Travelers 2015 Annual Report Download - page 45

Redundancy ............... With regard to reserves for a given liability, a redundancy exists
when it is estimated or determined that the reserves are greater
than what will be needed to pay the ultimate settlement value of
the related liabilities. Where the redundancy is the result of an
estimate, the estimated amount of redundancy (or even the finding
of whether or not a redundancy exists) may change as new
information becomes available.
Reinstatement premiums ...... Additional premiums payable to reinsurers to restore coverage
limits that have been exhausted as a result of reinsured losses under
certain excess-of-loss reinsurance treaties.
Reinsurance ............... The practice whereby one insurer, called the reinsurer, in
consideration of a premium paid to that insurer, agrees to
indemnify another insurer, called the ceding company, for part or
all of the liability of the ceding company under one or more
policies or contracts of insurance which it has issued.
Reinsurance agreement ....... A contract specifying the terms of a reinsurance transaction.
Renewal premium change ..... The estimated change in average premium on policies that renew,
including rate and exposure changes. Such statistics are subject to
change based on a number of factors, including changes in
estimates.
Renewal rate change ......... The estimated change in average premium on policies that renew,
excluding exposure changes. Such statistics are subject to change
based on a number of factors, including changes in estimates.
Reported claim development
method ................. A conventional actuarial method to estimate ultimate claim counts
for a given cohort of claims such as an accident year/product line
component. If the reported-to-date counts are then subtracted from
the estimated ultimate counts, the result is an indication of the
IBNR counts.
The approach is the same as that described in this glossary under
the ‘‘paid loss development method’’, but based on the growth in
cumulative claim counts rather than paid losses. The basic premise
of the method is that cumulative claim counts for a given cohort of
claims will grow in a stable, predictable pattern from year-to-year,
based on the age of the cohort.
Residual market (involuntary
business) ................ Insurance market which provides coverage for risks for those unable
to purchase insurance in the voluntary market. Possible reasons for
this inability include the risks being too great or the profit potential
too small under the required insurance rate structure. Residual
markets are frequently created by state legislation either because of
lack of available coverage such as: property coverage in a
windstorm prone area or protection of the accident victim as in the
case of workers’ compensation. The costs of the residual market are
usually charged back to the direct insurance carriers in proportion
to the carriers’ voluntary market shares for the type of coverage
involved.
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