Travelers 2014 Annual Report Download - page 154

Table of Contents
driven by better than expected loss experience for non
- catastrophe weather - related losses for accident year 2013 and for catastrophe losses for
accident years 2011 through 2013. The 2013 change was primarily driven by better than expected loss experience for catastrophe losses incurred in
2012 and non
- catastrophe weather - related losses and non - weather - related losses for accident years 2012 and 2011. The 2012 change reflected
better than expected loss development related to catastrophe losses incurred in 2011 and non
- catastrophe losses incurred in accident years 2010
and 2011.
International and Other
International and other includes products written by the Company's international operations, as well as all other products not explicitly
discussed above. The principal component of "other" claim reserves is assumed reinsurance written on an excess
- of - loss basis, which may include
reinsurance of non
- U.S. exposures, and is runoff business.
International and other claim liabilities result from a mix of coverages, currencies and jurisdictions/countries. The common characteristic is the
need to customize the analysis to the individual component, and the inability to rely on data characterizations and reporting requirements in the
U.S. statutory reporting framework.
Due to changes in the business mix for this line over time, including the recent acquisition of Dominion, the recently incurred claim liabilities
are relatively shorter tail (due to both the products and the jurisdictions involved, e.g., Canada, the Republic of Ireland and the United Kingdom),
while the older liabilities include some from runoff operations that are extremely long tail (e.g., U.S. excess liabilities reinsured through the London
market, and several underwriting pools in runoff). The speed of claim reporting and claim settlement is a function of the specific coverage provided,
the jurisdiction, the distribution system (e.g., underwriting pool versus direct) and the proximity of the insurance sale to the insured hazard
(e.g., insured and insurer located in different countries). In particular, liabilities arising from the underwriting pools in runoff may result in
significant reporting lags, settlement lags and claim complexity, due to the need to coordinate with other pool members or co
- insurers through a
broker or lead
- insurer for claim settlement purposes.
International reserves are generally analyzed by country and general coverage category (e.g., General Liability in Canada, Commercial Property
in the United Kingdom, etc.). The business is also generally split by direct versus assumed reinsurance for a given coverage. Where the underlying
insured hazard is outside the United States, the underlying coverages are generally similar to those described under the Homeowners, Personal
Automobile, Commercial Automobile, General Liability, Commercial Property and Surety discussions above, taking into account differences in the
legal environment and differences in terms and conditions. For example, in some jurisdictions there are no aggregate policy limits on certain liability
coverages.
Other reserves, primarily assumed reinsurance in runoff, are generally analyzed by program/pool, treaty type, and general coverage category
(e.g., General Liability —excess of loss reinsurance). Excess exposure requires the insured to "prove" not only claims under the policy, but also the
prior payment of claims reaching up to the excess policy's attachment point.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required International and other reserves
(beyond those included in the general discussion section, and in the Personal Automobile, Homeowners, General Liability, Commercial Property,
Commercial Automobile and Surety discussions above) include:
International and other risk factors
•
Changes in claim handling procedures, including those of the primary carriers
•
Changes in policy provisions or court interpretation of such provision
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