Travelers 2015 Annual Report Download - page 151

International reserves are generally analyzed by country and general coverage category
(e.g., General Liability in Canada, Commercial Property in the United Kingdom, etc.). The business is
also generally split by direct versus assumed reinsurance for a given coverage. Where the underlying
insured hazard is outside the United States, the underlying coverages are generally similar to those
described under the Homeowners, Personal Automobile, Commercial Automobile, General Liability,
Commercial Property and Surety discussions above, taking into account differences in the legal
environment and differences in terms and conditions. However, statutory coverage differences exist
amongst various jurisdictions. For example, in some jurisdictions there are no aggregate policy limits on
certain liability coverages.
Other reserves, primarily assumed reinsurance in runoff, are generally analyzed by program/pool,
treaty type, and general coverage category (e.g., General Liability—excess of loss reinsurance). Excess
exposure requires the insured to ‘‘prove’’ not only claims under the policy, but also the prior payment
of claims reaching up to the excess policy’s attachment point.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the
required International and other reserves (beyond those included in the general discussion section, and
in the Personal Automobile, Homeowners, General Liability, Commercial Property, Commercial
Automobile and Surety discussions above) include:
International and other risk factors
• Changes in claim handling procedures, including those of the primary carriers
• Changes in policy provisions or court interpretation of such provision
• Economic trends
• New theories of liability
• Trends in jury awards
• Changes in the propensity to sue
• 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
• Changes in claim adjuster office structure (causing distortions in the data)
• Changes in foreign currency exchange rates
International and other book of business risk factors
• Changes in policy provisions (e.g., deductibles, policy limits, endorsements, ‘‘claims-made’’
language)
• 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 International and other (excluding
asbestos and environmental), a 1% increase (decrease) in incremental paid loss development for each
future calendar year could result in a 1.2% increase (decrease) in claims and claim adjustment expense
reserves. International and other reserves (excluding asbestos and environmental) represent
approximately 9% of the Company’s total claims and claim adjustment expense reserves.
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