Travelers 2014 Annual Report Download - page 47

Table of Contents
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A given accident year's cumulative losses are then projected to ultimate by multiplying
current cumulative losses by successive age
- to - age link ratios up to that future age where
growth is expected to end. For example, if growth is expected to end at 60 months, then the
ultimate indication for an accident year with cumulative losses at 12 months equals those
losses times a 12 to 24 month link ratio, times a 24 to 36 month link ratio, times a
36 to 48 month link ratio, times a 48 to 60 month link ratio.
Advanced applications of the method include adjustments for changing conditions during
the historical period and anticipated changes in the future.
Pool
An organization of insurers or reinsurers through which particular types of risks are
underwritten with premiums, losses and expenses being shared in agreed
- upon percentages.
Premiums
The amount charged during the year on policies and contracts issued, renewed or reinsured
by an insurance company.
Property insurance
Insurance that provides coverage to a person or business with an insurable interest in
tangible property for that person's or business's property loss, damage or loss of use.
Quota share reinsurance
Reinsurance wherein the insurer cedes an agreed - upon fixed percentage of liabilities,
premiums and losses for each policy covered on a pro rata basis.
Rates
Amounts charged per unit of insurance.
Redundancy
With regard to reserves for a given liability, a redundancy exists when it is estimated or
determined that the reserves are greater than what will be needed to pay the ultimate
settlement value of the related liabilities. Where the redundancy is the result of an estimate,
the estimated amount of redundancy (or even the finding of whether or not a redundancy
exists) may change as new information becomes available.
Reinstatement premiums
Additional premiums payable to reinsurers to restore coverage limits that have been
exhausted as a result of reinsured losses under certain excess
- of - loss reinsurance treaties.
Reinsurance
The practice whereby one insurer, called the reinsurer, in consideration of a premium paid to
that insurer, agrees to indemnify another insurer, called the ceding company, for part or all of
the liability of the ceding company under one or more policies or contracts of insurance
which it has issued.
Reinsurance agreement
A contract specifying the terms of a reinsurance transaction.
Renewal premium change
The estimated change in average premium on policies that renew, including rate and
exposure changes. Such statistics are subject to change based on a number of factors,
including changes in actuarial estimates.