Travelers 2014 Annual Report Download - page 136

Table of Contents
Claims and Claim Adjustment Expense Reserves
Gross claims and claim adjustment expense reserves by product line were as follows:
The $1.05 billion decrease in gross claims and claim adjustment expense reserves since December 31, 2013 primarily reflected the impact of
favorable prior year reserve development, changes in foreign currency exchange rates and payments related to operations in runoff.
Asbestos and environmental reserves are included in the General liability, Commercial multi
- peril and International and other lines in the
foregoing summary table. Asbestos and environmental reserves are discussed separately; see "Asbestos Claims and Litigation", "Environmental
Claims and Litigation" and "Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves."
Claims and claim adjustment expense reserves represent management's estimate of ultimate unpaid costs of losses and loss adjustment
expenses for claims that have been reported and claims that have been incurred but not yet reported (IBNR). Claims and claim adjustment expense
reserves do not represent an exact calculation of liability, but instead represent management estimates, generally utilizing actuarial expertise and
projection techniques, at a given accounting date. These estimates are expectations of what the ultimate settlement and administration of claims will
cost upon final resolution in the future, based on the Company's assessment of facts and circumstances then known, review of historical settlement
patterns, estimates of trends in claims severity and frequency, expected interpretations of legal theories of liability and other factors. In establishing
gross claims and claim adjustment expense reserves, the Company also considers salvage and subrogation. Estimated recoveries from reinsurance
are included in "Reinsurance Recoverables" as an asset on the Company's consolidated balance sheet. The claims and claim adjustment expense
reserves are reviewed regularly by qualified actuaries employed by the Company.
The process of estimating claims and claim adjustment expense reserves involves a high degree of judgment and is subject to a number of
variables. These variables can be affected by both internal and external events, such as changes in claims handling procedures, changes in
individuals involved in the reserve estimation process, economic inflation, legal trends and legislative changes, among others. The impact of many
of these items on ultimate costs for claims and claim adjustment expenses is difficult to estimate. Estimation difficulties also differ significantly by
product line due to differences in claim complexity, the volume of claims, the potential severity of individual claims, the determination of occurrence
date for a claim and reporting lags (the time between the occurrence of the policyholder event and when it is actually reported to the insurer).
Informed judgment is applied throughout the
135
December 31, 2014
December 31, 2013
(in millions)
Case
IBNR
Total
Case
IBNR
Total
General liability
$
5,886
$
7,826
$
13,712
$
5,355
$
8,604
$
13,959
Commercial property
795
496
1,291
778
542
1,320
Commercial multi - peril
1,849
1,819
3,668
1,879
1,707
3,586
Commercial automobile
2,094
1,249
3,343
2,305
1,219
3,524
Workers' compensation
10,067
8,191
18,258
9,918
7,856
17,774
Fidelity and surety
233
573
806
426
818
1,244
Personal automobile
1,737
848
2,585
1,793
785
2,578
Homeowners and personal—
other
578
525
1,103
635
551
1,186
International and other
3,254
1,804
5,058
3,585
2,109
5,694
Property - casualty
26,493
23,331
49,824
26,674
24,191
50,865
Accident and health
26
—
26
30
—
30
Claims and claim
adjustment expense
reserves
$
26,519
$
23,331
$
49,850
$
26,704
$
24,191
$
50,895