Travelers 2013 Annual Report Download - page 52

Deferred acquisition costs ..... Primarily commissions and premium-related taxes that vary with,
and are primarily related to, the production of new contracts and
are deferred and amortized to achieve a matching of revenues and
expenses when reported in financial statements prepared in
accordance with U.S. Generally Accepted Accounting Principles
(GAAP).
Deficiency ................ With regard to reserves for a given liability, a deficiency exists when
it is estimated or determined that the reserves are insufficient to
pay the ultimate settlement value of the related liabilities. Where
the deficiency is the result of an estimate, the estimated amount of
deficiency (or even the finding of whether or not a deficiency exists)
may change as new information becomes available.
Demand surge ............. Significant short-term increases in building material and labor costs
due to a sharp increase in demand for those materials and services,
commonly as a result of a large catastrophe resulting in significant
widespread property damage.
Direct written premiums ...... The amounts charged by an insurer to insureds in exchange for
coverages provided in accordance with the terms of an insurance
contract. The amounts exclude the impact of all reinsurance
premiums, either assumed or ceded.
Earned premiums or premiums
earned ................. That portion of property casualty premiums written that applies to
the expired portion of the policy term. Earned premiums are
recognized as revenues under both Statutory Accounting Practices
(SAP) and GAAP.
Excess and surplus lines
insurance ............... Insurance for risks not covered by standard insurance due to the
unique nature of the risk. Risks could be placed in excess and
surplus lines markets due to any number of characteristics, such as
loss experience, unique or unusual exposures, or insufficient
experience in business. Excess and surplus lines are less regulated
by the states, allowing greater flexibility to design specific insurance
coverage and negotiate pricing based on the risks to be secured.
Excess liability ............. Additional casualty coverage above a layer of insurance exposures.
Excess-of-loss reinsurance ..... Reinsurance that indemnifies the reinsured against all or a specified
portion of losses over a specified dollar amount or ‘‘retention.’’
Exposure ................. The measure of risk used in the pricing of an insurance product.
The change in exposure is the amount of change in premium on
policies that renew attributable to the change in portfolio risk.
Facultative reinsurance ....... The reinsurance of all or a portion of the insurance provided by a
single policy. Each policy reinsured is separately negotiated.
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