AIG 2015 Annual Report Download - page 144

ITEM 7 / INSURANCE RESERVES / NON-LIFE INSURANCE COMPANIES
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In 2014, both the retained accounts and retroceded accounts ground-up reviews for asbestos were updated. As a result, we
decreased gross undiscounted asbestos incurred losses by $6 million and increased net undiscounted asbestos incurred
losses by $64 million. The net undiscounted increase reflects a buyout settlement on a retained account as well as a reduction
in estimated ceded loss reserves (prior to the retroactive reinsurance retrocession). For environmental, we increased gross
environmental incurred losses by $140 million and net environmental incurred losses by $60 million as a result of top-down
actuarial analyses performed during the year as well as development on a number of large accounts.
In 2013, we completed a ground-up review of all our remaining retained accounts for asbestos. In addition, a subsidiary of the
retrocessionaire for our retroactive reinsurance contract completed a ground-up asbestos study for the largest accounts it
assumed. As a result, we increased gross asbestos incurred losses by $169 million and net asbestos incurred losses by $6
million. For environmental, we increased gross environmental incurred losses by $98 million and net environmental incurred
losses by $61 million as a result of top-down actuarial analyses performed during the year as well as development on a
number of large accounts.
In addition to the U.S. asbestos and environmental reserve amounts shown in the tables below, the Non - Life Insurance
Companies also have asbestos reserves relating to foreign risks written by non-U.S. entities of $121 million gross and $93
million net as of December 31, 2015. The asbestos reserves relating to non-U.S. risks written by non-U.S. entities were $132
million gross and $105 million net as of December 31, 2014.
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, 2015 2014 2013
(in millions) Gross Net Gross Net Gross Net
Asbestos:
Liability for unpaid losses and loss adjustment expenses
at beginning of year $4,117 $388 $ 4,720 $ 529 $ 4,896 $ 427
Change in net loss reserves due to retroactive reinsurance -20 - 141 - 22
Dispositions - - - - (12) (12)
Losses and loss adjustment expenses incurred:
Undiscounted 13 164 (6) 64 169 6
Change in discount 9439 22 51 18
Losses and loss adjustment expenses incurred* 22 168 33 86 220 24
Losses and loss adjustment expenses paid* (544) (130) (636) (368) (444) (59)
Other changes - - - - 60 127
Liability for unpaid losses and loss adjustment expenses
at end of year $3,595 $446 $ 4,117 $ 388 $ 4,720 $ 529
Environmental:
Liability for unpaid losses and loss adjustment expenses
at beginning of year $368 $185 $ 313 $ 163 $ 309 $ 163
Dispositions - - - - (1) (1)
Losses and loss adjustment expenses incurred 214 117 140 60 98 61
Losses and loss adjustment expenses paid (37) (32) (85) (38) (93) (60)
Other changes - 6 - - - -
Liability for unpaid losses and loss adjustment expenses
at end of year $545 $276 $ 368 $ 185 $ 313 $ 163
Combined:
Liability for unpaid losses and loss adjustment expenses
at beginning of year $4,485 $573 $ 5,033 $ 692 $ 5,205 $ 590
Change in net loss reserves due to retroactive reinsurance -20 - 141 - 22
Dispositions - - - - (13) (13)