Travelers 2014 Annual Report Download - page 104

Table of Contents
and 2012, respectively, related to policyholders with whom the Company had entered into settlement agreements limiting the Company's liability.
The Company categorizes its asbestos reserves as follows:
The "policyholders with settlement agreements" category includes structured settlements, coverage in place arrangements and, with respect to
TPC, Wellington accounts. Reserves are based on the expected payout for each policyholder under the applicable agreement. Structured
settlements are arrangements under which policyholders and/or plaintiffs agree to fixed financial amounts to be paid at scheduled times. Coverage
in place arrangements represent agreements with policyholders on specified amounts of coverage to be provided. Payment obligations may be
subject to annual maximums and are only made when valid claims are presented. Wellington accounts refer to the 35 defendants that are parties to a
1985 agreement settling certain disputes concerning insurance coverage for their asbestos claims. Many of the aspects of the Wellington
agreement are similar to those of coverage in place arrangements in which the parties have agreed on specific amounts of coverage and the terms
under which the coverage can be accessed. As discussed above, on July 22, 2014, the United States Court of Appeals for the Second Circuit ruled
that all the conditions of the Direct Action Settlements had been satisfied. As a result, during the third quarter of 2014, $502 million of reserves
included in the unallocated IBNR component in the "home office and field office" category were reclassified to the "Policyholders with settlement
agreements" category. For a full discussion of these settlement agreements, including the payment of this settlement and related interest in January
2015, see the "Settlement of Asbestos Direct Action Litigation" section of note 16 of notes to the consolidated financial statements.
The "home office and field office" category relates to all other policyholders and also includes IBNR reserves and reserves for the costs of
defending asbestos
- related coverage litigation. IBNR reserves in the "home office and field office" category include amounts for new claims from
and adverse development on existing "home office and field office" policyholders, as well as reserves for claims from policyholders reporting
asbestos claims for the first time and for policyholders for which there is, or may be, litigation. Policyholders are identified for the annual home
office review based upon, among other factors: a combination of past payments and current case reserves in excess of a specified threshold
(currently $100,000), perceived level of exposure, number of reported claims, products/completed operations and potential "non
- product"
exposures, size of policyholder and geographic distribution of products or services sold by the policyholder. The "assumed reinsurance and other"
category primarily consists of reinsurance of excess coverage, including various pool participations.
On January 29, 2009, the Company and PPG Industries, Inc ("PPG"), along with approximately 30 other insurers of PPG, agreed in principle to
an agreement to settle asbestos
- related coverage litigation under insurance policies issued to PPG. The tentative settlement agreement has been
incorporated into the Modified Third Amended Plan of Reorganization ("Amended Plan") proposed as part of the Pittsburgh Corning Corp.
("PCC," which is 50% owned by PPG) bankruptcy proceeding. Pursuant to the proposed Amended Plan, which was filed on January 30, 2009, PCC,
along with enumerated other companies (including PPG as well as the Company as a participating insurer), are to receive protections
103
Number of
Policyholders
Total Net Paid
Net Asbestos
Reserves
(at and for the year ended December 31, $ in millions)
2014
2013
2014
2013
2014
2013
Policyholders with settlement agreements
17
15
$
19
$
3
$
613
$
108
Home office and field office
1,692
1,690
197
195
1,574
2,047
Assumed reinsurance and other
—
—
26
20
170
195
Total
1,709
1,705
$
242
$
218
$
2,357
$
2,350