Travelers 2013 Annual Report Download - page 161

accident year 2011. The 2011 change reflected worse than expected severity for the 2007-2010 accident
years.
Homeowners and Personal Lines Other
Homeowners is generally considered a short tail coverage. Most payments are related to the
property portion of the policy, where the claim reporting and settlement process is generally restricted
to the insured and the insurer. Claims on property coverage are typically reported soon after the actual
damage occurs, although delays of several months are not unusual. The resulting settlement process is
typically fairly short term, although exceptions do exist.
The liability portion of the homeowners policy generates claims which take longer to pay due to
the involvement of litigation and negotiation, but with generally small reporting lags.
Overall, the line is generally high frequency, low to moderate severity (except for catastrophes),
with simple to moderate claim complexity.
Homeowners reserves are typically analyzed in two components: non-catastrophe related losses and
catastrophe loss payments.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the
required homeowners reserves (beyond those included in the general discussion section) include:
Non-catastrophe risk factors
• Salvage opportunities
• Amount of time to return property to residential use
• Changes in weather patterns
• Local building codes
• Litigation trends
• Trends in jury awards
• Court interpretation of policy provisions (such as occurrence definition, or wind versus flooding)
• Lags in reporting claims (e.g., winter damage to summer homes, hidden damage after an
earthquake, hail damage to roofs and/or equipment on roofs)
• Court or legislative changes to the statute of limitations
Catastrophe risk factors
• Physical concentration of policyholders
• Availability and cost of local contractors
• Local building codes
• Quality of construction of damaged homes
• Amount of time to return property to residential use
• For the more severe catastrophic events, ‘‘demand surge’’ inflation, which refers to significant
short-term increases in building material and labor costs due to a sharp increase in demand for
those materials and services
Homeowners book of business risk factors
• Policy provisions mix (e.g., deductibles, policy limits, endorsements, etc.)
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