asbestos-related bankruptcies. It is also not
possible to predict changes in the legal, regulatory and legislative environment and their impact on the
future development of asbestos and environmental claims. This development will be affected by future
court and regulatory decisions and interpretations, as well as changes in applicable legislation. It is also
difficult to predict the ultimate outcome of complex coverage disputes until settlement negotiations
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