Travelers 2011 Annual Report Download - page 110

policyholders tendering claims for the first time and upward development in the expected defense and
settlement costs for certain of its pending policyholders.
Net environmental losses paid in 2011, 2010 and 2009 were $86 million, $77 million and
$91 million, respectively. At December 31, 2011, approximately 93% of the net environmental reserve
(approximately $316 million) was carried in a bulk reserve and included unresolved environmental
claims, incurred but not reported environmental claims and the anticipated cost of coverage litigation
disputes relating to these claims. The bulk reserve the Company carries is established and adjusted
based upon the aggregate volume of in-process environmental claims and the Company’s experience in
resolving those claims. The balance, approximately 7% of the net environmental reserve (approximately
$25 million), consists of case reserves.
The following table displays activity for environmental losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2011 2010 2009
Beginning reserves:
Direct ........................................ $354 $389 $400
Ceded ........................................ (3) 414
Net .......................................... 351 393 414
Incurred losses and loss expenses:
Direct ........................................ 80 45 85
Ceded ........................................ (4) (10) (15)
Net .......................................... 76 35 70
Losses paid:
Direct ........................................ 88 80 96
Ceded ........................................ (2) (3) (5)
Net .......................................... 86 77 91
Ending reserves:
Direct ........................................ 346 354 389
Ceded ........................................ (5) (3) 4
Net .......................................... $341 $351 $393
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, 2011 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
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