Travelers 2012 Annual Report Download - page 108

only made when valid claims are presented. Wellington accounts refer to the 35 defendants that are
parties to a 1985 agreement settling certain disputes concerning insurance coverage for their asbestos
claims. Many of the aspects of the Wellington agreement are similar to those of coverage in place
arrangements in which the parties have agreed on specific amounts of coverage and the terms under
which the coverage can be accessed.
The ‘‘home office and field office’’ category relates to all other policyholders and also includes
unallocated IBNR reserves and reserves for the costs of defending asbestos-related coverage litigation.
Policyholders are identified for the annual home office review based upon, among other factors: a
combination of past payments and current case reserves in excess of a specified threshold (currently
$100,000), perceived level of exposure, number of reported claims, products/completed operations and
potential ‘‘non-product’’ exposures, size of policyholder and geographic distribution of products or
services sold by the policyholder. In addition to IBNR amounts contained in the reserves for ‘‘home
office and field office’’ policyholders and the costs of litigating asbestos coverage matters, the Company
has established a reserve for further adverse development related to existing policyholders, new claims
from policyholders reporting claims for the first time and policyholders for which there is, or may be,
litigation and direct actions against the Company. During 2012, $502 million of reserves included in
‘‘Policyholders with settlement agreements’’ were reclassified to the unallocated IBNR component in
the ‘‘home office and field office’’ category as a result of the U.S. District Court ruling on March 1,
2012 that the conditions of the Direct Action Settlements had not been satisfied. For a full discussion
of these settlement agreements see the ‘‘Asbestos Direct Action Litigation’’ section of note 16 of notes
to the consolidated financial statements. The ‘‘assumed reinsurance and other’’ category primarily
consists of reinsurance of excess coverage, including various pool participations.
On January 29, 2009, the Company and PPG Industries, Inc (‘‘PPG’’), along with approximately 30
other insurers of PPG, agreed in principle to an agreement to settle asbestos-related coverage litigation
under insurance policies issued to PPG. The tentative settlement agreement has been incorporated into
the Modified Third Amended Plan of Reorganization (‘‘Amended Plan’’) proposed as part of the
Pittsburgh Corning Corp. (‘‘PCC’’, which is 50% owned by PPG) bankruptcy proceeding. Pursuant to
the proposed Amended Plan, which was filed on January 30, 2009, PCC, along with enumerated other
companies (including PPG as well as the Company as a participating insurer), are to receive protections
afforded by Section 524(g) of the Bankruptcy Code from certain asbestos-related bodily injury claims.
Under the agreement in principle, the Company has the option to make a series of payments over the
next 20 years totaling approximately $620 million to the Trust to be created under the Amended Plan,
or it may elect to make a one-time discounted payment, which, as of March 31, 2013, would total
approximately $481 million (approximately $452 million after reinsurance). The agreement in principle
with PPG is subject to numerous contingencies, including final court approval of the Amended Plan,
and the Company has no obligation to make the settlement payment until all contingencies are
satisfied. The Company’s obligations under this agreement in principle are included in the ‘‘home office
and field office’’ category in the preceding table.
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