Travelers 2012 Annual Report Download - page 58

Subrogation ............... A principle of law incorporated in insurance policies, which enables
an insurance company, after paying a claim under a policy, to
recover the amount of the loss from another person or entity who is
legally liable for it.
Third-party liability .......... A liability owed to a claimant (third party) who is not one of the
two parties to the insurance contract. Insured liability claims are
referred to as third-party claims.
Total capitalization .......... The sum of total shareholders’ equity and debt.
Treaty reinsurance .......... The reinsurance of a specified type or category of risks defined in a
reinsurance agreement (a ‘‘treaty’’) between a primary insurer or
other reinsured and a reinsurer. Typically, in treaty reinsurance, the
primary insurer or reinsured is obligated to offer and the reinsurer
is obligated to accept a specified portion of all that type or category
of risks originally written by the primary insurer or reinsured.
Umbrella coverage .......... A form of insurance protection against losses in excess of amounts
covered by other liability insurance policies or amounts not covered
by the usual liability policies.
Unassigned surplus .......... The undistributed and unappropriated amount of policyholders’
surplus.
Underlying GAAP combined
ratio ................... The sum of the underlying loss and LAE ratio and the underlying
underwriting expense ratio.
Underlying loss and LAE ratio . The ratio of incurred losses and loss adjustment expenses, reduced
by an allocation of fee income, to net earned premiums, excluding
the impact of catastrophe losses and prior year reserve
development.
Underlying underwriting
expense ratio ............. The ratio of underwriting expenses incurred, reduced by an
allocation of fee income and billing and policy fees, to net earned
premiums, excluding the impact of catastrophe losses.
Underlying underwriting margin Net earned premiums and fee income less claims and claim
adjustment expenses (excluding catastrophe losses and prior year
reserve development) and insurance-related expenses.
Underwriter ............... An employee of an insurance company who examines, accepts or
rejects risks and classifies accepted risks in order to charge an
appropriate premium for each accepted risk. The underwriter is
expected to select business that will produce an average risk of loss
no greater than that anticipated for the class of business.
Underwriting .............. The insurer’s or reinsurer’s process of reviewing applications for
insurance coverage, and the decision as to whether to accept all or
part of the coverage and determination of the applicable premiums;
also refers to the acceptance of that coverage.
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