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Reinsurance
12 Months Ended
Dec. 31, 2014
Insurance [Abstract]  
Reinsurance

(8)  Reinsurance

In the ordinary course of business, the P&C Group assumes and cedes reinsurance with other insurance companies. Reinsurance is ceded to provide greater diversification of risk and to limit the P&C Group’s maximum net loss arising from large risks or catastrophic events.

A large portion of the P&C Group’s ceded reinsurance is effected under contracts known as treaties under which all risks meeting prescribed criteria are automatically covered. Most of these arrangements consist of excess of loss and catastrophe contracts that protect against a specified part or all of certain types of losses over stipulated amounts arising from any one occurrence or event. In certain circumstances, reinsurance is also effected by negotiation on individual risks.

Ceded reinsurance contracts do not relieve the P&C Group of the primary obligation to its policyholders. Thus, an exposure exists with respect to reinsurance ceded to the extent that any reinsurer is unable or unwilling to meet its obligations assumed under the reinsurance contracts. The P&C Group monitors the financial 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 effect of reinsurance on the premiums written and earned of the P&C Group was as follows:

 

     Years Ended December 31  
     2014      2013      2012  
     (in millions)  

Direct premiums written

   $ 12,976       $ 12,804       $ 12,647   

Assumed reinsurance

     596         503         423   

Ceded reinsurance

     (980      (1,083      (1,200
  

 

 

    

 

 

    

 

 

 

Net premiums written

   $ 12,592       $ 12,224       $ 11,870   
  

 

 

    

 

 

    

 

 

 

Direct premiums earned

   $ 12,776       $ 12,717       $ 12,596   

Assumed reinsurance

     562         476         422   

Ceded reinsurance

     (1,010      (1,127      (1,180
  

 

 

    

 

 

    

 

 

 

Net premiums earned

   $ 12,328       $ 12,066       $ 11,838   
  

 

 

    

 

 

    

 

 

 

Ceded losses and loss expenses, which reduce losses and loss expenses incurred, were $273 million, $400 million and $586 million in 2014, 2013 and 2012, respectively.