The Hartford 2015 Annual Report Download - page 44

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Through both facultative and treaty reinsurance agreements, the Company cedes a share of the risks it has underwritten to other
insurance companies. The Company’s net reserves for loss and loss adjustment expenses include anticipated recovery from reinsurers on
unpaid claims. The estimated amount of the anticipated recovery, or reinsurance recoverable, is net of an allowance for uncollectible
reinsurance.
Reinsurance recoverables include an estimate of the amount of gross loss and loss adjustment expense reserves that may be ceded under
the terms of the reinsurance agreements, including IBNR for unpaid losses. The Company calculates its ceded reinsurance projection
based on the terms of any applicable facultative and treaty reinsurance, often including an estimate by reinsurance agreement of how
IBNR for losses will ultimately be ceded.
The Company provides an allowance for uncollectible reinsurance, reflecting management’s best estimate of reinsurance cessions that
may be uncollectible in the future due to reinsurers’ unwillingness or inability to pay. The Company analyzes recent developments in
commutation activity between reinsurers and cedants, recent trends in arbitration and litigation outcomes in disputes between reinsurers
and cedants and the overall credit quality of the Company’s reinsurers. Where its contracts permit, the Company secures funding of
future claim obligations with various forms of collateral, including irrevocable letters of credit, secured trusts, funds held accounts and
group-wide offsets. The allowance for uncollectible reinsurance was $266 as of December 31, 2015, comprised of $46 related to
Commercial Lines and $220 related to Property & Casualty Other Operations.
The Company’s estimate of reinsurance recoverables, net of an allowance for uncollectible reinsurance, is subject to similar risks and
uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment expenses.
The Hartford, like other insurance companies, categorizes and tracks its insurance reserves for its segments by “line of business”.
Commercial Lines policy packages that include property and general liability coverages are generally referred to as the package line of
business. Furthermore, The Hartford regularly reviews the appropriateness of reserve levels at the line of business level, taking into
consideration the variety of trends that impact the ultimate settlement of claims for the subsets of claims in each particular line of
business. In addition, Property & Casualty Other Operations categorizes reserves as asbestos and environmental (“A&E”), whereby the
Company reviews these reserve levels by type of event, rather than by line of business. Adjustments to previously established reserves,
which may be material, are reflected in the operating results of the period in which the adjustment is determined to be necessary. In the
judgment of management, information currently available has been properly considered in the reserves established for losses and loss
adjustment expenses.
Loss and loss adjustment expense reserves by line of business as of December 31, 2015, net of reinsurance are as follows:
Commercial Lines Personal Lines Property & Casualty Other Operations Total Property & Casualty Insurance
Auto liability $ 701 $ 1,361 $ — $ 2,062
Auto physical damage 21 25 — 46
Homeowners’ — 414 — 414
Professional liability 508 — — 508
Package business 1,274 — — 1,274
General liability 2,431 25 — 2,456
Bond 185 — — 185
Commercial property 143 — — 143
A&E 22 1 1,959 1,982
Workers’ compensation 8,981 — — 8,981
Assumed reinsurance — — 138 138
All other non-A&E — — 754 754
Total reserves-net 14,266 1,826 2,851 18,943
Reinsurance and other recoverables 2,293 19 570 2,882
Total reserves-gross $ 16,559 $ 1,845 $ 3,421 $ 21,825