Travelers 2013 Annual Report Download - page 112

TPC had entered into settlement agreements, which are subject to a number of contingencies, in
connection with a number of these direct action claims (Direct Action Settlements). 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.
Because each policyholder presents different liability and coverage issues, the Company generally
reviews the exposure presented by each policyholder at least annually. Among the factors which the
Company may consider in the course of this review are: available insurance coverage, including the role
of any umbrella or excess insurance the Company has issued to the policyholder; limits and deductibles;
an analysis of the policyholder’s potential liability; the jurisdictions involved; past and anticipated future
claim activity and loss development on pending claims; past settlement values of similar claims;
allocated claim adjustment expense; potential role of other insurance; the role, if any, of non-asbestos
claims or potential non-asbestos claims in any resolution process; and applicable coverage defenses or
determinations, if any, including the determination as to whether or not an asbestos claim is a products/
completed operation claim subject to an aggregate limit and the available coverage, if any, for that
claim.
In the third quarter of 2013, the Company completed its annual in-depth asbestos claim review,
including a review of active policyholders and litigation cases for potential product and ‘‘non-product’’
liability, and noted the continuation of the following trends:
• continued high level of litigation activity in certain jurisdictions involving individuals alleging
serious asbestos-related illness;
• while overall payment patterns have been generally stable, there has been an increase in severity
for certain policyholders due to the continued high level of litigation activity;
• continued moderate level of asbestos-related bankruptcy activity; and
• the absence of new theories of liability or new classes of defendants.
While the Company believes that over the past several years there has been a reduction in the
volatility associated with the Company’s overall asbestos exposure, there nonetheless remains a high
degree of uncertainty with respect to future exposure from asbestos claims.
The Home Office and Field Office categories, which account for the vast majority of policyholders
with active asbestos-related claims, experienced a slight increase in the number of policyholders with
open asbestos claims at December 31, 2013 compared with December 31, 2012, while net asbestos-
related payments in these categories decreased slightly in 2013 compared with 2012. Payments on
behalf of policyholders in these categories continue to be influenced by the high level of litigation
activity in a limited number of jurisdictions where individuals alleging serious asbestos-related injury
continue to target defendants who were not traditionally primary targets of asbestos litigation.
The Company’s quarterly asbestos reserve reviews include an analysis of exposure and claim
payment patterns by policyholder category, as well as recent settlements, policyholder bankruptcies,
judicial rulings and legislative actions. The Company also analyzes developing payment patterns among
policyholders in the Home Office, Field Office and Assumed Reinsurance and Other categories as well
as projected reinsurance billings and recoveries. In addition, the Company reviews its historical gross
and net loss and expense paid experience, year-by-year, to assess any emerging trends, fluctuations, or
characteristics suggested by the aggregate paid activity. Conventional actuarial methods are not utilized
to establish asbestos reserves nor have the Company’s evaluations resulted in any way of determining a
meaningful average asbestos defense or indemnity payment.
The completion of these reviews and analyses in 2013, 2012 and 2011 resulted in $190 million,
$175 million and $175 million increases, respectively, in the Company’s net asbestos reserves in each
period. In each year, the reserve increases were primarily driven by increases in the Company’s
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