Travelers 2013 Annual Report Download - page 223

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
Asbestos Reserves. 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.
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