Travelers 2015 Annual Report Download - page 41

Excess and surplus lines
insurance ............... Insurance for risks not covered by standard insurance due to the
unique nature of the risk. Risks could be placed in excess and
surplus lines markets due to any number of characteristics, such as
loss experience, unique or unusual exposures, or insufficient
experience in business. Excess and surplus lines are less regulated
by the states, allowing greater flexibility to design specific insurance
coverage and negotiate pricing based on the risks to be secured.
Excess liability ............. Additional casualty coverage above a layer of insurance exposures.
Excess-of-loss reinsurance ..... Reinsurance that indemnifies the reinsured against all or a specified
portion of losses over a specified dollar amount or ‘‘retention.’’
Exposure ................. The measure of risk used in the pricing of an insurance product.
The change in exposure is the amount of change in premium on
policies that renew attributable to the change in portfolio risk.
Facultative reinsurance ....... The reinsurance of all or a portion of the insurance provided by a
single policy. Each policy reinsured is separately negotiated.
Fair Access to Insurance
Requirements (FAIR) Plan . . A residual market mechanism which provides property insurance to
those unable to obtain such insurance through the regular
(voluntary) market. FAIR plans are set up on a state-by-state basis
to cover only those risks in that state. For more information, see
‘‘residual market (involuntary business).’’
Fidelity and surety programs . . . Fidelity insurance coverage protects an insured for loss due to
embezzlement or misappropriation of funds by an employee. Surety
is a three-party agreement in which the insurer agrees to pay a
third party or make complete an obligation in response to the
default, acts or omissions of an insured.
Gross written premiums ...... The direct and assumed contractually determined amounts charged
to the policyholders for the effective period of the contract based
on the terms and conditions of the insurance contract.
Ground-up analysis .......... A method to estimate ultimate claim costs for a given cohort of
claims such as an accident year/product line component. It involves
analyzing the exposure and claim activity at an individual insured
level and then through the use of deterministic or stochastic
scenarios and/or simulations, estimating the ultimate losses for those
insureds. The total losses for the cohort are then the sum of the
losses for each individual insured.
In practice, the method is sometimes simplified by performing the
individual insured analysis only for the larger insureds, with the
costs for the smaller insureds estimated via sampling approaches
(extrapolated to the rest of the smaller insured population) or
aggregate approaches (using assumptions consistent with the
ground-up larger insured analysis).
Guaranteed cost products ..... An insurance policy where the premiums charged will not be
adjusted for actual loss experience during the covered period.
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