The Hartford 2015 Annual Report Download - page 24

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We may experience unfavorable judicial or legislative developments involving claim litigation that could have a material adverse
effect on our business, financial condition, results of operations and liquidity.
The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending or providing
indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford
accounts for such activity through the establishment of unpaid loss and loss adjustment expense reserves. The Company is also involved
in legal actions that do not arise in the ordinary course of business, some of which assert claims for substantial amounts. Pervasive or
significant changes in the judicial environment relating to matters such as trends in the size of jury awards, developments in the law
relating to the liability of insurers or tort defendants, and rulings concerning the availability or amount of certain types of damages could
cause our ultimate liabilities to change from our current expectations. Changes in federal or state tort litigation laws or other applicable
law could have a similar effect. It is not possible to predict changes in the judicial and legislative environment and their impact on the
future development of the adequacy of our loss reserves, particularly reserves for longer-tailed lines of business, including asbestos and
environmental reserves, and how those changes might adversely affect our ability to price our products appropriately. Our business,
financial condition, results of operations and liquidity could also be adversely affected if judicial or legislative developments cause our
ultimate liabilities to increase from current expectations.
Potential changes in regulation may increase our business costs and required capital levels, which could have a material adverse
effect on our business, financial condition, results of operations and liquidity.
We are subject to extensive laws and regulations that are complex, subject to change and often conflicting in their approach or intended
outcomes. Compliance with these laws and regulations is costly and can affect our strategy, as well as the demand for and profitability of
the products we offer.
State insurance laws regulate most aspects of our insurance businesses, and our insurance subsidiaries are regulated by the insurance
departments of the states in which they are domiciled, licensed or authorized to conduct business. These regulatory regimes are generally
designed to protect the interests of policyholders rather than insurers, their shareholders and other investors. U.S. state laws grant
insurance regulatory authorities broad administrative powers with respect to, among other things, licensing and authorization for lines of
business, statutory capital and reserve requirements, limitations on the types and amounts of certain investments, underwriting
limitations, transactions with affiliates, dividend limitations, changes in control, premium rates and a variety of other financial and non-
financial components of an insurer's business.
In addition, future regulatory initiatives could be adopted at the federal or state level that could impact the profitability of our businesses.
For example, the NAIC and state insurance regulators are continually reexamining existing laws and regulations, specifically focusing
on modifications to statutory accounting principles, interpretations of existing laws and the development of new laws and regulations.
The NAIC continues to enhance the U.S. system of insurance solvency regulation, with a particular focus on group supervision, risk-
based capital, accounting and financial reporting, enterprise risk management and reinsurance. Any proposed or future legislation or
NAIC initiatives, if adopted, may be more restrictive on our ability to conduct business than current regulatory requirements or may
result in higher costs or increased statutory capital and reserve requirements. In addition, the Federal Reserve Board and the International
Association of Insurance Supervisors ("IAIS") each have initiatives underway to develop insurance group capital standards. While the
Company would not currently be subject to either of these capital standard regimes, it is possible that in the future standards similar to
what is being contemplated by the Federal Reserve Board or the IAIS could apply to the Company. The NAIC is in the process of
developing a U.S. group capital calculation that will employ a methodology based on aggregated risk-based capital.
Further, because these laws and regulations are complex and sometimes inexact, there is also a risk that our business may not fully
comply with a particular regulator's or enforcement authority's interpretation of a legal, accounting, or reserving issue or that such
regulator’s or enforcement authority’s interpretation may change over time to our detriment, or expose us to different or additional
regulatory risks. The application of these regulations and guidelines by insurers involves interpretations and judgments that may not be
consistent with the opinion of state insurance departments. We cannot provide assurance that such differences of opinion will not result
in regulatory, tax or other challenges to the actions we have taken to date. The result of those potential challenges could require us to
increase levels of statutory capital and reserves or incur higher operating and/or tax costs.
In addition, our international operations are subject to regulation in the relevant jurisdictions in which they operate which in many ways
is similar to the state regulation outlined above, with similar related restrictions and obligations. Our asset management businesses are
also subject to extensive regulation in the various jurisdictions where they operate.
These laws and regulations are primarily intended to protect investors in the securities markets or investment advisory clients and
generally grant supervisory authorities broad administrative powers. Compliance with these laws and regulations is costly, time
consuming and personnel intensive, and may have an adverse effect on our business, financial condition, results of operations and
liquidity. See the risk factor, “The impact of regulatory initiatives and legislative developments, including the implementation of The
Dodd-Frank Act of 2010, could have a material adverse impact on our business, financial condition, results of operations and liquidity.”