Travelers 2010 Annual Report Download - page 52

Facultative reinsurance ....... The reinsurance of all or a portion of the insurance provided by a
single policy. Each policy reinsured is separately negotiated.
Fair Access to Insurance
Requirements (FAIR) Plan . . A residual market mechanism which provides property insurance to
those unable to obtain such insurance through the regular
(voluntary) market. FAIR plans are set up on a state-by-state basis
to cover only those risks in that state. For more information, see
‘‘residual market (involuntary business).’’
Fidelity and surety programs . . . Fidelity insurance coverage protects an insured for loss due to
embezzlement or misappropriation of funds by an employee. Surety
is a three-party agreement in which the insurer agrees to pay a
third party or make complete an obligation in response to the
default, acts or omissions of an insured.
GAAP combined ratio ....... The sum of the loss and LAE ratio, the underwriting expense ratio
and, where applicable, the ratio of dividends to policyholders to net
premiums earned. A combined ratio under 100% generally indicates
an underwriting profit. A combined ratio over 100% generally
indicates an underwriting loss.
GAAP combined ratio excluding
incremental impact of direct
to consumer initiative ...... The GAAP combined ratio adjusted to exclude the direct, variable
impact of the Company’s direct-to-consumer initiative in the
Personal Insurance segment.
Gross written premiums ...... The direct and assumed contractually determined amounts charged
to the policyholders for the effective period of the contract based
on the terms and conditions of the insurance contract.
Ground-up analysis .......... A method to estimate ultimate claim costs for a given cohort of
claims such as an accident year/product line component. It involves
analyzing the exposure at an individual insured level and then
through the use of deterministic or stochastic scenarios and/or
simulations, estimating the ultimate losses for those insureds. The
total losses for the cohort are then the sum of the losses for each
individual insured.
In practice, the method is sometimes simplified by performing the
individual insured analysis only for the larger insureds, with the
costs for the smaller insureds estimated via sampling approaches
(extrapolated to the rest of the smaller insured population) or
aggregate approaches (using assumptions consistent with the
ground-up larger insured analysis).
Guaranteed cost products ..... An insurance policy where the premiums charged will not be
adjusted for actual loss experience during the covered period.
Guaranty fund ............. A state-regulated mechanism that is financed by assessing insurers
doing business in those states. Should insolvencies occur, these
funds are available to meet some or all of the insolvent insurer’s
obligations to policyholders.
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