Travelers 2009 Annual Report Download - page 222

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
Business Insurance. Net favorable prior year reserve development totaled $301 million in 2007,
primarily driven by better than expected loss development for recent accident years in the commercial
multi-peril, general liability, commercial automobile and property product lines. The commercial multi-
peril and general liability product lines experienced better than anticipated loss development that was
attributable to several factors, including improved legal and judicial environments, as well as enhanced
risk control, underwriting and claim process initiatives. The commercial automobile product line
experienced better than expected loss development due to more favorable legal and judicial
environments, claim handling initiatives focused on the automobile line of insurance and improvements
in auto safety technology. The property product line experienced fewer than expected late reported
claims related to non-catastrophe weather events that occurred late in 2006, as well as better than
expected frequency and severity due in part to changes in the marketplace, such as higher deductibles
and lower policy limits. In addition, the property product line experienced better than expected large
loss outcomes which were partially attributable to favorable litigation resolutions. Net total prior year
development in 2007 included a $185 million increase to environmental reserves.
Financial, Professional & International Insurance. Net favorable prior year reserve development in
2007 totaled $93 million, primarily reflecting better than expected loss development in international
property, employers’ liability, professional indemnity and motor lines of business for recent accident
years, which was attributable to several factors, including enhanced pricing and underwriting strategies
throughout the international operations, and the favorable impact of legal and judicial reforms in
Ireland.
Personal Insurance. Net favorable prior year reserve development in 2007 totaled $152 million,
driven by better than expected automobile loss experience due in part to claim initiatives and fewer
than expected late reported homeowners’ claims related to non-catastrophe weather events that
occurred in the fourth quarter of 2006. In addition, a portion of net favorable prior year reserve
development in the Homeowners and Other line of business in 2007 was attributable to a decrease in
the number of claims due to changes in the marketplace, including higher deductibles and fewer small-
dollar claims.
Asbestos and Environmental Reserves
At December 31, 2009 and 2008, the Company’s claims and claim adjustment expense reserves
included $3.15 billion and $3.33 billion, respectively, for asbestos and environmental-related claims, net
of reinsurance. In December 2008, the Company completed the sale of Unionamerica, which comprised
its United Kingdom-based runoff direct insurance and reinsurance businesses. Included in the claims
and claim adjustment expense reserves transferred to the purchaser were net asbestos and
environmental reserves of $265 million.
It is difficult to estimate the reserves for asbestos and environmental-related claims due to the
vagaries of court coverage decisions, plaintiffs’ expanded theories of liability, the risks inherent in
complex litigation and other uncertainties, including without limitation, those which are set forth below.
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