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Management’s Discussion (Continued)<br />
Property and casualty losses (Continued)<br />
General Re and BHRG (Continued)<br />
and the appropriate client personnel or through independent outside counsel. If disputes cannot be resolved, our contracts<br />
generally specify whether arbitration, litigation, or an alternative dispute resolution process will be invoked. There are no<br />
coverage disputes at this time for which an adverse resolution would likely have a material impact on our consolidated results of<br />
operations or financial condition.<br />
General Re<br />
General Re’s gross and net unpaid losses and loss adjustment expenses and gross reserves by major line of business as of<br />
December 31, 2013 are summarized below. Amounts are in millions.<br />
Type<br />
Line of business<br />
Reported case reserves ........................ $ 7,809 Workers’ compensation (1) .................... $ 2,830<br />
IBNR reserves ............................... 7,859 Mass tort-asbestos/environmental .............. 1,539<br />
Gross reserves ............................... 15,668 Auto liability .............................. 3,769<br />
Ceded reserves and deferred charges ............. (1,004) Other casualty (2) ........................... 2,288<br />
Net reserves ................................. $14,664 Other general liability ....................... 2,462<br />
(1) Net of discounts of $1,866 million.<br />
Property .................................. 2,780<br />
Total .................................... $15,668<br />
(2) Includes directors and officers, errors and omissions, medical malpractice and umbrella coverage.<br />
General Re’s loss reserve estimation process is based upon a ground-up approach, beginning with case estimates and<br />
supplemented by additional case reserves (“ACRs”) and IBNR reserves. The critical processes in establishing loss reserves<br />
involve the establishment of ACRs by claim examiners, the determination of expected ultimate loss ratios which drive IBNR<br />
reserve amounts and the comparison of case reserve reporting trends to the expected loss reporting patterns. Recorded reserve<br />
amounts are subject to “tail risk” where reported losses develop beyond the maximum expected loss emergence time period.<br />
We do not routinely determine loss reserve ranges. We believe that the techniques necessary to make such determinations<br />
have not sufficiently developed and that the myriad of assumptions required render such resulting ranges to be unreliable. In<br />
addition, claim counts or average amounts per claim are not utilized because clients do not consistently provide reliable data in<br />
sufficient detail.<br />
Upon notification of a reinsurance claim from a ceding company, our claim examiners make independent evaluations of<br />
loss amounts. In some cases, examiners’ estimates differ from amounts reported by ceding companies. If the examiners’<br />
estimates are significantly greater than the ceding company’s estimates, the claims are further investigated. If deemed<br />
appropriate, ACRs are established above the amount reported by the ceding company. As of December 31, 2013, ACRs<br />
aggregated approximately $2.2 billion before discounts and were concentrated in workers’ compensation reserves, and to a<br />
lesser extent in professional liability reserves. Our examiners also periodically conduct detailed claim reviews of individual<br />
clients and case reserves are often increased as a result. In 2013, we conducted 266 claim reviews.<br />
Our actuaries classify all loss and premium data into segments (“reserve cells”) primarily based on product (e.g., treaty,<br />
facultative and program) and line of business (e.g., auto liability, property, etc.). For each reserve cell, premiums and losses are<br />
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