The Hartford 2010 Annual Report Download - page 49

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The following table sets forth, for the years ended December 31, 2010, 2009 and 2008, paid and incurred loss activity by the three
categories of claims for asbestos and environmental.
Paid and Incurred Losses and Loss Adjustment Expenses (“LAE”) Development – Asbestos and Environmental
Asbestos [1] Environmental [1]
2010
Paid
Losses & LAE
Incurred
Losses & LAE
Paid
Losses & LAE
Incurred
Losses & LAE
Gross
Direct $ 201 $ 209 $ 35 $ 50
Assumed Reinsurance 128 — 12 5
London Market 42 (15) 7 10
Total 371 194 54 65
Ceded (77) (5) (14) 2
Net $ 294 $ 189 $ 40 $ 67
2009
Gross
Direct $ 160 $ 117 $ 29 $ 92
Assumed Reinsurance 56 52 7 —
London Market 18 — 10 12
Total 234 169 46 104
Ceded (53) (31) (6) (29)
Net prior to reclassification 181 138 40 75
Reclassification of asbestos and
environmental liabilities [2] —
51
—
3
Net $ 181 $ 189 $ 40 $ 78
2008
Gross
Direct $ 207 $ 76 $ 32 $ 69
Assumed – Domestic 61 — 9 (17)
London Market 19 — 6 13
Total 287 76 47 65
Ceded (105) (8) (11) (11)
Net $ 182 $ 68 $ 36 $ 54
[1] Excludes asbestos and environmental paid and incurred loss and LAE reported in Property & Casualty Commercial. Total gross losses and LAE
incurred in Property & Casualty Commercial for the years ended December 31, 2010, 2009 and 2008 includes $15, $17 and $15, respectively,
related to asbestos and environmental claims. Total gross losses and LAE paid in Property & Casualty Commercial for the years ended
December 31, 2010, 2009 and 2008 includes $14, $20 and $12, respectively, related to asbestos and environmental claims.
[2] During the three months ended June 30, 2009, the Company reclassified liabilities of $54 that were previously classified as “All Other” to
“Asbestos” and “Environmental”.
In the fourth quarters of 2010, 2009 and 2008, the Company completed evaluations of certain of its non-asbestos and environmental
reserves, including its assumed reinsurance liabilities. Based on this evaluation in 2010, the Company recognized unfavorable prior
year development of $11. In 2009, the Company recognized unfavorable prior year development of $35, principally driven by higher
projected unallocated loss adjustment expenses. The Company recognized favorable prior year development of $30 in 2008 for its
HartRe assumed reinsurance liabilities principally driven by lower than expected reported losses. In 2008, the favorable HartRe
assumed reinsurance prior year development was offset by unfavorable other non-asbestos and environmental prior year development of
$30, including $25 of adverse development for assumed reinsurance obligations of the Company’ s Bermuda operations.
During the third quarters of 2010, 2009 and 2008, the Company completed its annual ground up environmental reserve evaluations. In
each of these evaluations, the Company reviewed all of its open direct domestic insurance accounts exposed to environmental liability as
well as assumed reinsurance accounts and its London Market exposures for both direct and assumed reinsurance. During the third
quarter of 2010, the Company found estimates for some individual accounts increased based upon unfavorable litigation results and
increased clean-up or expense costs, with the vast majority of this deterioration emanating from a limited number of insureds. In 2009,
the Company found estimates for some individual accounts increased based upon additional sites identified, litigation developments and
new damage and defense cost information obtained on these accounts since the last review. In 2008, the Company found that the
decline in the reporting of new accounts and sites has been slower than anticipated in the previous review. The net effect of these
account-specific changes as well as actuarial evaluations of new account emergence and historical loss and expense paid experience
resulted in $62, $75 and $53 increases in net environmental liabilities in 2010, 2009 and 2008, respectively. The Company currently
expects to continue to perform an evaluation of its environmental liabilities annually.