Allstate 2008 Annual Report Download - page 134

Other Discontinued Lines and Coverages The following table shows reserves for Other Discontinued Lines
which provide for remaining loss and loss expense liabilities related to business no longer written by us, other
than asbestos and environmental as of December 31.
2008 2007 2006
($ in millions)
Other mass torts $177 $189 $185
Workers’ compensation 130 133 140
Commercial and other 201 219 260
Other discontinued lines $508 $541 $585
Other mass torts describes direct excess and reinsurance general liability coverage provided for cumulative
injury losses other than asbestos and environmental. Workers’ compensation and commercial and other include
run-off from discontinued direct primary, direct excess and reinsurance commercial insurance operations of
various coverage exposures other than asbestos and environmental. Reserves are based on considerations similar
to those previously described, as they relate to the characteristics of specific individual coverage exposures.
Potential Reserve Estimate Variability Establishing Discontinued Lines and Coverages net loss reserves for
asbestos, environmental and other discontinued lines claims is subject to uncertainties that are much greater than
those presented by other types of claims. Among the complications are lack of historical data, long reporting
delays, uncertainty as to the number and identity of insureds with potential exposure and unresolved legal issues
regarding policy coverage; unresolved legal issues regarding the determination, availability and timing of
exhaustion of policy limits; plaintiffs’ evolving and expanding theories of liability; availability and collectability of
recoveries from reinsurance; retrospectively determined premiums and other contractual agreements; estimates of
the extent and timing of any contractual liability; the impact of bankruptcy protection sought by various asbestos
producers and other asbestos defendants; and other uncertainties. There are also complex legal issues concerning
the interpretation of various insurance policy provisions and whether those losses are covered, or were ever
intended to be covered, and could be recoverable through retrospectively determined premium, reinsurance or
other contractual agreements. Courts have reached different and sometimes inconsistent conclusions as to when
losses are deemed to have occurred and which policies provide coverage; what types of losses are covered;
whether there is an insurer obligation to defend; how policy limits are determined; how policy exclusions and
conditions are applied and interpreted; and whether clean-up costs represent insured property damage. Our
reserves for asbestos and environmental exposures could be affected by tort reform, class action litigation, and
other potential legislation and judicial decisions. Environmental exposures could also be affected by a change in
the existing federal Superfund law and similar state statutes. There can be no assurance that any reform
legislation will be enacted or that any such legislation will provide for a fair, effective and cost-efficient system for
settlement of asbestos or environmental claims. We believe these issues are not likely to be resolved in the near
future, and the ultimate costs may vary materially from the amounts currently recorded resulting in material
changes in loss reserves. Historical variability of reserve estimates is demonstrated in the Property-Liability Claims
and Claims Expense Reserves section of this document.
Adequacy of Reserve Estimates Management believes its net loss reserves for environmental, asbestos and
other discontinued lines exposures are appropriately established based on available facts, technology, laws,
regulations, and assessments of other pertinent factors and characteristics of exposure (e.g. claim activity,
potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders,
assuming no change in the legal, legislative or economic environment. Due to the uncertainties and factors
described above, management believes it is not practicable to develop a meaningful range for any such additional
net loss reserves that may be required.
Further Discussion of Reserve Estimates For further discussion of these estimates and quantification of the
impact of reserve estimates, reserve reestimates and assumptions, see Notes 7 and 13 to the consolidated
financial statements and the Catastrophe Losses, Property-Liability Claims and Claims Expense Reserves and
Forward-looking Statements and Risk Factors sections of this document.
Reserve for Life-Contingent Contract Benefits Estimation Benefits for these policies are payable over
many years; accordingly, the reserves are calculated as the present value of future expected benefits to be paid,
reduced by the present value of future expected net premiums. Long-term actuarial assumptions of future
investment yields, mortality, morbidity, policy terminations and expenses are used when establishing the reserve
for life-contingent contract benefits payable under insurance policies including traditional life insurance,
life-contingent immediate annuities and voluntary health products. These assumptions, which for traditional life
insurance are applied using the net level premium method, include provisions for adverse deviation and generally
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