Travelers 2009 Annual Report Download - page 151

is illustrative of reasonably possible one-year changes in reserve estimates for this product line.
Commercial multi-peril reserves (excluding asbestos and environmental reserves) represent
approximately 7% of the Company’s total loss reserves.
As discussed above, this line combines general liability and property coverages and it has been
impacted in the past by many of the same events as those two lines.
The Company’s change in reserve estimate for this product line was 8% for 2009, 16% for
2008 and 8% for 2007. The 2009 and 2008 changes were attributable to several factors, including
improved legal and judicial environments, and enhanced risk control, underwriting and claim process
initiatives. Also contributing to the change was improvement in the litigation environment relating to,
and ongoing claim settlements for, Hurricane Katrina. The 2007 change was attributable to better than
expected results due to, among other factors, increasingly favorable legal and judicial environments as
well as enhanced risk control, underwriting and claim process initiatives.
Commercial Automobile
The commercial automobile product line is a mix of property and liability coverages and, therefore,
includes both short and long tail coverages. The payments that are made quickly typically pertain to
auto physical damage (property) claims and property damage (liability) claims. The payments that take
longer to finalize and are more difficult to estimate relate to bodily injury claims. In general, claim
reporting lags are minor, claim complexity is not a major issue, and the line is viewed as high
frequency, low to moderate severity. Overall, the claim liabilities for this line create a moderate
estimation risk.
Commercial automobile reserves are typically analyzed in four components: bodily injury liability;
property damage liability; collision claims; and comprehensive claims. These last two components have
minimum reserve risk and fast payouts and, accordingly, separate risk factors are not presented.
The Company utilizes the traditional actuarial methods mentioned in the general discussion above in
estimating claim liabilities for this line. This is supplemented with detailed custom analyses where needed.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the
required commercial automobile reserves (beyond those included in the general discussion section)
include:
Bodily injury and property damage liability risk factors
Trends in jury awards
Changes in the underlying court system
Changes in case law
Litigation trends
Frequency of claims with payment capped by policy limits
Change in average severity of accidents, or proportion of severe accidents
Changes in auto safety technology
Subrogation opportunities
Changes in claim handling philosophies
Frequency of visits to health providers
Number of medical procedures given during visits to health providers
Types of health providers used
Types of medical treatments received
Changes in cost of medical treatments
Degree of patient responsiveness to treatment
Commercial automobile book of business risk factors
Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.)
Changes in mix of insured vehicles (e.g., long haul trucks versus local and smaller vehicles, fleet risks
versus non-fleets)
Changes in underwriting standards
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