Travelers 2014 Annual Report Download - page 43

Table of Contents
42
Deficiency
With regard to reserves for a given liability, a deficiency exists when it is estimated or
determined that the reserves are insufficient to pay the ultimate settlement value of the
related liabilities. Where the deficiency is the result of an estimate, the estimated amount of
deficiency (or even the finding of whether or not a deficiency exists) may change as new
information becomes available.
Demand surge
Significant short - term increases in building material and labor costs due to a sharp increase
in demand for those materials and services, commonly as a result of a large catastrophe
resulting in significant widespread property damage.
Direct written premiums
The amounts charged by an insurer to insureds in exchange for coverages provided in
accordance with the terms of an insurance contract. The amounts exclude the impact of all
reinsurance premiums, either assumed or ceded.
Earned premiums or premiums earned
That portion of property casualty premiums written that applies to the expired portion of the
policy term. Earned premiums are recognized as revenues under both Statutory Accounting
Practices (SAP) and GAAP.
Excess and surplus lines insurance
Insurance for risks not covered by standard insurance due to the unique nature of the risk.
Risks could be placed in excess and surplus lines markets due to any number of
characteristics, such as loss experience, unique or unusual exposures, or insufficient
experience in business. Excess and surplus lines are less regulated by the states, allowing
greater flexibility to design specific insurance coverage and negotiate pricing based on the
risks to be secured.
Excess liability
Additional casualty coverage above a layer of insurance exposures.
Excess - of - loss reinsurance
Reinsurance that indemnifies the reinsured against all or a specified portion of losses over a
specified dollar amount or "retention."
Exposure
The measure of risk used in the pricing of an insurance product. The change in exposure is
the amount of change in premium on policies that renew attributable to the change in
portfolio risk.
Facultative reinsurance
The reinsurance of all or a portion of the insurance provided by a single policy. Each policy
reinsured is separately negotiated.
Fair Access to Insurance Requirements (FAIR) Plan
A residual market mechanism which provides property insurance to those unable to obtain
such insurance through the regular (voluntary) market. FAIR plans are set up on a state
- by -
state basis to cover only those risks in that state. For more information, see "residual market
(involuntary business)."