Travelers 2010 Annual Report Download - page 110

The following table displays activity for environmental losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2010 2009 2008
Beginning reserves:
Direct ........................................ $389 $400 $478
Ceded ........................................ 414 12
Net .......................................... 393 414 490
Incurred losses and loss expenses:
Direct ........................................ 45 85 85
Ceded ........................................ (10) (15) —
Net .......................................... 35 70 85
Losses paid:
Direct ........................................ 80 96 123
Ceded ........................................ (3) (5) 5
Net .......................................... 77 91 128
Sale of subsidiary:
Direct ........................................ ——40
Ceded ........................................ ——(7)
Net .......................................... ——33
Ending reserves:
Direct ........................................ 354 389 400
Ceded ........................................ (3) 414
Net .......................................... $351 $393 $414
UNCERTAINTY REGARDING ADEQUACY OF ASBESTOS AND ENVIRONMENTAL RESERVES
As a result of the processes and procedures described above, management believes that the
reserves carried for asbestos and environmental claims at December 31, 2010 are appropriately
established based upon known facts, current law and management’s judgment. However, the
uncertainties surrounding the final resolution of these claims continue, and it is difficult to determine
the ultimate exposure for asbestos and environmental claims and related litigation. As a result, these
reserves are subject to revision as new information becomes available and as claims develop. The
continuing uncertainties include, without limitation, the risks and lack of predictability inherent in
complex litigation, any impact from the bankruptcy protection sought by various asbestos producers and
other asbestos defendants, a further increase or decrease in the cost to resolve, and/or the number of,
asbestos and environmental claims beyond that which is anticipated, the role of any umbrella or excess
policies the Company has issued, the resolution or adjudication of disputes pertaining to the amount of
available coverage for asbestos and environmental claims in a manner inconsistent with the Company’s
previous assessment of these claims, the number and outcome of direct actions against the Company,
future developments pertaining to the Company’s ability to recover reinsurance for asbestos and
environmental claims and the unavailability of other insurance sources potentially available to
policyholders, whether through exhaustion of policy limits or through the insolvency of other
participating insurers. In addition, uncertainties arise from the insolvency or bankruptcy of
policyholders and other defendants. It is also not possible to predict changes in the legal, regulatory
and legislative environment and their impact on the future development of asbestos and environmental
claims. This development will be affected by future court and regulatory decisions and interpretations,
including the outcome of legal challenges to legislative and/or judicial reforms establishing medical
criteria for the pursuit of asbestos claims, as well as changes in applicable legislation. It is also difficult
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