Travelers 2010 Annual Report Download - page 218

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
that are heavily populated. The Company generally seeks to mitigate its exposure to catastrophes
through individual risk selection and the purchase of catastrophe reinsurance.
There are also risks which impact the estimation of ultimate costs for catastrophes. For example,
the estimation of reserves related to hurricanes can be affected by the inability of the Company and its
insureds to access portions of the impacted areas, the complexity of factors contributing to the losses,
the legal and regulatory uncertainties and the nature of the information available to establish the
reserves. Complex factors include, but are not limited to: determining whether damage was caused by
flooding versus wind; evaluating general liability and pollution exposures; estimating additional living
expenses; the impact of demand surge; infrastructure disruption; fraud; the effect of mold damage and
business income interruption costs; and reinsurance collectibility. The timing of a catastrophe’s
occurrence, such as at or near the end of a reporting period, can also affect the information available
to us in estimating reserves for that reporting period. The estimates related to catastrophes are
adjusted as actual claims emerge.
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