Travelers 2013 Annual Report Download - page 114

On January 29, 2009, the Company and PPG Industries, Inc. (‘‘PPG’’), along with approximately
30 other insurers of PPG, agreed in principle to an agreement to settle asbestos-related coverage
litigation under insurance policies issued to PPG. The tentative settlement agreement has been
incorporated into the Modified Third Amended Plan of Reorganization (‘‘Amended Plan’’) proposed as
part of the Pittsburgh Corning Corp. (‘‘PCC,’’ which is 50% owned by PPG) bankruptcy proceeding.
Pursuant to the proposed Amended Plan, which was filed on January 30, 2009, PCC, along with
enumerated other companies (including PPG as well as the Company as a participating insurer), are to
receive protections afforded by Section 524(g) of the Bankruptcy Code from certain asbestos-related
bodily injury claims. Under the agreement in principle, the Company has the option to make a series of
payments over the next 20 years totaling approximately $620 million to the Trust to be created under
the Amended Plan, or it may elect to make a one-time discounted payment, which, as of March 31,
2014, would total approximately $493 million (approximately $464 million after reinsurance). The
agreement in principle with PPG is subject to numerous contingencies, including final court approval of
the Amended Plan, and the Company has no obligation to make the settlement payment until all
contingencies are satisfied. The Company’s obligations under this agreement in principle are included
in the ‘‘home office and field office’’ category in the preceding table.
The following table displays activity for asbestos losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2013 2012 2011
Beginning reserves:
Gross ..................................... $2,689 $2,780 $2,941
Ceded .................................... (311) (341) (393)
Net ...................................... 2,378 2,439 2,548
Incurred losses and loss expenses:
Gross ..................................... 190 171 195
Ceded .................................... —4 (20)
Net ...................................... 190 175 175
Losses paid:
Gross ..................................... 273 262 356
Ceded .................................... (55) (26) (72)
Net ...................................... 218 236 284
Ending reserves:
Gross ..................................... 2,606 2,689 2,780
Ceded .................................... (256) (311) (341)
Net ...................................... $2,350 $2,378 $2,439
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.
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