Travelers 2010 Annual Report Download - page 55

A given accident year’s cumulative losses are then projected to
ultimate by multiplying current cumulative losses by successive
age-to-age link ratios up to that future age where growth is
expected to end. For example, if growth is expected to end at
60 months, then the ultimate indication for an accident year with
cumulative losses at 12 months equals those losses times a 12 to
24 month link ratio, times a 24 to 36 month link ratio, times a 36 to
48 month link ratio, times a 48 to 60 month link ratio.
Advanced applications of the method include adjustments for
changing conditions during the historical period and anticipated
changes in the future.
Pool..................... An organization of insurers or reinsurers through which particular
types of risks are underwritten with premiums, losses and expenses
being shared in agreed-upon percentages.
Premiums................. The amount charged during the year on policies and contracts
issued, renewed or reinsured by an insurance company.
Property insurance .......... Insurance that provides coverage to a person or business with an
insurable interest in tangible property for that person’s or business’s
property loss, damage or loss of use.
Quota share reinsurance ...... Reinsurance wherein the insurer cedes an agreed-upon fixed
percentage of liabilities, premiums and losses for each policy
covered on a pro rata basis.
Rates .................... Amounts charged per unit of insurance.
Redundancy ............... With regard to reserves for a given liability, a redundancy exists
when it is estimated or determined that the reserves are greater
than what will be needed to pay the ultimate settlement value of
the related liabilities. Where the redundancy is the result of an
estimate, the estimated amount of redundancy (or even the finding
of whether or not a redundancy exists) may change as new
information becomes available.
Reinstatement premiums ...... Additional premiums payable to reinsurers to restore coverage
limits that have been exhausted as a result of reinsured losses under
certain excess-of-loss reinsurance treaties.
Reinsurance ............... The practice whereby one insurer, called the reinsurer, in
consideration of a premium paid to that insurer, agrees to
indemnify another insurer, called the ceding company, for part or
all of the liability of the ceding company under one or more
policies or contracts of insurance which it has issued.
Reinsurance agreement ....... A contract specifying the terms of a reinsurance transaction.
Renewal premium change ..... The estimated change in average premium on policies that renew,
including rate and exposure changes.
Renewal rate change ......... The estimated change in average premium on policies that renew,
excluding exposure changes.
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