Travelers 2012 Annual Report Download - page 151

(averaging 2%) for the industry overall. The Company’s year-to-year changes are driven by, and are
based on, observed events during the year. The Company believes that its range of historical outcomes
is illustrative of reasonably possible one-year changes in reserve estimates for this product line.
Commercial multi-peril reserves (excluding asbestos and environmental reserves) represent
approximately 7% of the Company’s total claims and claim adjustment expense reserves.
As discussed above, this line combines general liability and commercial property coverages and it
has been impacted in the past by many of the same events as those two lines.
The Company’s change in reserve estimate for this product line was 1% for 2012, 5% for 2011
and 1% for 2010. The 2011 change reflected unfavorable loss development driven by late reporting of
hail claims incurred in 2010.
Commercial Automobile
The commercial automobile product line is a mix of property and liability coverages and, therefore,
includes both short and long tail coverages. The payments that are made quickly typically pertain to
auto physical damage (property) claims and property damage (liability) claims. The payments that take
longer to finalize and are more difficult to estimate relate to bodily injury claims. In general, claim
reporting lags are minor, claim complexity is not a major issue, and the line is viewed as high
frequency, low to moderate severity. Overall, the claim liabilities for this line create a moderate
estimation risk.
Commercial automobile reserves are typically analyzed in four components: bodily injury liability;
property damage liability; collision claims; and comprehensive claims. These last two components have
minimum reserve risk and fast payouts and, accordingly, separate risk factors are not presented.
The Company utilizes the conventional actuarial methods mentioned in the general discussion
above in estimating claim liabilities for this line. This is supplemented with detailed custom analyses
where needed.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the
required commercial automobile reserves (beyond those included in the general discussion section)
include:
Bodily injury and property damage liability risk factors
• Trends in jury awards
• Changes in the underlying court system
• Changes in case law
• Litigation trends
• Frequency of claims with payment capped by policy limits
• Change in average severity of accidents, or proportion of severe accidents
• Changes in auto safety technology
• Subrogation opportunities
• Changes in claim handling philosophies
• Frequency of visits to health providers
• Number of medical procedures given during visits to health providers
• Types of health providers used
139