AIG 2014 Annual Report Download - page 153

ITEM 7 / INSURANCE RESERVES / NON-LIFE INSURANCE COMPANIES
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The following table provides a summary of reserve activity, including estimates for applicable IBNR, relating to
asbestos and environmental claims:
As of or for the Years Ended December 31, 2014 2013 2012
(in millions) Gross Net Gross Net Gross Net
Asbestos:
Liability for unpaid losses and loss adjustment expenses
at beginning of year $4,720 $529 $ 4,896 $ 427 $ 5,226 $ 537
Change in net loss reserves due to retroactive reinsurance:
Paid losses recoverable under retroactive reinsurance contracts -145 - 113 - 111
Re-estimation of amounts recoverable under retroactive
reinsurance contracts(a) -(4) - (91) - (21)
Change in net loss reserves due to retroactive reinsurance -141 - 22 - 90
Dispositions - - (12) (12) (10) (10)
Losses and loss adjustment expenses incurred:
Undiscounted (6) 64 169 6 1 -
Change in discount 39 22 51 18 83 37
Losses and loss adjustment expenses incurred(b) 33 86 220 24 84 37
Losses and loss adjustment expenses paid(b) (636) (368) (444) (59) (404) (227)
Other changes - - 60 127 - -
Liability for unpaid losses and loss adjustment expenses
at end of year $4,117 $388 $ 4,720 $ 529 $ 4,896 $ 427
Environmental:
Liability for unpaid losses and loss adjustment expenses
at beginning of year $313 $163 $ 309 $ 163 $ 204 $ 119
Dispositions - - (1) (1) (1) (1)
Losses and loss adjustment expenses incurred 140 60 98 61 150 75
Losses and loss adjustment expenses paid (85) (38) (93) (60) (44) (30)
Liability for unpaid losses and loss adjustment expenses
at end of year $368 $185 $ 313 $ 163 $ 309 $ 163
Combined:
Liability for unpaid losses and loss adjustment expenses
at beginning of year $5,033 $692 $ 5,205 $ 590 $ 5,430 $ 656
Change in net loss reserves due to retroactive reinsurance:
Paid losses recoverable under retroactive reinsurance contracts -145 - 113 - 111
Re-estimation of amount recoverable under retroactive
reinsurance contracts -(4) - (91) - (21)
Change in net loss reserves due to retroactive reinsurance -141 - 22 - 90
Dispositions - - (13) (13) (11) (11)
Losses and loss adjustment expenses incurred:
Undiscounted 134 124 267 67 151 75
Change in discount 39 22 51 18 83 37
Losses and loss adjustment expenses incurred 173 146 318 85 234 112
Losses and loss adjustment expenses paid (721) (406) (537) (119) (448) (257)
Other changes - - 60 127 - -
Liability for unpaid losses and loss adjustment expenses
at end of year $4,485 $573 $ 5,033 $ 692 $ 5,205 $ 590
(a) Re-estimation of amounts recoverable under retroactive reinsurance contracts includes effect of changes in reserve estimates and changes in discount.
(b) These amounts exclude benefit from retroactive reinsurance.
Transfer of Domestic Asbestos Liabilities Under a Retroactive Reinsurance Arrangement
On June 17, 2011, we completed a transaction under which the bulk of AIG Property Casualty’s net domestic asbestos
liabilities were transferred to National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway, Inc. This was part of
our ongoing strategy to reduce our overall loss reserve development risk. This transaction covers potentially volatile U.S.-