Travelers 2012 Annual Report Download - page 109

The following table displays activity for asbestos losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2012 2011 2010
Beginning reserves:
Gross ..................................... $2,780 $2,941 $3,097
Ceded .................................... (341) (393) (339)
Net ...................................... 2,439 2,548 2,758
Incurred losses and loss expenses:
Gross ..................................... 171 195 262
Ceded .................................... 4(20) (122)
Net ...................................... 175 175 140
Losses paid:
Gross ..................................... 262 356 418
Ceded .................................... (26) (72) (68)
Net ...................................... 236 284 350
Ending reserves:
Gross ..................................... 2,689 2,780 2,941
Ceded .................................... (311) (341) (393)
Net ...................................... $2,378 $2,439 $2,548
See ‘‘—Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.’’
ENVIRONMENTAL CLAIMS AND LITIGATION
The Company has received and 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 through settlements
with policyholders as opposed to claimants. 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 obligation which the
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