Travelers 2011 Annual Report Download - page 159

above, provided that reserves relating to insured hazards outside the United States are analyzed taking
into account differences in the legal environment and differences in terms and conditions, including, for
example and where applicable, that in some jurisdictions there are no aggregate policy limits on certain
liability coverages. Where the underlying hazard is within the U.S., the coverage involved is typically that
of General Liability and Property, but on an excess or excess-of-loss reinsurance basis. Excess exposure
requires the insured to ‘‘prove’’ not only claims under the policy, but also the prior payment of claims
reaching up to the excess policy’s attachment point.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the
required International and other reserves (beyond those included in the general discussion section)
include:
International and other risk factors
• Changes in claim handling procedures, including those of the primary carriers
• Changes in policy provisions or court interpretation of such provision
• New theories of liability
• Trends in jury awards
• Changes in the propensity to sue
• Changes in statutes of limitations
• Changes in the underlying court system
• Distortions from losses resulting from large single accounts or single issues
• Changes in tort law
• Changes in claim adjuster office structure (causing distortions in the data)
International and other book of business risk factors
• Changes in policy provisions (e.g., deductibles, policy limits, endorsements, ‘‘claims-made’’
language)
• Changes in underwriting standards
• Product mix (e.g., size of account, industries insured, jurisdiction mix)
Unanticipated changes in risk factors can affect reserves. As an indicator of the causal effect that a
change in one or more risk factors could have on reserves for International and other (excluding
asbestos and environmental), a 1% increase (decrease) in incremental paid loss development for each
future calendar year could result in a 1.3% increase (decrease) in claims and claim adjustment expense
reserves. International and other reserves (excluding asbestos and environmental) represent
approximately 8% of the Company’s total claims and claim adjustment expense reserves.
International and other represents a combination of different product lines, some of which are in
runoff. Comparative historical information is not available for international product lines as insurers
domiciled outside of the U.S. do not file U.S. statutory reports. Comparative historical information on
runoff business is not indicative of reasonably possible one-year changes in the reserve estimate for this
mix of runoff business. Accordingly, the Company has not included comparative analyses for
International and other.
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