Travelers 2013 Annual Report Download - page 222

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
favorable reserve development, while the 2010 accident year experienced $383 million of net
unfavorable reserve development.
Business Insurance. Net favorable prior year reserve development in 2011 was $245 million,
primarily driven by better than expected loss development in the general liability product line
(excluding increases to asbestos and environmental reserves discussed below) which was concentrated in
excess coverages for accident years 2005 through 2008 and reflected what the Company believes are
more favorable legal and judicial environments than what the Company previously expected, as well as
net favorable prior year reserve development in the commercial property product line that reflected
better than expected loss development for the 2008 and 2009 accident years. The workers’
compensation line of business also contributed slightly to net favorable prior year reserve development
in 2011, as favorable loss development for accident years 2003 through 2009 was largely offset by net
unfavorable loss development for the 2010 accident year. Net favorable prior year reserve development
in 2011 was reduced by $175 million and $76 million increases to asbestos and environmental reserves,
respectively (discussed in further detail in the ‘‘Asbestos and Environmental Reserves’’ section below),
unfavorable prior year reserve development in the commercial multi-peril product line driven by late
reporting of hail claims incurred in 2010 and unfavorable prior year reserve development in the
commercial automobile product line that reflected worse than expected severity for accident years 2009
and 2010.
Financial, Professional & International Insurance. Net favorable prior year reserve development in
2011 was $360 million. In Bond & Financial Products, net favorable development in 2011 primarily
reflected better than expected results for accident years 2008 and prior for the contract surety business,
and better than expected loss development for liability lines of business, driven by the fiduciary product
for accident years 2008 and prior. In International, net favorable development in 2011 reflected better
than expected loss development in Canada, primarily in the surety, directors and officers, and general
liability lines of business for recent accident years and better than expected development in the
Company’s operation at Lloyd’s in the aviation, kidnap & ransom, and property lines for recent
accident years.
Personal Insurance. Net favorable prior year reserve development in 2011 was $110 million, driven
by better than expected loss development related to catastrophe losses incurred in the first half of 2010,
as well as better than expected loss development for accident years 2006 through 2010 in the umbrella
line of business in the Homeowners and Other product line, partially offset by unfavorable prior year
reserve development in the Automobile product line that was driven by worse than expected loss
experience for accident years 2007 through 2010.
Asbestos and Environmental Reserves
At December 31, 2013 and 2012, the Company’s claims and claim adjustment expense reserves
included $2.69 billion and $2.73 billion, respectively, for asbestos and environmental-related claims, net
of reinsurance.
It is difficult to estimate the reserves for asbestos and environmental-related claims due to the
vagaries of court coverage decisions, plaintiffs’ expanded theories of liability, the risks inherent in
complex litigation and other uncertainties, including, without limitation, those which are set forth
below.
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