Travelers 2013 Annual Report Download - page 116

environmental claim. However, based upon the Company’s experience in resolving these claims, the
duration may vary from months to several years.
The Company continues to receive notices from policyholders tendering claims for the first time,
frequently under policies issued prior to the mid-1980’s. These policyholders continue to present
smaller exposures, have fewer sites and are lower tier defendants. Further, in many instances, clean-up
costs have been reduced because regulatory agencies are willing to accept risk-based site analyses and
more efficient clean-up technologies. Over the past several years, the Company has experienced
generally favorable trends in the number of new policyholders tendering environmental claims for the
first time and in the number of pending declaratory judgment actions relating to environmental
matters. However, the degree to which those favorable trends have continued has been less than
anticipated. In addition, reserve development on existing environmental claims has been greater than
anticipated. As a result, in 2013, 2012 and 2011, the Company increased its net environmental reserves
by $65 million, $90 million and $76 million, respectively.
Net environmental losses paid in 2013, 2012 and 2011 were $84 million, $84 million and
$86 million, respectively. At December 31, 2013, approximately 91% of the net environmental reserve
(approximately $314 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 9% of the net environmental reserve (approximately
$30 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) 2013 2012 2011
Beginning reserves:
Gross ......................................... $352 $346 $354
Ceded ........................................ (5) (5) (3)
Net .......................................... 347 341 351
Incurred losses and loss expenses:
Gross ......................................... 72 99 80
Ceded ........................................ (7) (9) (4)
Net .......................................... 65 90 76
Losses paid:
Gross ......................................... 87 93 88
Ceded ........................................ (3) (9) (2)
Net .......................................... 84 84 86
Acquired reserves, foreign exchange and other:(1)
Gross ......................................... 18 ——
Ceded ........................................ (2) ——
Net .......................................... 16 ——
Ending reserves:
Gross ......................................... 355 352 346
Ceded ........................................ (11) (5) (5)
Net .......................................... $344 $347 $341
(1) Represents acquired reserves of Dominion at November 1, 2013.
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