Travelers 2014 Annual Report Download - page 49

Table of Contents
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Risk - based capital (RBC)
A measure adopted by the NAIC and enacted by states for determining the minimum
statutory policyholders' surplus requirements of insurers. Insurers having total adjusted
capital less than that required by the RBC calculation will be subject to varying degrees of
regulatory action depending on the level of capital inadequacy.
Risk retention group
An alternative form of insurance in which members of a similar profession or business band
together to self insure their risks.
Runoff business
An operation which has been determined to be nonstrategic; includes non - renewals of in -
force policies and a cessation of writing new business, where allowed by law.
Salvage
The amount of money an insurer recovers through the sale of property transferred to the
insurer as a result of a loss payment.
S - curve method
A mathematical function which depicts an initial slow change, followed by a rapid change
and then ending in a slow change again. This results in an "S" shaped line when depicted
graphically. The actuarial application of these curves fit the reported data to date for a
particular cohort of claims to an S
- curve to project future activity for that cohort.
Second - injury fund
The employer of an injured, impaired worker is responsible only for the workers'
compensation benefit for the most recent injury; the second
- injury fund would cover the
cost of any additional benefits for aggravation of a prior condition. The cost is shared by the
insurance industry and self
- insureds, funded through assessments to insurance companies
and self
- insureds based on either premiums or losses.
Self - insured retentions
That portion of the risk retained by a person for its own account.
Servicing carrier
An insurance company that provides, for a fee, various services including policy issuance,
claims adjusting and customer service for insureds in a reinsurance pool.
Statutory accounting practices (SAP)
The practices and procedures prescribed or permitted by domiciliary state insurance
regulatory authorities in the United States for recording transactions and preparing financial
statements. Statutory accounting practices generally reflect a modified going concern basis
of accounting.
Statutory capital and surplus
The excess of an insurance company's admitted assets over its liabilities, including loss
reserves, as determined in accordance with statutory accounting practices (SAP). Admitted
assets are assets of an insurer prescribed or permitted by a state to be recognized on the
statutory balance sheet. Statutory capital and surplus is also referred to as "statutory
surplus" or "policyholders' surplus."
Statutory net income
As determined under SAP, total revenues less total expenses and income taxes.