Travelers 2009 Annual Report Download - page 112

or it may elect to make a one-time discounted payment, which, as of June 30, 2010, would total
approximately $443 million (approximately $414 million after reinsurance). The agreement in principle
with PPG is subject to numerous contingencies, including final court approval of the Amended Plan,
and the Company has no obligation to make the settlement payment until all contingencies are
satisfied. The Company’s obligations under this agreement in principle are included in the unallocated
asbestos IBNR reserve.
In December 2008, the Company completed the sale of Unionamerica, which comprised its United
Kingdom-based runoff insurance and reinsurance businesses. Included in the claims and claim
adjustment expense reserves transferred to the purchaser were gross and net asbestos reserves of
$330 million and $232 million, respectively.
The following table displays activity for asbestos losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2009 2008 2007
Beginning reserves:
Direct..................................... $3,299 $4,353 $4,777
Ceded .................................... (385) (619) (726)
Net ...................................... 2,914 3,734 4,051
Incurred losses and loss expenses:
Direct..................................... 185 70 (1)
Ceded .................................... ——1
Net ...................................... 185 70 —
Losses paid:
Direct..................................... 387 794 423
Ceded .................................... (46) (136) (106)
Net ...................................... 341 658 317
Sale of subsidiary:
Direct..................................... —330 —
Ceded .................................... —(98) —
Net ...................................... —232 —
Ending reserves:
Direct..................................... 3,097 3,299 4,353
Ceded .................................... (339) (385) (619)
Net ...................................... $2,758 $2,914 $3,734
See ‘‘—Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.’’
ENVIRONMENTAL CLAIMS AND LITIGATION
The Company continues to receive claims from policyholders who allege that they are liable for
injury or damage arising out of their alleged disposition of toxic substances. Mostly, these claims are
due to various legislative as well as regulatory efforts aimed at environmental remediation. For
instance, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
enacted in 1980 and later modified, enables private parties as well as federal and state governments to
take action with respect to releases and threatened releases of hazardous substances. This federal
statute permits the recovery of response costs from some liable parties and may require liable parties to
undertake their own remedial action. Liability under CERCLA may be joint and several with other
responsible parties.
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