Travelers 2011 Annual Report Download - page 50

Catastrophe ............... A severe loss, resulting from a variety of events, including, among
others, hurricanes, tornadoes and other windstorms, earthquakes,
hail, wildfires, severe winter weather, floods and volcanic eruptions.
Catastrophes can also result from a terrorist attack (including those
involving nuclear, biological, chemical or radiological events),
explosions, infrastructure failures or as a consequence of political
instability. Each catastrophe has unique characteristics and
catastrophes are not predictable as to timing or amount. Their
effects are included in net and operating income and claims and
claim adjustment expense reserves upon occurrence. A catastrophe
may result in the payment of reinsurance reinstatement premiums
and assessments from various pools.
Catastrophe loss ............ Loss and directly identified loss adjustment expenses from
catastrophes.
Catastrophe reinsurance ...... A form of excess of loss reinsurance which, subject to a specified
limit, indemnifies the ceding company for the amount of loss in
excess of a specified retention with respect to an accumulation of
losses resulting from a catastrophic event. The actual reinsurance
document is called a ‘‘catastrophe cover.’’ These reinsurance
contracts are typically designed to cover property insurance losses
but can be written to cover casualty insurance losses such as from
workers’ compensation policies.
Cede; ceding company ....... When an insurer reinsures its liability with another insurer or a
‘‘cession,’’ it ‘‘cedes’’ business and is referred to as the ‘‘ceding
company.’’
Ceded reinsurance .......... Insurance risks transferred to another company as reinsurance. See
‘‘Reinsurance.’’
Claim .................... Request by an insured for indemnification by an insurance company
for loss incurred from an insured peril.
Claim adjustment expenses .... See ‘‘Loss adjustment expenses (LAE).’’
Claims and claim adjustment
expenses ................ See ‘‘Loss’’ and ‘‘Loss adjustment expenses (LAE).’’
Claims and claim adjustment
expense reserves .......... See ‘‘Loss reserves.’’
Cohort ................... A group of items or individuals that share a particular statistical or
demographic characteristic. For example, all claims for a given
product in a given market for a given accident year would represent
a cohort of claims.
Commercial multi-peril policies . Refers to policies which cover both property and third-party liability
exposures.
Commutation agreement ...... An agreement between a reinsurer and a ceding company whereby
the reinsurer pays an agreed-upon amount in exchange for a
complete discharge of all obligations, including future obligations,
between the parties for reinsurance losses incurred.
Debt-to-total capital ratio ..... The ratio of debt to total capitalization.
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