XML 34 R16.htm IDEA: XBRL DOCUMENT v3.22.0.1
Insurance Claim Reserves
 12 Months Ended
Dec. 31, 2021
Insurance Loss Reserves [Abstract]  
Insurance Claim Reserves INSURANCE CLAIM RESERVES
Claims and claim adjustment expense reserves were as follows:
(at December 31, in millions)20212020
Property-casualty$56,897 $54,510 
Accident and health10 11 
Total$56,907 $54,521 
The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses:
(at and for the year ended December 31, in millions)202120202019
Claims and claim adjustment expense reserves at beginning of year$54,510 $51,836 $50,653 
Less reinsurance recoverables on unpaid losses8,153 8,035 8,182 
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020— 53 — 
Net reserves at beginning of year46,357 43,854 42,471 
Estimated claims and claim adjustment expenses for claims arising in the current year
20,698 19,285 18,854 
Estimated increase (decrease) in claims and claim adjustment expenses for claims arising in prior years
(484)(267)164 
Total increases20,214 19,018 19,018 
Claims and claim adjustment expense payments for claims arising in:
Current year8,401 7,497 7,734 
Prior years9,470 9,092 10,060 
Total payments17,871 16,589 17,794 
Unrealized foreign exchange loss (gain)(12)74 106 
Net reserves at end of year48,688 46,357 43,801 
Plus reinsurance recoverables on unpaid losses8,209 8,153 8,035 
Claims and claim adjustment expense reserves at end of year$56,897 $54,510 $51,836 
Gross claims and claim adjustment expense reserves at December 31, 2021 increased by $2.39 billion over December 31, 2020, primarily reflecting the impacts of (i) higher volumes of insured exposures, (ii) catastrophe losses in 2021, (iii) loss cost trends for the current accident year and (iv) reduced claim settlement activity largely due to continued disruptions in the judicial system related to COVID-19. Gross claims and claim adjustment expense reserves at December 31, 2020 increased by $2.67 billion over December 31, 2019, primarily reflecting the impacts of (i) reduced judicial system and claim settlement activity largely related to COVID-19 and (ii) catastrophe losses in 2020.
Reinsurance recoverables on unpaid losses at December 31, 2021 increased by $56 million over December 31, 2020, primarily reflecting the impacts of catastrophe losses in 2021, partially offset by a lower level of structured settlements and recoverables from mandatory pools and associations. Reinsurance recoverables on unpaid losses at December 31, 2020 increased by $118 million over December 31, 2019, primarily reflecting the impacts of catastrophe losses in 2020, partially offset by a lower level of recoverables from mandatory pools and associations and the $53 million increase in the allowance for estimated uncollectible reinsurance from the cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020.
Beginning in late March 2020, in response to COVID-19, a number of states have enacted changes designed to effectively expand workers’ compensation coverage by creating a presumption of compensability for certain types of workers. In addition, other states are considering similar changes. Depending on the number of states that institute such changes and the terms of the
changes, the Company could experience elevated claims frequency and severity for its workers' compensation line, which could have a material adverse effect on its results of operations.
PG&E Corporation and Pacific Gas and Electric Company (together, PG&E) emerged from bankruptcy on July 1, 2020, the date the Debtors' and Shareholder Proponents' Joint Chapter 11 Plan of Reorganization Dated June 19, 2020 (the Plan) became effective. In accordance with the terms of the Plan, PG&E funded a trust from which the Company and other subrogation claimants have received, and/or will receive, recoveries related to the 2017 and 2018 California wildfires. In 2020, the Company recognized a subrogation benefit related to these claims of $403 million.
Included in the claims and claim adjustment expense reserves are reserves for long-term disability and annuity claim payments, primarily arising from workers’ compensation insurance and workers’ compensation excess insurance policies, that are discounted to the present value of the estimated future payments.  The discount rates used were a range of 3.5% to 5.0% at both December 31, 2021 and 2020.  Total reserves net of the discount were $2.74 billion and $2.69 billion, and the related amount of discount was $1.15 billion and $1.14 billion, at December 31, 2021 and 2020, respectively.  Accretion of the discount is reported as part of “claims and claim adjustment expenses” in the consolidated statement of income and was $48 million, $49 million and $49 million for the years ended December 31, 2021, 2020 and 2019.

Prior Year Reserve Development
The following disclosures regarding reserve development are on a “net of reinsurance” basis.
2021
In 2021, estimated claims and claim adjustment expenses incurred included $484 million of net favorable development for claims arising in prior years, including $538 million of net favorable prior year reserve development and $48 million of accretion of discount that impacted the Company's results of operations.
Business Insurance. Net favorable prior year reserve development in 2021 totaled $173 million, primarily driven by the following:
•Workers' compensation - better than expected loss experience in the segment's domestic operations for multiple accident years;

•Commercial property - better than expected loss experience in the segment's domestic operations for recent accident years;

•International - better than expected loss experience for recent accident years; and

•Commercial automobile - better than expected loss experience in the segment's domestic operations for recent accident years.
Partially offset by:

•Asbestos reserves - an increase of $225 million, primarily in the segment's domestic general liability product line;

•Other reserves - an increase related to run-off operations; and

•Environmental reserves - an increase primarily in the segment's domestic general liability product line.
Bond & Specialty Insurance. Net favorable prior year reserve development in 2021 totaled $105 million, primarily driven by better than expected loss experience in the segment's domestic operations in the fidelity and surety product lines for multiple accident years, partially offset by higher than expected loss experience in the general liability product line for management liability coverages for multiple accident years.
Personal Insurance. Net favorable prior year reserve development in 2021 totaled $260 million, primarily driven by better than expected loss experience in the segment's domestic operations in both the homeowners and other and automobile product lines for recent accident years.
2020
In 2020, estimated claims and claim adjustment expenses incurred included $267 million of net favorable development for claims arising in prior years, including $351 million of net favorable prior year reserve development and $49 million of accretion of discount that impacted the Company's results of operations.
Business Insurance.  Net unfavorable prior year reserve development in 2020 totaled $91 million, primarily driven by the following:
•Asbestos reserves - an increase of $295 million, primarily in the segment's domestic general liability product line;
•General liability (excluding asbestos and environmental) - higher than expected loss experience in the segment's domestic operations for primary and excess coverages for recent accident years, as well as an increase to general liability reserves in the Company's run-off operations related to policies issued more than 20 years ago;
•Commercial automobile - higher than expected loss experience in the segment's domestic operations for recent accident years; and
•Commercial multi-peril (excluding PG&E subrogation recoveries and asbestos and environmental) - higher than expected loss experience in the segment's domestic operations for recent accident years.
Partially offset by:
•Workers' compensation - better than expected loss experience in the segment's domestic operations for multiple accident years;
•Commercial property (excluding PG&E subrogation recoveries) - better than expected loss experience in the segment's domestic operations for multiple accident years; and
•PG&E subrogation recoveries - $81 million of recoveries described above.
Bond & Specialty Insurance.  Net unfavorable prior year reserve development in 2020 totaled $1 million, as higher than expected loss experience in the domestic general liability product line for management liability coverages for recent accident years was largely offset by better than expected loss experience in the surety product line for multiple accident years.
Personal Insurance.  Net favorable prior year reserve development in 2020 totaled $443 million, primarily driven by $322 million of PG&E subrogation recoveries described above and better than expected loss experience in the segment's domestic operations in the automobile product line for recent accident years.
2019
In 2019, estimated claims and claim adjustment expenses incurred included $164 million of net unfavorable development for claims arising in prior years, including $60 million of net unfavorable prior year reserve development and $49 million of accretion of discount that impacted the Company's results of operations.
Business Insurance. Net unfavorable prior year reserve development in 2019 totaled $258 million, primarily driven by the following:
•General liability (excluding asbestos and environmental) - higher than expected loss experience in the segment's domestic operations for primary and excess coverages for multiple accident years, including the impact for accident years 2009 and prior related to the enactment of legislation by a number of states that extended the statute of limitations for childhood sexual molestation claims;
•Commercial automobile - higher than expected loss experience in the segment's domestic operations for recent accident years;
•Asbestos reserves - an increase of $220 million, primarily in the segment's domestic general liability product line;
•Commercial multi-peril - higher than expected loss experience in the segment's domestic operations for recent accident years; and
•Environmental reserves - an increase of $76 million, primarily in the segment's domestic general liability product line,
Partially offset by:
•Workers' compensation - better than expected loss experience in the segment's domestic operations for multiple accident years; and
•Commercial property - better than expected loss experience in the segment's domestic operations for recent accident years.
Bond & Specialty Insurance.  Net favorable prior year reserve development in 2019 totaled $65 million, primarily driven by better than expected loss experience in the segment’s domestic operations in the general liability product line for management liability coverages and in the fidelity and surety product line for multiple accident years.
Personal Insurance.  Net favorable prior year reserve development in 2019 totaled $133 million, primarily driven by better than expected loss experience in the segment's domestic operations in both the automobile and homeowners and other product lines for recent accident years.
Claims Development
The following is a summary of claims and claim adjustment expense reserves, including certain components, for the Company’s major product lines by reporting segment at December 31, 2021.
(at December 31, 2021, in millions)Net Undiscounted
Claims and Claim
Adjustment Expense
Reserves		Discount
(Net of
Reinsurance)		Subtotal:
Net Claims and Claim Adjustment
Expense Reserves		Reinsurance
Recoverables on
Unpaid Losses (4)		Claims and Claim
Adjustment
Expense
Reserves
Business Insurance
General liability$8,893 $(139)$8,754 $978 $9,732 
Commercial property997 — 997 513 1,510 
Commercial multi-peril4,427 — 4,427 225 4,652 
Commercial automobile3,740 — 3,740 303 4,043 
Workers’ compensation (1)
16,623 (948)15,675 665 16,340 
Bond & Specialty Insurance
General liability2,297 — 2,297 173 2,470 
Fidelity and surety527 — 527 6 533 
Personal Insurance
Automobile3,155 — 3,155 442 3,597 
Homeowners (excluding Other)1,661 — 1,661 210 1,871 
International - Canada745 — 745 21 766 
Subtotal — claims and allocated claim adjustment expenses for the products presented in the development tables below
43,065 (1,087)41,978 3,536 45,514 
Other insurance contracts (2)
4,231 (4)4,227 1,825 6,052 
Unallocated loss adjustment expense reserves
2,383 — 2,383 15 2,398 
Structured settlements (3)
— — — 2,856 2,856 
Other100 — 100 (23)77 
Total property-casualty49,779 (1,091)48,688 8,209 56,897 
Accident and health— — — 10 10 
Total$49,779 $(1,091)$48,688 $8,219 $56,907 
___________________________________________
(1)Net discount amount includes discount of $55 million on reinsurance recoverables for long-term disability and annuity claim payments.
(2)Primarily includes residual market, international (other than operations in Canada within the Personal Insurance segment) and runoff assumed reinsurance business.
(3)Includes structured settlements in cases where the Company did not receive a release from the claimant.
(4)Total reinsurance recoverables (on paid and unpaid losses) at December 31, 2021 were $8.45 billion.
The claim development tables that follow present, by accident year, incurred and cumulative paid claims and allocated claim adjustment expense on a historical basis.  This claim development information is presented on an undiscounted, net of reinsurance basis for ten years, or the number of years for which claims incurred typically remain outstanding if less than ten years. The claim development tables also provide the historical average annual percentage payout of incurred claims (including the impact of subrogation recoveries from PG&E for accident years 2017 and 2018 in the commercial property, commercial multi-peril and homeowners and other product lines) by age, net of reinsurance, as supplementary information (identified as unaudited in the tables below). For Personal Insurance - International - Canada, the claim development information reflects the acquisition of The Dominion of Canada General Insurance Company (Dominion) in November 2013 on a retrospective basis (includes Dominion data for years prior to the Company’s acquisition of Dominion).
Business Insurance
General Liability
(dollars in millions)
For the Years Ended December 31,
2012201320142015201620172018201920202021
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Unaudited
Accident YearIBNR Reserves Dec 31, 2021Cumulative Number of Reported Claims
2012$989 $985 $935 $913 $892 $905 $917 $920 $941 $927 $59 25,061 
2013965 975 958 940 927 933 975 975 963 72 22,775 
2014976 989 983 948 956 1,013 988 979 100 22,576 
2015998 956 923 967 1,057 1,087 1,072 113 21,689 
20161,075 1,058 1,087 1,187 1,204 1,179 189 20,556 
20171,133 1,143 1,196 1,234 1,226 266 19,262 
20181,253 1,312 1,344 1,395 407 19,135 
20191,447 1,486 1,498 682 17,717 
20201,467 1,493 1,013 12,141 
20211,591 1,365 9,119 
Total$12,323 
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident YearUnaudited
2012$32 $150 $295 $489 $589 $699 $754 $811 $831 $837 
201335 175 363 498 639 745 816 836 853 
201437 163 321 515 640 750 805 832 
201536 137 336 558 740 828 875 Liability for Claims
201635 191 421 649 758 858 And Allocated Claim
201740 180 378 552 724 Adjustment Expenses,
201842 202 441 709 Net of Reinsurance
201951 233 482 
202061 244 2012 -Before
202167 20212012
Total$6,481 $5,842 $3,051 
Total net liability$8,893 
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Unaudited
Years12345678910
3.5 %12.2 %17.4 %18.3 %13.1 %10.2 %5.8 %3.6 %2.0 %0.6 %
Commercial Property
(dollars in millions)
For the Years Ended December 31,
20172018201920202021
Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance
Unaudited
Accident YearIBNR Reserves December 31, 2021Cumulative Number of Reported Claims
2017$1,209 $1,177 $1,151 $1,128 $1,117 $3 25,143 
20181,093 1,079 1,070 1,068 20 25,077 
20191,069 1,034 1,031 (12)25,376 
20201,107 1,025 38 25,434 
20211,236 94 21,996 
Total$5,477 
Cumulative Paid Claims and Allocated Claim
Adjustment Expenses, Net of Reinsurance
Unaudited
Liability for Claims
Accident YearAnd Allocated Claim
2017$618 $1,003 $1,073 $1,094 $1,103 Adjustment Expenses,
2018561 928 981 1,005 Net of Reinsurance
2019610 957 1,001 
2020580 857 2017 -Before
2021645 20212017
Total$4,611 $866 $131 
Total net liability$997 
Average Annual Percentage Payout of Incurred
Claims by Age, Net of Reinsurance
 Unaudited
Years12345
 55.2 %32.4 %5.2 %2.0 %0.8 %
Commercial Multi-Peril
(dollars in millions)
For the Years Ended December 31,
2012201320142015201620172018201920202021
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Unaudited
Accident YearIBNR Reserves December 31, 2021Cumulative Number of Reported Claims
2012$1,885 $1,883 $1,903 $1,888 $1,888 $1,867 $1,859 $1,854 $1,853 $1,851 $21 105,054 
20131,615 1,623 1,620 1,609 1,591 1,600 1,599 1,598 1,593 26 83,991 
20141,663 1,627 1,625 1,617 1,626 1,627 1,627 1,622 32 78,465 
20151,568 1,625 1,593 1,597 1,606 1,593 1,584 46 71,922 
20161,662 1,623 1,598 1,590 1,601 1,587 63 69,368 
20171,872 1,928 1,956 1,919 1,935 104 72,318 
20181,976 2,114 2,092 2,112 163 72,853 
20192,017 2,087 2,089 294 66,484 
20202,142 2,141 575 67,796 
20212,164 892 47,190 
Total$18,678 
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident YearUnaudited
2012$795 $1,246 $1,424 $1,590 $1,699 $1,752 $1,780 $1,804 $1,811 $1,818 
2013644 987 1,167 1,304 1,410 1,475 1,516 1,532 1,544 
2014628 956 1,154 1,328 1,448 1,512 1,544 1,560 
2015595 970 1,144 1,310 1,409 1,452 1,489 Liability for Claims
2016585 950 1,133 1,278 1,373 1,437 And Allocated Claim
2017716 1,199 1,388 1,531 1,674 Adjustment Expenses,
2018792 1,302 1,500 1,669 Net of Reinsurance
2019707 1,187 1,423 
2020791 1,180 2012 -Before
2021744 20212012
Total$14,538 $4,140 $287 
Total net liability$4,427 
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Unaudited
Years12345678910
37.6 %22.6 %10.8 %9.0 %6.6 %3.5 %2.1 %1.1 %0.6 %0.4 %
Commercial Automobile
(dollars in millions)
For the Years Ended December 31,
20172018201920202021
Incurred Claims and Allocated Claims Adjustment
Expenses, Net of Reinsurance
Unaudited
Accident YearIBNR Reserves December 31, 2021Cumulative Number of Reported Claims
2017$1,386 $1,501 $1,524 $1,522 $1,533 $53 192,155 
20181,645 1,742 1,745 1,761 130 204,588 
20191,835 1,951 1,976 321 206,533 
20201,788 1,677 640 141,722 
20211,741 941 132,893 
Total$8,688 
Cumulative Paid Claims and Allocated Claim
Adjustment Expenses, Net of Reinsurance
Unaudited
Liability for Claims
Accident YearAnd Allocated Claim
2017$456 $746 $1,027 $1,226 $1,361 Adjustment Expenses,
2018515 848 1,159 1,404 Net of Reinsurance
2019539 934 1,269 
2020437 696 2017 -Before
2021453 20212017
Total$5,183 $3,505 $235 
Total net liability$3,740 
Average Annual Percentage Payout of Incurred
Claims by Age, Net of Reinsurance
Unaudited
Years12345
27.6 %18.3 %17.6 %13.4 %8.8 %
Workers’ Compensation
(dollars in millions)
For the Years Ended December 31,
2012201320142015201620172018201920202021
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Unaudited
Accident YearIBNR Reserves December 31, 2021Cumulative Number of Reported Claims
2012$2,447 $2,456 $2,457 $2,456 $2,445 $2,453 $2,416 $2,387 $2,377 $2,375 $347 138,454 
20132,553 2,545 2,540 2,506 2,463 2,423 2,354 2,321 2,304 344 134,573 
20142,554 2,553 2,547 2,476 2,430 2,393 2,352 2,336 393 131,465 
20152,644 2,585 2,505 2,441 2,372 2,279 2,220 462 130,920 
20162,768 2,690 2,569 2,473 2,372 2,300 456 130,036 
20172,779 2,681 2,584 2,483 2,439 638 122,110 
20182,744 2,687 2,599 2,503 737 122,931 
20192,680 2,714 2,699 844 119,678 
20202,559 2,530 1,249 95,611 
20212,356 1,420 83,546 
Total$24,062 
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident YearUnaudited
2012$443 $940 $1,217 $1,394 $1,536 $1,629 $1,689 $1,735 $1,768 $1,793 
2013458 954 1,237 1,413 1,525 1,604 1,659 1,700 1,729 
2014455 944 1,224 1,399 1,505 1,581 1,634 1,672 
2015430 893 1,154 1,310 1,411 1,470 1,520 Liability for Claims
2016421 873 1,118 1,272 1,367 1,433 And Allocated Claim
2017433 890 1,154 1,314 1,418 Adjustment Expenses,
2018440 919 1,169 1,330 Net of Reinsurance
2019466 951 1,229 
2020389 794 2012 -Before
2021427 20212012
Total$13,345 $10,717 $5,906 
Total net liability$16,623 
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Unaudited
Years12345678910
18.2 %19.5 %11.2 %7.0 %4.7 %3.2 %2.4 %1.8 %1.3 %1.1 %
Bond & Specialty Insurance
General Liability
(dollars in millions)
For the Years Ended December 31,
2012201320142015201620172018201920202021
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Unaudited
Accident YearIBNR Reserves December 31, 2021Cumulative Number of Reported Claims
2012$538 $591 $614 $605 $601 $599 $605 $593 $581 $605 $14 4,872 
2013510 565 606 630 654 607 586 575 564 (4)4,467 
2014549 571 563 518 473 452 450 449 15 4,375 
2015528 524 486 437 395 414 413 21 4,226 
2016512 511 504 520 514 510 34 4,398 
2017534 517 526 493 524 65 4,585 
2018530 548 585 595 99 4,795 
2019588 653 665 214 5,290 
2020772 753 399 5,004 
2021812 613 3,847 
Total$5,890 
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident YearUnaudited
2012$38 $160 $255 $342 $383 $419 $436 $453 $459 $493 
201334 154 252 352 400 434 451 462 482 
201438 150 239 312 367 407 418 426 
201538 141 234 310 338 348 381 Liability for Claims
201630 141 233 313 378 446 And Allocated Claim
201738 155 262 340 404 Adjustment Expenses,
201849 182 290 383 Net of Reinsurance
201951 189 323 
202052 210 2012 -Before
202178 20212012
Total$3,626 $2,264 $33 
Total net liability$2,297 
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Unaudited
Years12345678910
7.5 %22.1 %19.0 %16.1 %9.9 %7.3 %4.1 %2.2 %2.2 %5.6 %
Fidelity and Surety
  
(dollars in millions)
For the Years Ended December 31,  
20172018201920202021IBNR Reserves December 31, 2021Cumulative Number of Reported Claims
Incurred Claims and Allocated Claims Adjustment
Expenses, Net of Reinsurance
Accident YearUnaudited 
2017$244 $271 $240 $241 $226 $1 940 
2018 220 235 220 220 2 907 
2019  203 193 200 37 871 
2020   274 203 93 754 
2021    284 253 421 
    Total$1,133   
 Cumulative Paid Claims and Allocated Claim  
Adjustment Expenses, Net of Reinsurance  
Accident YearUnaudited Liability for Claims
      And Allocated Claim
2017$70 $166 $194 $205 $210 Adjustment Expenses,
2018 64 171 202 206 Net of Reinsurance
2019  49 121 147   
2020   50 79 2017 -Before
2021    25 20212017
    Total$667 $466 $61 
     Total net liability$527 
Average Annual Percentage Payout of Incurred
Claims by Age, Net of Reinsurance
 Unaudited
Years12345
 23.6 %35.4 %13.2 %3.4 %2.1 %
Personal Insurance
Automobile
(dollars in millions)
 For the Years Ended December 31,  
 20172018201920202021IBNR Reserves December 31, 2021Cumulative Number of Reported Claims
 Incurred Claims and Allocated Claims Adjustment
Expenses, Net of Reinsurance
Accident YearUnaudited 
2017$3,323 $3,256 $3,221 $3,206 $3,199 $24 1,062,811 
2018 3,281 3,269 3,233 3,220 60 1,051,415 
2019  3,362 3,361 3,333 153 1,032,740 
2020   2,829 2,764 353 808,338 
2021    3,716 1,028 894,499 
    Total$16,232   
 Cumulative Paid Claims and Allocated Claim  
Adjustment Expenses, Net of Reinsurance  
Accident YearUnaudited Liability for Claims
      And Allocated Claim
2017$1,912 $2,575 $2,887 $3,046 $3,121 Adjustment Expenses,
2018 1,889 2,582 2,880 3,040 Net of Reinsurance
2019  1,933 2,650 2,958   
2020   1,571 2,126 2017 -Before
2021    2,062 20212017
    Total$13,307 $2,925 $230 
     Total net liability$3,155 
Average Annual Percentage Payout of Incurred
Claims by Age, Net of Reinsurance
 Unaudited
Years12345
 57.8 %21.0 %9.4 %5.0 %2.4 %
Homeowners (excluding Other)
(dollars in millions)
 For the Years Ended December 31,  
 20172018201920202021IBNR Reserves December 31, 2021Cumulative Number of Reported Claims
 Incurred Claims and Allocated Claims Adjustment
Expenses, Net of Reinsurance
Accident YearUnaudited 
2017$2,312 $2,340 $2,343 $2,170 $2,160 $14 170,198 
2018 2,610 2,574 2,381 2,325 21 187,306 
2019  2,297 2,344 2,343 26 181,209 
2020   3,019 2,967 170 219,786 
2021    3,463 774 203,280 
    Total$13,258   
 Cumulative Paid Claims and Allocated Claim  
Adjustment Expenses, Net of Reinsurance  
Accident YearUnaudited Liability for Claims
      And Allocated Claim
2017$1,471 $2,059 $2,197 $2,089 $2,103 Adjustment Expenses,
2018 1,657 2,298 2,255 2,239 Net of Reinsurance
2019  1,613 2,179 2,269   
2020   2,019 2,673 2017 -Before
2021    2,334 20212017
    Total$11,618 $1,640 $21 
     Total net liability$1,661 
Average Annual Percentage Payout of Incurred
Claims by Age, Net of Reinsurance
 Unaudited
Years12345
 68.7 %25.2 %2.8 %(2.8)%0.7 %
International - Canada
(dollars in millions)
 For the Years Ended December 31,IBNR Reserves December 31, 2021Cumulative
 2012201320142015201620172018201920202021Number of
AccidentIncurred Claims and Allocated Claim Adjustment Expenses, Net of ReinsuranceReported
YearUnaudited Claims
2012$446 $423 $425 $408 $407 $390 $383 $371 $372 $372 $— 51,245 
2013 497 490 481 469 456 454 444 439 436 (7)54,268 
2014  440 456 456 444 437 434 433 430 (10)52,300 
2015   370 369 369 366 367 366 361 (2)45,220 
2016    370 419 420 429 429 428 2 45,764 
2017     355 391 414 414 413 5 46,825 
2018      451 474 475 480 17 50,599 
2019       456 451 473 53 48,179 
2020        356 342 88 30,098 
2021         357 136 26,606 
         Total$4,092   
AccidentCumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance  
YearUnaudited   
2012$170 $237 $268 $295 $324 $342 $351 $356 $362 $365   
2013 199 278 311 345 378 397 415 423 430   
2014  194 272 309 339 371 394 411 426   
2015   166 232 260 290 315 330 344 Liability for Claims
2016    217 291 317 352 377 395 And Allocated Claim
2017     187 263 304 328 356 Adjustment Expenses,
2018      224 312 349 389 Net of Reinsurance
2019       221 296 333   
2020        148 199 2012 -Before
2021         131 20212012
         Total$3,368 $724 $21 
          Total net liability$745 
 Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
 Unaudited
Years12345678910
 45.1 %17.5 %8.0 %7.5 %7.1 %4.6 %3.6 %2.3 %1.6 %0.7 %

The incurred and paid amounts have been translated from the local currency to U.S. dollars using the December 31, 2021 spot rate for all years presented in the table above in order to isolate changes in foreign exchange rates from loss development.
Methodology for Estimating Incurred But Not Reported (IBNR) Reserves
Claims and claim adjustment expense reserves represent management’s estimate of the ultimate liability for unpaid losses and loss adjustment expenses for claims that have been reported and claims that have been incurred but not yet reported (IBNR) as of the balance sheet date.  Claims and claim adjustment expense reserves do not represent an exact calculation of the liability, but instead represent management estimates, primarily utilizing actuarial expertise and projection methods that develop estimates for the ultimate cost of claims and claim adjustment expenses.  Because the establishment of claims and claim adjustment expense reserves is an inherently uncertain process involving estimates and judgment, currently estimated claims and claim adjustment expense reserves may change.  The Company reflects changes to the reserves in the results of operations in the period the estimates are changed.
Cumulative amounts paid and case reserves held as of the balance sheet date are subtracted from the estimate of the ultimate cost of claims and claim adjustment expenses to derive incurred but not reported (IBNR) reserves.  Accordingly, IBNR reserves include the cost of unreported claims, development on known claims and re-opened claims.  This approach to estimating IBNR reserves has been in place for many years, with no material changes in methodology in the past year.
Detailed claim data is typically insufficient to produce a reliable indication of the initial estimate for ultimate claims and claim adjustment expenses for an accident year.  As a result, the initial estimate for an accident year is generally based on an exposure-based method using either the loss ratio projection or the expected loss method.  The loss ratio projection method, which is typically used for guaranteed-cost business, develops an initial estimate of ultimate claims and claim adjustment expenses for an accident year by multiplying earned premium for the accident year by a projected loss ratio.  The projected loss ratio is determined by analyzing prior period experience, and adjusting for loss cost trends, rate level differences, mix of business changes and other known or observed factors influencing the accident year relative to prior accident years.  The expected loss method, which is typically used for loss sensitive business, develops an initial estimate of ultimate claims and claim adjustment expenses for an accident year by analyzing exposures by account.
For prior accident years, the following estimation and analysis methods are principally used by the Company’s actuaries to estimate the ultimate cost of claims and claim adjustment expenses.  These estimation and analysis methods are typically referred to as conventional actuarial methods.
•The paid loss development method assumes that the future change (positive or negative) in cumulative paid losses for a given cohort of claims will occur in a stable, predictable pattern from year-to-year, consistent with the pattern observed in past cohorts.
•The case incurred development method is the same as the paid loss development method but is based on cumulative case-incurred losses rather than paid losses.
•The Bornhuetter-Ferguson method uses an initial estimate of ultimate losses for a given product line reserve component, typically expressed as a ratio to earned premium.  The method assumes that the ratio of additional claim activity to earned premium for that component is relatively stable and predictable over time and that actual claim activity to date is not a credible predictor of further activity for that component.  The method is used most often for more recent accident years where claim data is sparse and/or volatile, with a transition to other methods as the underlying claim data becomes more voluminous and therefore more credible.
•The average value analysis combined with the reported claim development method assumes that average claim values are stable and predictable over time for a particular cohort of claims.  It is typically limited to analysis at more granular levels, such as coverage or hazard/peril, where a more homogeneous subset of claims produce a more stable and fairly predictable average value.  The reported claim development method is the same as the paid loss development method but uses changes in cumulative claim counts to produce estimates of ultimate claim counts rather than ultimate dollars.  The resulting estimate of ultimate claim counts by cohort is multiplied by an average value per claim from an average value analysis to obtain estimated ultimate claims and claim adjustment expenses.

While these are the principal methods utilized, the Company’s actuaries have available to them the full range of actuarial methods developed by the casualty actuarial profession.  The Company’s actuaries are also regularly monitoring developments within the profession for advances in existing techniques or the creation of new techniques that might improve current and future estimates.  Most actuarial methods assume that past patterns demonstrated in the data will repeat themselves in the
future.  For certain reserve components where this assumption may not hold, such as asbestos and environmental reserves, conventional actuarial methods are not utilized by the Company.
Methodology for Determining Cumulative Number of Reported Claims
A claim file is created when the Company is notified of an actual demand for payment, notified of an event that may lead to a demand for payment or when it is determined that a demand for payment could possibly lead to a future demand for payment on another coverage on the same policy or on another policy.  Claim files are generally created for a policy at the claimant by coverage level, depending on the particular facts and circumstances of the underlying event.
For Business Insurance and for Personal Insurance, claim file information is summarized such that the Company generally recognizes one count for each policy claim event by internal regulatory line of business, regardless of the number of claimants or coverages involved.  The claims counts are then accumulated and reported by product line.  While the methodology is generally consistent within each segment for the product lines displayed, there are some minor differences between and within segments.  For Bond & Specialty Insurance, the Company generally recognizes one count per coverage per policy claim event and one count per bond per surety claim event.
For purposes of the claims development tables above, claims reported for direct business are counted even if they eventually close with no loss payment, except in the case of (i) deductible business, where the claim is not counted until the case incurred claim estimate is above the deductible and (ii) International-Canada reported claim counts where claims closed with no loss payment are not counted.  Note that claims with zero claim dollars may still generate some level of claim adjustment expenses.  Claim counts for assumed business are included only to the extent such counts are available. The Company generally does not receive claim count information for which the underlying claim activity is handled by others, including pools and associations.  The Company does not generate claim counts for ceded business. The methods used to summarize claim counts have not changed significantly over the time periods reported in the tables above.
The Company cautions against using the summarized claim count information provided in this disclosure in attempting to project ultimate loss payouts by product line. The Company generally finds claim count data to be useful only on a more granular basis than the aggregated basis disclosed in the claim development tables above, as the risks, average values and other dynamics of the claim process can vary materially by the cause of loss and coverage within product line.  For example, in Personal Automobile, the introduction of roadside assistance coverage resulted in a significant increase in claim counts with a low average claim cost.  For this reason the Company varies its approach to, and in many cases the level of aggregation for, counting claims for internal analysis purposes depending on the particular granular analysis performed.
Asbestos and Environmental Reserves
At December 31, 2021 and 2020, the Company’s claims and claim adjustment expense reserves included $1.66 billion and $1.65 billion, respectively, for asbestos and environmental-related claims, net of reinsurance.
It is difficult to estimate the reserves for asbestos and environmental-related claims due to the vagaries of court coverage decisions, plaintiffs’ expanded theories of liability, the risks inherent in complex litigation and other uncertainties, including, without limitation, those which are set forth below.
Asbestos Reserves. Because each policyholder presents different liability and coverage issues, the Company generally reviews the exposure presented by each policyholder with open claims at least annually.  Among the factors the Company may consider in the course of this review are: available insurance coverage, including the role of any umbrella or excess insurance the Company has issued to the policyholder; limits and deductibles; an analysis of the policyholder’s potential liability; the jurisdictions involved; past and anticipated future claim activity and loss development on pending claims; past settlement values of similar claims; allocated claim adjustment expense; the potential role of other insurance; the role, if any, of non-asbestos claims or potential non-asbestos claims in any resolution process; and applicable coverage defenses or determinations, if any, including the determination as to whether or not an asbestos claim is a products/completed operation claim subject to an aggregate limit and the available coverage, if any, for that claim.
In the third quarter of 2021, the Company completed its annual in-depth asbestos claim review, including a review of policyholders with open claims and litigation cases for potential product and "non-product" liability, and noted the continuation of the following trends:
•a high level of litigation activity in certain jurisdictions involving individuals alleging serious asbestos-related illness, primarily involving mesothelioma claims;
•while overall payment patterns have been generally stable, there has been an increase in severity for certain policyholders due to the high level of litigation activity; and
•a moderate level of asbestos-related bankruptcy activity.

Both the number of policyholders with open asbestos claims and net asbestos-related payments decreased slightly when compared to 2020. Payments on behalf of these policyholders continue to be influenced by a high level of litigation activity in a limited number of jurisdictions where individuals alleging serious asbestos-related injury, primarily mesothelioma, continue to target defendants who were not traditionally primary targets of asbestos litigation.

The Company’s quarterly asbestos reserve reviews include an analysis of exposure and claim payment patterns by policyholder, as well as recent settlements, policyholder bankruptcies, judicial rulings and legislative actions.  The Company also analyzes developing payment patterns among policyholders and the assumed reinsurance component of reserves, as well as projected reinsurance billings and recoveries. In addition, the Company reviews its historical gross and net loss and expense paid experience, year-by-year, to assess any emerging trends, fluctuations, or characteristics suggested by the aggregate paid activity. Conventional actuarial methods are not utilized to establish asbestos reserves, and the Company’s evaluations have not resulted in a reliable method to determine a meaningful average asbestos defense or indemnity payment.

The completion of these reviews and analyses in 2021, 2020 and 2019 resulted in $225 million, $295 million and $220 million increases, respectively, to the Company’s net asbestos reserves. In each year, the reserve increases were primarily driven by increases in the Company’s estimate of projected settlement and defense costs related to a broad number of policyholders. The increase in the estimate of projected settlement and defense costs primarily resulted from payment trends that continue to be higher than previously anticipated due to the continued high level of mesothelioma claim filings and the impact of the current litigation environment surrounding those claims discussed above. Over the past decade, the property and casualty insurance industry, including the Company, has experienced net unfavorable prior year reserve development with regard to asbestos reserves, but the Company believes that over that period there has been a reduction in the volatility associated with the Company’s overall asbestos exposure as the overall asbestos environment has evolved from one dominated by exposure to significant litigation risks, particularly coverage disputes relating to policyholders in bankruptcy who were asserting that their claims were not subject to the aggregate limits contained in their policies, to an environment primarily driven by a frequency of litigation related to individuals with mesothelioma. The Company’s overall view of the current underlying asbestos environment is essentially unchanged from recent periods, and there remains a high degree of uncertainty with respect to future exposure to asbestos claims.
Net asbestos paid loss and loss expenses in 2021, 2020 and 2019 were $221 million, $237 million and $224 million, respectively. Approximately 9%, 1% and 4% of total net paid losses in 2021, 2020 and 2019, respectively, related to policyholders with whom the Company entered into settlement agreements that limit those policyholders' ability to present future claims to the Company.
Environmental Reserves. In establishing environmental reserves, the Company evaluates the exposure presented by each policyholder and the anticipated cost of resolution, if any. These claims are mainly brought pursuant to various state or federal statutes that require a liable party to undertake or pay for environmental remediation. Liability under these statutes may be joint and several with other responsible parties. In the course of its analysis, the Company generally considers the probable liability, available coverage and relevant judicial interpretations. In addition, the Company considers the many variables presented, such as: the nature of the alleged activities of the policyholder at each site; the number of sites; the total number of potentially responsible parties at each site; the nature of the alleged environmental harm and the corresponding remedy at each site; the nature of government enforcement activities at each site; the ownership and general use of each site; the overall nature of the insurance relationship between the Company and the policyholder, including the role of any umbrella or excess insurance the Company has issued to the policyholder; the involvement of other insurers; the potential for other available coverage, including the number of years of coverage; the role, if any, of non-environmental claims or potential non-environmental claims in any
resolution process; and the applicable law in each jurisdiction. The evaluation of the exposure presented by a policyholder can change as information concerning that policyholder and the many variables presented is developed. Conventional actuarial methods are not used to estimate these reserves.

Over the past several years, the Company has experienced generally favorable trends in the number of new policyholders tendering environmental claims for the first time and in the number of pending declaratory judgment actions relating to environmental matters. These policyholders continue to present smaller exposures, are involved in fewer hazardous waste sites and are lower tier defendants than policyholders presenting such claims in the past. Further, in many instances, clean-up costs have been reduced because regulatory agencies are willing to accept risk-based site analyses and more efficient clean-up technologies. However, the degree to which those favorable trends have continued has been less than anticipated. In addition, reserve development on existing environmental claims as well as the costs associated with coverage litigation on environmental matters has been greater than anticipated, driven by claims and legal developments in a limited number of jurisdictions. As a result of these factors, in 2021, 2020 and 2019, the Company increased its net environmental reserves by $89 million, $54 million and $76 million, respectively.

Asbestos and Environmental Reserves. As a result of the processes and procedures discussed above, management believes that the reserves carried for asbestos and environmental claims are appropriately established based upon known facts, current law and management’s judgment. However, the uncertainties surrounding the final resolution of these claims continue, and it is difficult to determine the ultimate exposure for asbestos and environmental claims and related litigation. As a result, these reserves are subject to revision as new information becomes available and as claims develop. Changes in the legal, regulatory and legislative environment may impact the future resolution of asbestos and environmental claims and result in adverse loss reserve development.  The emergence of a greater number of asbestos or environmental claims beyond that which is anticipated may result in adverse loss reserve development. Changes in applicable legislation and future court and regulatory decisions and interpretations, including the outcome of legal challenges to legislative and/or judicial reforms establishing medical criteria for the pursuit of asbestos claims, could affect the settlement of asbestos and environmental claims.  It is also difficult to predict the ultimate outcome of complex coverage disputes until settlement negotiations near completion and significant legal questions are resolved or, failing settlement, until the dispute is adjudicated. This is particularly the case with policyholders in bankruptcy where negotiations often involve a large number of claimants and other parties and require court approval to be effective. As part of its continuing analysis of asbestos and environmental reserves, the Company continues to study the implications of these and other developments.
Because of the uncertainties set forth above, additional liabilities may arise for amounts in excess of the Company’s current reserves.  In addition, the Company’s estimate of claims and claim adjustment expenses may change.  These additional liabilities or increases in estimates, or a range of either, cannot now be reasonably estimated and could result in income statement charges that could be material to the Company’s operating results in future periods.
Catastrophe Exposure
The Company has geographic exposure to catastrophe losses, which include hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions, solar flares and other naturally-occurring events.  Catastrophes can also result from terrorist attacks and other intentionally destructive acts including those involving cyber events, nuclear, biological, chemical and radiological events, civil unrest, explosions and destruction of infrastructure.  The incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophes are restricted to small geographic areas; however, hurricanes, earthquakes, wildfires and cyber attacks may produce significant damage in larger areas, especially those that are heavily populated. The Company generally seeks to mitigate its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance.
There are also risks which impact the estimation of ultimate costs for catastrophes.  For example, the estimation of reserves related to hurricanes can be affected by the inability of the Company and its insureds to access portions of the impacted areas, the complexity of factors contributing to the losses, the legal and regulatory uncertainties and the nature of the information available to establish the reserves.  Complex factors include, but are not limited to: determining whether damage was caused by flooding versus wind; evaluating general liability and pollution exposures; estimating additional living expenses; the impact of demand surge; the potential impact of changing climate conditions, including higher frequency and severity of weather-related
events; infrastructure disruption; fraud; the effect of mold damage and business income interruption costs; and reinsurance collectibility.  The timing of a catastrophe’s occurrence, such as at or near the end of a reporting period, can also affect the information available to the Company in estimating reserves for that reporting period.  The estimates related to catastrophes are adjusted as actual claims emerge.