Annual Report 2005 - Chubb Group of Insurance Companies

The following table presents the number of policyholders for whom we have open asbestos case
reserves and the related net loss reserves at December 31, 2005 as well as the net losses paid during
2005 by component.
Number of Net Loss Net Losses
Policyholders Reserves Paid
(in millions)
Traditional defendantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21 $334 $10
Peripheral defendants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 375 378 51
Future claims from unknown policyholders ÏÏÏÏÏÏÏÏ 168 Ì
$880 $61
SigniÑcant uncertainty remains as to our ultimate liability related to asbestos related claims. This
uncertainty is due to several factors including:
‚the long latency period between asbestos exposure and disease manifestation and the resulting
potential for involvement of multiple policy periods for individual claims;
‚plaintiÅs' increased focus on peripheral defendants;
‚the increase in the volume of claims by unimpaired plaintiÅs and the extent to which they can
be precluded from making claims;
‚the eÅorts by insureds to obtain coverage not subject to aggregate limits;
‚the number of insureds seeking bankruptcy protection as a result of asbestos related liabilities
and the impact of prepackaged bankruptcies;
‚the ability of claimants to bring a claim in a state in which they have no residency or exposure;
‚inconsistent court decisions and diverging legal interpretations; and
‚the possibility, however remote, of federal legislation that would address the asbestos problem.
These signiÑcant uncertainties are not likely to be resolved deÑnitively in the near future. While
there have been some positive legislative and judicial developments in the asbestos arena over the past
two years, it is too early to call it a trend.
Toxic Waste Reserves. Toxic waste claims relate primarily to pollution and related cleanup costs.
Our insureds have two potential areas of exposure Ìhazardous waste dump sites and pollution at the
insured site primarily from underground storage tanks and manufacturing processes.
Under the federal ""Superfund'' law and similar state statutes, when potentially responsible parties
(PRPs) fail to handle the clean-up at a hazardous waste site, regulators have the work done and then
attempt to establish legal liability against the PRPs. Most sites have multiple PRPs.
Most PRPs named to date are parties who have been generators, transporters, past or present
landowners or past or present site operators. The PRPs disposed of toxic materials at a waste dump site
or transported the materials to the site. These PRPs had proper government authorization in many
instances. Insurance policies issued to PRPs were not intended to cover the clean-up costs of pollution
and, in many cases, did not intend to cover the pollution itself. Pollution was not a recognized hazard
at the time many of these policies were written. In more recent years, however, policies speciÑcally
excluded such exposures.
As the costs of environmental clean-up became substantial, PRPs and others increasingly Ñled
claims with their insurance carriers. Litigation against insurers extends to issues of liability, coverage
and other policy provisions.
There is substantial uncertainty involved in estimating our liabilities related to these claims. First,
the liabilities of the claimants are extremely diÇcult to estimate. At any given waste site, the allocation
of remediation costs among governmental authorities and the PRPs varies greatly depending on a
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