Annual Report 2005 - Chubb Group of Insurance Companies

annual aggregate limit for the federal government and all insurers of $100 billion. If acts of terrorism
result in covered losses exceeding the $100 billion annual limit, insurers are not liable for additional
losses.
While the provisions of TRIA will serve to mitigate our exposure in the event of a large-scale
terrorist attack, our deductible is substantial, approximating $925 million in 2006. For certain classes of
business, such as workers' compensation, terrorism insurance is mandatory under TRIA. For those
classes of business where it is not mandatory, insureds may choose not to accept terrorism insurance,
which would, subject to other statutory or regulatory restrictions, reduce our exposure.
We will continue to manage this type of catastrophic risk by monitoring terrorism risk aggregations.
Nevertheless, given the unpredictability of the targets, frequency and severity of potential
terrorist events as well as the limited terrorism coverage in our reinsurance program, the occurrence of
any such events could have a material adverse eÅect on the Corporation's results of operations,
Ñnancial condition or liquidity.
We also have exposure outside the United States to risk of loss from acts of terrorism. In some
jurisdictions, we have access to government mechanisms that would mitigate our exposure.
Loss Reserves
Unpaid losses and loss expenses, also referred to as loss reserves, are the largest liability of our
property and casualty subsidiaries.
Our loss reserves include the accumulation of individual case estimates for claims that have been
reported and estimates of claims that have been incurred but not reported as well as estimates of the
expenses associated with processing and settling all reported and unreported claims. Estimates are
based upon past loss experience modiÑed for current trends as well as prevailing economic, legal and
social conditions. Our loss reserves are not discounted to present value.
We regularly review our loss reserves using a variety of actuarial techniques. We update the
reserve estimates as historical loss experience develops, additional claims are reported or settled and
new information becomes available. Any changes in estimates are reÖected in operating results in the
period in which the estimates are changed.
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