Travelers 2014 Annual Report Download - page 103

Table of Contents
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 2014, 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,
primarily involving mesothelioma claims;
•
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; and
•
continued moderate level of asbestos - related bankruptcy activity.
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 net asbestos
- related payments in 2014 when compared with 2013. The number of policyholders with pending
asbestos claims in these categories as of December 31, 2014 was essentially unchanged when compared with December 31, 2013. 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.
The completion of these reviews and analyses in 2014, 2013 and 2012 resulted in $250 million, $190 million and $175 million increases,
respectively, in the Company's net asbestos reserves. In each year, the reserve increases were primarily driven by increases in the Company's
estimate of projected settlement and defense costs related to a broad number of policyholders in the Home Office category due to a higher level of
litigation activity surrounding mesothelioma claims than previously anticipated. In addition, the reserve increases in 2013 and 2012 also reflected
higher projected payments on assumed reinsurance accounts. The increase in the estimate of projected settlement and defense costs resulted from
payment trends that continue to be higher than previously anticipated due to the impact of the current litigation environment discussed above.
Notwithstanding these trends, the Company's overall view of the underlying asbestos environment is essentially unchanged from recent periods
and there remains a high degree of uncertainty with respect to future exposure to asbestos claims.
Net asbestos paid loss and loss expenses in 2014, 2013 and 2012 were $242 million, $218 million and $236 million, respectively. Approximately
8%, 1% and 6% of total net paid losses in 2014, 2013
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