Annual Report 2005 - Chubb Group of Insurance Companies

(b) Interest costs of $134.8 million, $138.7 million (9) Reinsurance
and $130.1 million were incurred in 2005, 2004 and
2003, respectively. Interest paid was $137.9 million,
In the ordinary course of business, the P&C Group
$135.6 million and $122.2 million in 2005, 2004 and
assumes and cedes reinsurance with other insurance
2003, respectively.
companies. Reinsurance is ceded to provide greater diversiÑcation
of risk and to limit the P&C Group's
(c) In June 2005, the Corporation entered into a maximum net loss arising from large risks or catastrophic
revolving credit agreement with a group of banks that events.
provides for unsecured borrowings of up to $500 million.
The revolving credit facility terminates on June 22,
A large portion of the P&C Group's ceded reinsur-
2010. On the termination date of the agreement, any
ance is eÅected under contracts known as treaties under
loans then outstanding become payable. There have been
which all risks meeting prescribed criteria are automati-
no borrowings under this agreement. Various interest
cally covered. Most of these arrangements consist of
rate options are available to the Corporation, all of which
excess of loss and catastrophe contracts that protect
are based on market interest rates. The Corporation pays
against a speciÑed part or all of certain types of losses
a fee to have this revolving credit facility available. The
over stipulated amounts arising from any one occurrence
agreement contains customary restrictive covenants ineÅected
by negotiation on individual risks.
or event. In certain circumstances, reinsurance is also
cluding a covenant to maintain a minimum consolidated
shareholders' equity, as adjusted. The facility is available Ceded reinsurance contracts do not relieve the P&C
for general corporate purposes and to support the Cor- Group of the primary obligation to its policyholders.
poration's commercial paper borrowing arrangement. Thus, an exposure exists with respect to reinsurance
This facility replaced, on substantially the same terms, a ceded to the extent that any reinsurer is unable or
$250 million short term revolving credit facility that unwilling to meet the obligations assumed under the
expired and a $250 million medium term revolving credit reinsurance contracts. The P&C Group monitors the
facility that was terminated.
Ñnancial strength of its reinsurers on an ongoing basis.
Premiums earned and insurance losses and loss expenses
are reported net of reinsurance in the consolidated
statements of income.
The eÅect of reinsurance on the premiums written and
earned of the P&C Group was as follows:
Years Ended December 31
2005 2004 2003
(in millions)
Direct premiums written ÏÏÏÏ $12,179.6 $12,001.3 $11,337.7
Reinsurance assumed ÏÏÏÏÏÏÏ 1,119.7 1,397.7 1,266.0
Reinsurance cededÏÏÏÏÏÏÏÏÏÏ (1,016.7) (1,346.1) (1,535.8)
Net premiums writtenÏÏÏÏÏ $12,282.6 $12,052.9 $11,067.9
Direct premiums earnedÏÏÏÏÏ $12,110.6 $11,663.8 $10,720.0
Reinsurance assumed ÏÏÏÏÏÏÏ 1,175.5 1,367.7 1,094.4
Reinsurance cededÏÏÏÏÏÏÏÏÏÏ (1,110.1) (1,395.8) (1,631.9)
Net premiums earned ÏÏÏÏÏ $12,176.0 $11,635.7 $10,182.5
Reinsurance recoveries by the P&C Group that have
been deducted from insurance losses and loss expenses
were $1,030.7 million, $803.0 million and $767.0 million
in 2005, 2004 and 2003, respectively.
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