AIG 2015 Annual Report Download - page 142

ITEM 7 / INSURANCE RESERVES / NON-LIFE INSURANCE COMPANIES
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Excess Casualty revised tail factor selections, updated loss development selections for various run-off portfolios, updated
industry experience for asbestos and revised estimates on expected future recoveries from risk-sharing policies.
For 2014, the favorable development in accident years 2013 and 2012 was driven by Financial Lines, Commercial Property
and other short tailed lines, like Personal Lines. For accident year 2007, the favorable development was driven by U.S. and
Canada Financial lines and Excess Casualty. For accident years 2004 and prior, the adverse development was driven by the
Excess Casualty results of the a mass-tort resegmentation analysis, the updated primary workers’ compensation loss
development selections (principally in California, New York and the excess of deductible segments) as well as the run-off
pollution products business (1987-2004) and the asbestos and environmental (1986 and prior) exposure.
For 2013, the favorable development from accident year 2012 was driven primarily by consumer lines and lower losses in
domestic commercial property, while the favorable development from accident year 2010 was primarily the result of favorable
claims emergence from domestic excess casualty and from liability and financial lines coverage policies that are on a claims-
made basis. The adverse development from accident year 2011 was driven by large losses in financial lines and adverse
development in primary casualty, including the loss-sensitive business. The adverse development from accident year 2009
was driven by large losses in financial lines and adverse development in primary casualty including loss-sensitive business.
The adverse development from accident years 2003 and prior was primarily driven by loss development on toxic tort claims,
construction general liability claims and pollution product claims.
For certain categories of claims (e.g., construction defect claims and environmental claims) and for reinsurance recoverable,
losses may sometimes be reclassified to an earlier or later accident year as more information about the date of occurrence
becomes available to AIG. These reclassifications are shown as development in the respective years in the tables above.
The following table summarizes development, (favorable) or unfavorable, of incurred losses and loss adjustment
expenses for accident year 2004 and prior by major class of business and driver of development:
Years Ended December 31,
(in millions) 2015 2014 2013
2004 and prior accident year development by major class of
business and driver of development:
Excess Casualty - primarily mass torts(a) $ 388 $ 301 $ -
Excess Casualty - all other 104 53 251
Primary Casualty - loss sensitive business 1 37 (24)
Primary Casualty - all other(b) 362 196 102
Run-off environmental (1987 to 2004)(c) 74 97 214
Asbestos and Environmental (1986 and prior) 281 124 67
Commutations and Arbitrations(d) 62 63 21
All Other 333 30 98
Total prior year unfavorable development $ 1,605 $ 901 $ 729
(a) Updates of mass tort loss development patterns.
(b) Includes loss development on excess of deductible exposures in workers’ compensation, general liability and commercial auto.
(c) Includes results of comprehensive specific large claim file reviews initiated in 2012 and updated in 2013 and 2014.
(d) The effects of commutations are shown separately from the related classes of business, primarily excess workers’ compensation. Commutations are
reflected for the years in which they were contractually binding.
The main sources of unfavorable prior year development for accident years 2004 and prior recorded in 2013 through 2015 are
as follows:
• Update of the mass tort loss development patterns and segmentation used for U.S. Excess Casualty, which accounted for
$689 million and other loss emergence including specific large loss development totaling $408 million across the three
years;
• Loss sensitive business that is entirely offset by premium adjustments accounted for $14 million;