Travelers 2012 Annual Report Download - page 111

Net environmental losses paid in 2012, 2011 and 2010 were $84 million, $86 million and
$77 million, respectively. At December 31, 2012, approximately 93% of the net environmental reserve
(approximately $323 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
$24 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) 2012 2011 2010
Beginning reserves:
Gross ......................................... $346 $354 $389
Ceded ........................................ (5) (3) 4
Net .......................................... 341 351 393
Incurred losses and loss expenses:
Gross ......................................... 99 80 45
Ceded ........................................ (9) (4) (10)
Net .......................................... 90 76 35
Losses paid:
Gross ......................................... 93 88 80
Ceded ........................................ (9) (2) (3)
Net .......................................... 84 86 77
Ending reserves:
Gross ......................................... 352 346 354
Ceded ........................................ (5) (5) (3)
Net .......................................... $347 $341 $351
UNCERTAINTY REGARDING ADEQUACY OF ASBESTOS AND ENVIRONMENTAL RESERVES
As a result of the processes and procedures discussed above, management believes that the
reserves carried for asbestos and environmental claims at December 31, 2012 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
policyholders, whether through exhaustion of policy limits or through the insolvency of other
participating insurers. In addition, uncertainties arise from the insolvency or bankruptcy of
policyholders and other defendants. It is also not possible to predict changes in the legal, regulatory
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