Travelers 2014 Annual Report Download - page 216

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
and 2012, respectively, related to policyholders with whom the Company had entered into settlement agreements limiting the Company's liability.
Environmental Reserves. In establishing environmental reserves, the Company evaluates the exposure presented by each policyholder and
the anticipated cost of resolution, if any. In the course of this analysis, the Company generally considers the probable liability, available coverage
and relevant judicial interpretations. In addition, the Company considers the many variables presented, such as: the nature of the alleged activities
of the policyholder at each site; the number of sites; the total number of potentially responsible parties at each site; the nature of the alleged
environmental harm and the corresponding remedy at each site; the nature of government enforcement activities at each site; the ownership and
general use of each site; the overall nature of the insurance relationship between the Company and the policyholder, including the role of any
umbrella or excess insurance the Company has issued to the policyholder; the involvement of other insurers; the potential for other available
coverage, including the number of years of coverage; the role, if any, of non
- environmental claims or potential non - environmental claims in any
resolution process; and the applicable law in each jurisdiction. The evaluation of the exposure presented by a policyholder can change as
information concerning that policyholder and the many variables presented is developed. Conventional actuarial techniques are not used to
estimate these reserves.
The Company continues to receive notices from policyholders tendering claims for the first time, frequently under policies issued prior to the
mid - 1980's. These policyholders continue to present smaller exposures, have fewer sites and are lower tier defendants. Further, in many instances,
clean
- up costs have been reduced because regulatory agencies are willing to accept risk - based site analyses and more efficient clean - up
technologies. Over the past several years, the Company has experienced generally favorable trends in the number of new policyholders tendering
environmental claims for the first time and in the number of pending declaratory judgment actions relating to environmental matters. However, the
degree to which those favorable trends have continued has been less than anticipated. In addition, reserve development on existing environmental
claims has been greater than anticipated. As a result of these factors, in 2014, 2013 and 2012, the Company increased its net environmental reserves
by $87 million, $65 million and $90 million, respectively.
Asbestos and Environmental Reserves. As a result of the processes and procedures discussed above, management believes that the
reserves carried for asbestos and environmental claims are appropriately established based upon known facts, current law and management's
judgment. However, the uncertainties surrounding the final resolution of these claims continue, and it is difficult to determine the ultimate exposure
for asbestos and environmental claims and related litigation. As a result, these reserves are subject to revision as new information becomes
available and as claims develop. The continuing uncertainties include, without limitation, the risks and lack of predictability inherent in complex
litigation, any impact from the bankruptcy protection sought by various asbestos producers and other asbestos defendants, a further increase or
decrease in the cost to resolve, and/or the number of, asbestos and environmental claims beyond that which is anticipated, the emergence of a
greater number of asbestos claims than anticipated as a result of extended life expectancies resulting from medical advances and lifestyle
improvements, the role of any umbrella or excess policies the Company has issued, the resolution or adjudication of disputes pertaining to the
amount of available coverage for asbestos and environmental claims in a manner inconsistent with the Company's previous assessment of these
claims, the number and outcome of direct actions against the Company, future developments pertaining to the Company's ability to recover
reinsurance for asbestos and
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