Travelers 2015 Annual Report Download - page 103

The duration of the Company’s investigation and review of these claims and the extent of time
necessary to determine an appropriate estimate, if any, of the value of the claim to the Company vary
significantly and are dependent upon a number of factors. These factors include, but are not limited to,
the cooperation of the policyholder in providing claim information, the pace of underlying litigation or
claim processes, the pace of coverage litigation between the policyholder and the Company and the
willingness of the policyholder and the Company to negotiate, if appropriate, a resolution of any
dispute pertaining to these claims. Because these factors vary from claim-to-claim and
policyholder-by-policyholder, the Company cannot provide a meaningful average of the duration of an
environmental claim. However, based upon the Company’s experience in resolving these claims, the
duration may vary from months to several years.
The Company continues to receive notices from policyholders tendering claims for the first time,
frequently under policies issued prior to the mid-1980s. 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 2015, 2014 and 2013, the Company increased its net environmental reserves
by $72 million, $87 million and $65 million, respectively.
Net environmental paid loss and loss expenses were $55 million, $84 million and $84 million in
2015, 2014 and 2013, respectively. At December 31, 2015, approximately 93% of the net environmental
reserve (approximately $335 million) was carried in a bulk reserve and included unresolved
environmental claims, incurred but not reported environmental claims and the anticipated cost of
coverage litigation disputes relating to these claims. The bulk reserve the Company carries is
established and adjusted based upon the aggregate volume of in-process environmental claims and the
Company’s experience in resolving those claims. The balance, approximately 7% of the net
environmental reserve (approximately $26 million), consists of case reserves.
103