AIG 2014 Annual Report Download - page 201

ITEM 7 / CRITICAL ACCOUNTING ESTIMATES
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involve issues such as allocation of responsibility among potentially responsible parties and the government’s refusal to
release parties from liability. Future claims development also will be affected by the changes in Superfund and waste dump site
coverage and liability issues.
If the asbestos and environmental reserves develop deficiently, resulting deficiencies could have an adverse effect on our
future results of operations for an individual reporting period.
With respect to known environmental claims, we established over two decades ago a specialized environmental claims unit,
which investigates and adjusts all such environmental claims. This unit evaluates environmental claims utilizing a claim-by-
claim approach that involves a detailed review of individual policy terms and exposures. Because each policyholder presents
different liability and coverage issues, we generally evaluate exposure on a policy-by-policy basis, considering a variety of
factors such as known facts, current law, jurisdiction, policy language and other factors that are unique to each policy.
Quantitative techniques must be supplemented by subjective considerations, including management judgment. Each claim is
reviewed at least semi-annually utilizing the aforementioned approach and adjusted as necessary to reflect the current
information.
The environmental claims unit also actively manages and pursues early resolution with respect to these claims in an attempt to
mitigate its exposure to the unpredictable development of these claims. We attempt to mitigate our known long-tail
environmental exposures through a combination of proactive claim-resolution techniques, including policy buybacks, complete
environmental releases, compromise settlements, and, when appropriate, litigation.
Known asbestos claims are managed in a similar manner. Over two decades ago we established a specialized toxic tort claims
unit, which historically investigated and adjusted all such asbestos claims. As part of the above mentioned NICO transaction,
effective January 1, 2011, NICO assumed responsibility for claims handling related to the majority of AIG’s domestic asbestos
liabilities.