Travelers 2014 Annual Report Download - page 155

Table of Contents
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Economic trends
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New theories of liability
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Trends in jury awards
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Changes in the propensity to sue
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Changes in statutes of limitations
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Changes in the underlying court system
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Distortions from losses resulting from large single accounts or single issues
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Changes in tort law
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Changes in claim adjuster office structure (causing distortions in the data)
International and other book of business risk factors
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Changes in policy provisions (e.g., deductibles, policy limits, endorsements, "claims - made" language)
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Changes in underwriting standards
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Product mix (e.g., size of account, industries insured, jurisdiction mix)
Unanticipated changes in risk factors can affect reserves. As an indicator of the causal effect that a change in one or more risk factors could
have on reserves for International and other (excluding asbestos and environmental), a 1% increase (decrease) in incremental paid loss
development for each future calendar year could result in a 1.2% increase (decrease) in claims and claim adjustment expense reserves. International
and other reserves (excluding asbestos and environmental) represent approximately 9% of the Company's total claims and claim adjustment
expense reserves.
International and other represents a combination of different product lines, some of which are in runoff. Comparative historical information is
not available for international product lines as insurers domiciled outside of the U.S. do not file U.S. statutory reports. Comparative historical
information on runoff business is not indicative of reasonably possible one
- year changes in the reserve estimate for this mix of runoff business.
Accordingly, the Company has not included comparative analyses for International and other.
Reinsurance Recoverables
Amounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. The Company evaluates and
monitors the financial condition of its reinsurers under voluntary reinsurance arrangements to minimize its exposure to significant losses from
reinsurer insolvencies. In addition, in the ordinary course of business, the Company becomes involved in coverage disputes with its reinsurers.
Some of these disputes could result in lawsuits and arbitrations brought by or against the reinsurers to determine the Company's rights and
obligations under the various reinsurance agreements. The Company employs dedicated specialists and aggressive strategies to manage
reinsurance collections and disputes.
The Company has entered into two reinsurance contracts in connection with catastrophe bonds issued by Long Point Re III. Both of these
contracts meet the requirements to be accounted for as reinsurance in accordance with guidance for accounting for reinsurance contracts. The
catastrophe bonds are described in more detail in "Item 1—Business—Catastrophe Reinsurance."
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