Travelers 2009 Annual Report Download - page 223

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
Asbestos Reserves. Because each policyholder presents different liability and coverage issues, the
Company generally reviews the exposure presented by each policyholder at least annually. Among the
factors which the Company may consider in the course of this review are: available insurance coverage,
including the role of any umbrella or excess insurance the Company has issued to the policyholder;
limits and deductibles; an analysis of the policyholder’s potential liability; the jurisdictions involved; past
and anticipated future claim activity and loss development on pending claims; past settlement values of
similar claims; allocated claim adjustment expense; potential role of other insurance; the role, if any, of
non-asbestos claims or potential non-asbestos claims in any resolution process; and applicable coverage
defenses or determinations, if any, including the determination as to whether or not an asbestos claim
is a product/completed operation claim subject to an aggregate limit and the available coverage, if any,
for that claim.
In the third quarter of 2009, the Company completed its annual in-depth asbestos claim review. As
in prior years, the review considered active policyholders and litigation cases for potential product and
‘‘non-product’’ liability. The Company again experienced an overall reduction in new claim filings.
Overall gross defense and indemnity costs remained at similar levels to what the Company has
experienced in recent years due to the continued high level of trial activity involving individuals alleging
serious asbestos-related injury, rather than decreasing slightly as the Company had expected. While
there was an aggregate decrease in the number of claims received, the number of policyholders
tendering asbestos claims for the first time increased from the number tendering claims for the first
time in 2008.
The Company also noted the continuation of recent trends, which included:
• stable payment patterns for a large proportion of policyholders;
• a decrease in the number of claims received;
• a decrease in the number of large asbestos exposures confronting the Company due to
additional settlement activity;
• continued moderate level of asbestos-related bankruptcy activity; and
• the absence of new theories of liability or new classes of defendants.
While the Company believes that these trends indicate a reduction in the volatility associated with
the Company’s overall asbestos exposure, there nonetheless remains a high degree of uncertainty with
respect to future exposure from asbestos claims.
The Company’s quarterly asbestos reserve review includes an analysis of exposure and claim
payment patterns by policyholder category, as well as recent settlements, policyholder bankruptcies,
judicial rulings and legislative actions. Developing payment patterns among policyholders are also
analyzed. In addition, the Company reviews its historical gross and net loss and expense paid
experience, year-by-year, to assess any emerging trends, fluctuations, or characteristics suggested by the
aggregate paid activity. For certain policyholders an estimate of the gross ultimate exposure for
indemnity and related claim adjustment expense is determined, and for those policyholders the
Company calculates, by each policy year, a ceded reinsurance projection based on any applicable
facultative and treaty reinsurance, past ceded experience and reinsurance collections. Conventional
actuarial methods are not utilized to establish asbestos reserves nor have the Company’s evaluations
resulted in any way of determining a meaningful average asbestos defense or indemnity payment.
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