Travelers 2008 Annual Report Download - page 53

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 represent investors. 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 payment 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, including legal and other fees and
the portion of general expenses allocated to claim settlement costs.
Loss and LAE ratio ......... For SAP, it is the ratio of incurred losses and loss adjustment
expenses to net earned premiums. For GAAP, it is the ratio of
incurred losses and loss adjustment expenses reduced by an
allocation of fee income to net earned premiums.
Loss reserves .............. Liabilities established by insurers and reinsurers to reflect the
estimated cost of claims incurred that the insurer or reinsurer will
ultimately be required to pay in respect of insurance or reinsurance
it has written. Reserves are established for losses and for LAE, and
consist of case reserves and IBNR reserves. As the term is used in
this document, ‘‘loss reserves’’ is meant to include reserves for both
losses and LAE.
Loss reserve development ..... The increase or decrease in incurred claims and claim adjustment
expenses as a result of the re-estimation of claims and claim
adjustment expense reserves at successive valuation dates for a
given group of claims. Loss reserve development may be related to
prior year or current year development.
Losses incurred ............ The total losses sustained by an insurance company under a policy
or policies, whether paid or unpaid. Incurred losses include a
provision for IBNR.
National Association of
Insurance Commissioners
(NAIC) ................ An organization of the insurance commissioners or directors of all
50 states, the District of Columbia and the five U.S. territories
organized to promote consistency of regulatory practice and
statutory accounting standards throughout the United States.
Net written premiums ........ Direct written premiums plus assumed reinsurance premiums less
premiums ceded to reinsurers.
Operating income (loss) ...... Net income (loss) excluding the after-tax impact of net realized
investment gains (losses), discontinued operations and cumulative
effect of changes in accounting principles when applicable.
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