Travelers 2015 Annual Report Download - page 99

predict the outcome of these proceedings, including whether the plaintiffs will be able to sustain these
actions against insurers based on novel legal theories of liability. The Company believes it has
meritorious defenses to these claims and has received favorable rulings in certain jurisdictions.
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.
While the Company believes that over the past several years there has been a reduction in the
volatility associated with the Company’s overall asbestos exposure, there nonetheless remains a high
degree of uncertainty with respect to future exposure from asbestos claims.
In the Home Office and Field Office category, which accounts for the vast majority of
policyholders with active asbestos-related claims, both the number of policyholders tendering asbestos
claims for the first time and the number of policyholders with open asbestos claims declined when
compared with 2014. Gross asbestos payments in this category were essentially unchanged when
compared with 2014, while net asbestos-related payments increased in 2015 due to significant
reinsurance billings relating to one policyholder in 2014. Payments on behalf of policyholders in this
category continue to be influenced by the high level of litigation activity in a limited number of
jurisdictions where individuals alleging serious asbestos-related injury, primarily mesothelioma, continue
to target defendants who were not traditionally primary targets of asbestos litigation.
The Company’s quarterly asbestos reserve reviews include an analysis of exposure and claim
payment patterns by policyholder category, as well as recent settlements, policyholder bankruptcies,
judicial rulings and legislative actions. The Company also analyzes developing payment patterns among
policyholders in the Home Office and Field Office, and Assumed Reinsurance and Other categories as
well as projected reinsurance billings and recoveries. In addition, the Company reviews its historical
gross and net loss and expense paid experience, year-by-year, to assess any emerging trends,
fluctuations, or characteristics suggested by the aggregate paid activity. Conventional actuarial methods
are not utilized to establish asbestos reserves nor have the Company’s evaluations resulted in any way
of determining a meaningful average asbestos defense or indemnity payment.
The completion of these reviews and analyses in 2015, 2014 and 2013 resulted in $224 million,
$250 million and $190 million increases, respectively, in the Company’s net asbestos reserves. In each
year, the reserve increases were primarily driven by increases in the Company’s estimate of projected
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