Travelers 2011 Annual Report Download - page 108

The following table displays activity for asbestos losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2011 2010 2009
Beginning reserves:
Direct ..................................... $2,941 $3,097 $3,299
Ceded .................................... (393) (339) (385)
Net ...................................... 2,548 2,758 2,914
Incurred losses and loss expenses:
Direct ..................................... 195 262 185
Ceded .................................... (20) (122) —
Net ...................................... 175 140 185
Losses paid:
Direct ..................................... 356 418 387
Ceded .................................... (72) (68) (46)
Net ...................................... 284 350 341
Ending reserves:
Direct ..................................... 2,780 2,941 3,097
Ceded .................................... (341) (393) (339)
Net ...................................... $2,439 $2,548 $2,758
See ‘‘—Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.’’
ENVIRONMENTAL CLAIMS AND LITIGATION
The Company continues to receive claims from policyholders who allege that they are liable for
injury or damage arising out of their alleged disposition of toxic substances. Mostly, these claims are
due to various legislative as well as regulatory efforts aimed at environmental remediation. For
instance, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
enacted in 1980 and later modified, enables private parties as well as federal and state governments to
take action with respect to releases and threatened releases of hazardous substances. This federal
statute permits the recovery of response costs from some liable parties and may require liable parties to
undertake their own remedial action. Liability under CERCLA may be joint and several with other
responsible parties.
The Company has been, and continues to be, involved in litigation involving insurance coverage
issues pertaining to environmental claims. The Company believes that some court decisions have
interpreted the insurance coverage to be broader than the original intent of the insurers and
policyholders. These decisions often pertain to insurance policies that were issued by the Company
prior to the mid-1980s. These decisions continue to be inconsistent and vary from jurisdiction to
jurisdiction. Environmental claims when submitted rarely indicate the monetary amount being sought by
the claimant from the policyholder, and the Company does not keep track of the monetary amount
being sought in those few claims which indicate a monetary amount.
The resolution of environmental exposures by the Company generally occurs by settlement on a
policyholder-by-policyholder basis as opposed to a claim-by-claim basis. Generally, the Company strives
to extinguish any obligations it may have under any policy issued to the policyholder for past, present
and future environmental liabilities and extinguish any pending coverage litigation dispute with the
policyholder. This form of settlement is commonly referred to as a ‘‘buy-back’’ of policies for future
environmental liability. In addition, many of the agreements have also extinguished any insurance
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