Travelers 2014 Annual Report Download - page 48

Table of Contents
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Renewal rate change
The estimated change in average premium on policies that renew, excluding exposure
changes. Such statistics are subject to change based on a number of factors, including
changes in actuarial estimates.
Reported claim development method
A conventional actuarial method to estimate ultimate claim counts for a given cohort of
claims such as an accident year/product line component. If the reported
- to - date counts are
then subtracted from the estimated ultimate counts, the result is an indication of the IBNR
counts.
The approach is the same as that described in this glossary under the "paid loss
development method", but based on the growth in cumulative claim counts rather than paid
losses. The basic premise of the method is that cumulative claim counts for a given cohort of
claims will grow in a stable, predictable pattern from year
- to - year, based on the age of the
cohort.
Residual market (involuntary business)
Insurance market which provides coverage for risks for those unable to purchase insurance
in the voluntary market. Possible reasons for this inability include the risks being too great
or the profit potential too small under the required insurance rate structure. Residual markets
are frequently created by state legislation either because of lack of available coverage such
as: property coverage in a windstorm prone area or protection of the accident victim as in the
case of workers' compensation. The costs of the residual market are usually charged back to
the direct insurance carriers in proportion to the carriers' voluntary market shares for the
type of coverage involved.
Retention
The amount of exposure a policyholder company retains on any one risk or group of risks.
The term may apply to an insurance policy, where the policyholder is an individual, family or
business, or a reinsurance policy, where the policyholder is an insurance company.
Retention rate
The percentage of prior period premiums (excluding renewal premium changes), accounts or
policies available for renewal in the current period that were renewed. Such statistics are
subject to change based on a number of factors, including changes in actuarial estimates.
Retrospective premiums
Premiums related to retrospectively rated policies.
Retrospective rating
A plan or method which permits adjustment of the final premium or commission on the basis
of actual loss experience, subject to certain minimum and maximum limits.
Return on equity
The ratio of net income (loss) less preferred dividends to average shareholders' equity.