Travelers 2015 Annual Report Download - page 211

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
in the Company’s operations at Lloyd’s. These factors contributing to net favorable prior year reserve
development in 2013 were partially offset by $190 million and $65 million increases to asbestos and
environmental reserves, respectively, which are discussed in further detail in the ‘‘Asbestos and
Environmental Reserves’’ section below and by higher than expected loss experience in the public and
product liability line of business in the United Kingdom.
Bond & Specialty Insurance. Net favorable prior year reserve development in 2013 totaled
$232 million, primarily driven by better than expected loss experience in the contract surety product
line for accident years 2010 and prior.
Personal Insurance. Net favorable prior year reserve development in 2013 totaled $209 million,
primarily driven by better than expected loss experience in the Homeowners and Other product line for
catastrophe losses incurred in 2012, and non-catastrophe weather-related losses and non-weather-
related losses for accident years 2012 and 2011.
Asbestos and Environmental Reserves
At December 31, 2015 and 2014, the Company’s claims and claim adjustment expense reserves
included $2.17 billion and $2.70 billion, respectively, for asbestos and environmental-related claims, net
of reinsurance.
It is difficult to estimate the reserves for asbestos and environmental-related claims due to the
vagaries of court coverage decisions, plaintiffs’ expanded theories of liability, the risks inherent in
complex litigation and other uncertainties, including, without limitation, those which are set forth
below.
Asbestos Reserves. Because each policyholder presents different liability and coverage issues, the
Company generally reviews the exposure presented by each policyholder at least annually. Among the
factors which the Company may consider in the course of this review are: available insurance coverage,
including the role of any umbrella or excess insurance the Company has issued to the policyholder;
limits and deductibles; an analysis of the policyholder’s potential liability; the jurisdictions involved; past
and anticipated future claim activity and loss development on pending claims; past settlement values of
similar claims; allocated claim adjustment expense; potential role of other insurance; the role, if any, of
non-asbestos claims or potential non-asbestos claims in any resolution process; and applicable coverage
defenses or determinations, if any, including the determination as to whether or not an asbestos claim
is a products/completed operation claim subject to an aggregate limit and the available coverage, if any,
for that claim.
In the third quarter of 2015, the Company completed its annual in-depth asbestos claim review,
including a review of active policyholders and litigation cases for potential product and ‘‘non-product’’
liability, and noted the continuation of the following trends:
• continued high level of litigation activity in certain jurisdictions involving individuals alleging
serious asbestos-related illness, primarily involving mesothelioma claims;
• while overall payment patterns have been generally stable, there has been an increase in severity
for certain policyholders due to the continued high level of litigation activity; and
• continued moderate level of asbestos-related bankruptcy activity.
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