Travelers 2015 Annual Report Download - page 140

• Changes in policy provisions or court interpretation of such provisions
• New or expanded theories of liability
• Trends in jury awards
• Changes in the propensity to sue, in general with specificity to particular issues
• Changes in the propensity to litigate rather than settle a claim
• Changes in statutes of limitations
• Changes in the underlying court system
• Distortions from losses resulting from large single accounts or single issues
• Changes in tort law
• Shifts in lawsuit mix between federal and state courts
• Changes in claim adjuster office structure (causing distortions in the data)
• The potential impact of inflation on loss costs
• Changes in settlement patterns
General liability book of business risk factors
• Changes in policy provisions (e.g., deductibles, policy limits, endorsements)
• Changes in underwriting standards
• Product mix (e.g., size of account, industries insured, jurisdiction mix)
Unanticipated changes in risk factors can affect reserves. As an indicator of the causal effect that a
change in one or more risk factors could have on reserves for general liability (excluding asbestos and
environmental), a 1% increase (decrease) in incremental paid loss development for each future
calendar year could result in a 1.5% increase (decrease) in claims and claim adjustment expense
reserves.
Historically, the one-year change in the reserve estimate for this product line, excluding estimated
asbestos and environmental amounts, over the last nine years has varied from 8% to 2%
(averaging 4%) for the Company, and from 5% to 2% (averaging 3%) for the industry overall.
The Company’s year-to-year changes are driven by, and are based on, observed events during the year.
The Company believes that its range of historical outcomes is illustrative of reasonably possible
one-year changes in reserve estimates for this product line. General liability reserves (excluding
asbestos and environmental) represent approximately 22% of the Company’s total claims and claim
adjustment expense reserves.
The Company’s change in reserve estimate for this product line, excluding estimated asbestos and
environmental amounts, was 3% for 2015, 5% for 2014 and 4% for 2013. The 2015 change was
primarily concentrated in excess coverages for accident years 2005 through 2013, reflecting a more
favorable legal environment than what the Company previously expected. The 2014 change was
primarily concentrated in excess coverages for accident years 2008 through 2012, reflecting a more
favorable legal environment than what the Company previously expected. The 2013 change was
primarily concentrated in excess coverages for accident years 2010 and prior, reflecting a more
favorable legal environment than what the Company previously expected.
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