Travelers 2015 Annual Report Download - page 47

Statutory accounting practices
(SAP).................. The practices and procedures prescribed or permitted by domiciliary
state insurance regulatory authorities in the United States for
recording transactions and preparing financial statements. SAP
generally reflect a modified going concern basis of accounting.
Statutory capital and surplus . . . The excess of an insurance company’s admitted assets over its
liabilities, including loss reserves, as determined in accordance with
SAP. Admitted assets are assets of an insurer prescribed or
permitted by a state to be recognized on the statutory balance
sheet. Statutory capital and surplus is also referred to as ‘‘statutory
surplus’’ or ‘‘policyholders’ surplus.’’
Statutory net income ......... As determined under SAP, total revenues less total expenses and
income taxes.
Structured settlements ........ Periodic payments to an injured person or survivor for a determined
number of years or for life, typically in settlement of a claim under
a liability policy, usually funded through the purchase of an annuity.
Subrogation ............... A principle of law incorporated in insurance policies, which enables
an insurance company, after paying a claim under a policy, to
recover the amount of the loss from another person or entity who is
legally liable for it.
Third-party liability .......... A liability owed to a claimant (third party) who is not one of the
two parties to the insurance contract. Insured liability claims are
referred to as third-party claims.
Total capitalization .......... The sum of total shareholders’ equity and debt.
Treaty reinsurance .......... The reinsurance of a specified type or category of risks defined in a
reinsurance agreement (a ‘‘treaty’’) between a primary insurer or
other reinsured and a reinsurer. Typically, in treaty reinsurance, the
primary insurer or reinsured is obligated to offer and the reinsurer
is obligated to accept a specified portion of all that type or category
of risks originally written by the primary insurer or reinsured.
Umbrella coverage .......... A form of insurance protection against losses in excess of amounts
covered by other liability insurance policies or amounts not covered
by the usual liability policies.
Unassigned surplus .......... The undistributed and unappropriated amount of statutory capital
and surplus.
Underlying combined ratio .... The underlying combined ratio is the sum of the underlying loss
and LAE ratio and the underlying underwriting expense ratio. The
underlying combined ratio is an indicator of the Company’s
underwriting discipline and underwriting profitability for the current
accident year.
Underlying loss and LAE ratio . The underlying loss and LAE ratio is the loss and LAE ratio,
adjusted to exclude the impact of catastrophes and prior year
reserve development. The underlying loss and LAE ratio is an
indicator of the Company’s underwriting discipline and underwriting
profitability for the current accident year.
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