Claim, Claim Adjustment Expense and Future Policy Benefit Reserves

12 Months Ended

Dec. 31, 2019

Insurance [Abstract]

Claim, Claim Adjustment Expense and Future Policy Benefit Reserves

Note 8. Claim, Claim Adjustment Expense and Future Policy Benefit Reserves

CNA’s property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (“IBNR”) claims as of the reporting date. CNA’s reserve projections are based primarily on detailed analysis of the facts in each case, CNA’s experience with similar cases and various historical development patterns. Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions including inflation and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.

Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers’ compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that CNA’s ultimate cost for insurance losses will not exceed current estimates.

CNA’s commercial property and casualty insurance operations (“Property & Casualty Operations”) include its Specialty, Commercial and International lines of business. CNA’s Other Insurance Operations outside of Property & Casualty Operations include its long term care business that is in run-off, certain corporate expenses, including interest on CNA’s corporate debt, and certain property and casualty businesses in run-off, including CNA Re and A&EP.

Liability for Unpaid Claim and Claim Adjustment Expenses

The table below reconciles the net liability for unpaid claim and claim adjustment expenses to the amount presented on the Consolidated Balance Sheets.

December 31	2019
(In millions)
Net liability for unpaid claim and claim adjustment expenses:
Property & Casualty Operations	$	14,153
Other Insurance Operations (a)		3,732
Total net claim and claim adjustment expenses		17,885
Reinsurance receivables: (b)
Property & Casualty Operations		1,617
Other Insurance Operations (c)		2,218
Total reinsurance receivables		3,835
Total gross liability for unpaid claims and claims adjustment expenses	$	21,720

(a) Other Insurance Operations amounts are primarily related to long term care claim reserves, which are long duration insurance contracts, but also include amounts related to unfunded structured settlements arising from short duration insurance contracts.

(b) Reinsurance receivables presented are gross of the allowance for uncollectible reinsurance and do not include reinsurance receivables related to paid losses.

(c) The Other Insurance Operations reinsurance receivables are primarily related to A&EP claims covered under the loss portfolio transfer (“LPT”).

The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of Other Insurance Operations.

Year Ended December 31	2019			2018			2017
(In millions)
Reserves, beginning of year:
Gross	$	21,984		$	22,004		$	22,343
Ceded		4,019			3,934			4,094
Net reserves, beginning of year		17,965			18,070			18,249
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year		5,356			5,358			5,201
Decrease in provision for insured events of prior years		(127	)		(179	)		(381	)
Amortization of discount		184			176			179
Total net incurred (a)		5,413			5,355			4,999
Net payments attributable to:
Current year events		(992	)		(1,046	)		(975	)
Prior year events		(4,584	)		(4,285	)		(4,366	)
Total net payments		(5,576	)		(5,331	)		(5,341	)
Foreign currency translation adjustment and other		83			(129	)		163
Net reserves, end of year		17,885			17,965			18,070
Ceded reserves, end of year		3,835			4,019			3,934
Gross reserves, end of year	$	21,720		$	21,984		$	22,004

(a) Total net incurred above does not agree to Insurance claims and policyholders’ benefits as reflected on the Consolidated Statements of Income due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and benefit expenses related to future policy benefits, which are not reflected in the table above.

Reserving Methodology

In developing claim and claim adjustment expense (“loss” or “losses”) reserve estimates, CNA’s actuaries perform detailed reserve analyses that are staggered throughout the year. Every reserve group is reviewed at least once during the year, but most are reviewed more frequently. The analyses generally review losses gross of ceded reinsurance and apply the ceded reinsurance terms to the gross estimates to establish estimates net of reinsurance. Factors considered include, but are not limited to, the historical pattern and volatility of the actuarial indications, the sensitivity of the actuarial indications to changes in paid and incurred loss patterns, the consistency of claims handling processes, the consistency of case reserving practices, changes in CNA’s pricing and underwriting, pricing and underwriting trends in the insurance market and legal, judicial, social and economic trends. In addition to the detailed analyses, CNA reviews actual loss emergence for all products each quarter. In developing the loss reserve estimates for property and casualty contracts, CNA generally projects ultimate losses using several common actuarial methods as listed below. CNA reviews the various indications from the various methods and applies judgment to select an actuarial point estimate. The carried reserve may differ from the actuarial point estimate as the result of CNA’s consideration of the factors noted above as well as the potential volatility of the projections associated with the specific product being analyzed and other factors affecting claims costs that may not be quantifiable through traditional actuarial analysis. The indicated required reserve is the difference between the selected ultimate loss and the inception-to-date paid losses. The difference between the selected ultimate loss and the case incurred or reported loss is IBNR. IBNR includes a provision for development on known cases as well as a provision for late reported incurred claims. The most frequently utilized methods to project ultimate losses include the following:

● Paid development: The paid development method estimates ultimate losses by reviewing paid loss patterns and applying them to accident years with further expected changes in paid losses.

● Incurred development: The incurred development method is similar to the paid development method, but it uses case incurred losses instead of paid losses.

● Loss ratio: The loss ratio method multiplies premiums by an expected loss ratio to produce ultimate loss estimates for each accident year.

● Bornhuetter-Ferguson using premiums and paid loss: The Bornhuetter-Ferguson using premiums and paid loss method is a combination of the paid development approach and the loss ratio approach. This method normally determines expected loss ratios similar to the approach used to estimate the expected loss ratio for the loss ratio method.

● Bornhuetter-Ferguson using premiums and incurred loss: The Bornhuetter-Ferguson using premiums and incurred loss method is similar to the Bornhuetter-Ferguson using premiums and paid loss method except that it uses case incurred losses.

● Frequency times severity: The frequency times severity method multiplies a projected number of ultimate claims by an estimated ultimate average loss for each accident year to produce ultimate loss estimates.

● Stochastic modeling: The stochastic modeling produces a range of possible outcomes based on varying assumptions related to the particular product being modeled.

For many exposures, especially those that are considered long-tail, a particular accident or policy year may not have a sufficient volume of paid losses to produce a statistically reliable estimate of ultimate losses. In such a case, CNA’s actuaries typically assign more weight to the incurred development method than to the paid development method. As claims continue to settle and the volume of paid loss increases, the actuaries may assign additional weight to the paid development method. For most of CNA’s products, even the incurred losses for accident or policy years that are early in the claim settlement process will not be of sufficient volume to produce a reliable estimate of ultimate losses. In these cases, CNA may not assign any weight to the paid and incurred development methods. CNA may use the loss ratio, Bornhuetter-Ferguson and frequency times severity methods. For short-tail exposures, the paid and incurred development methods can often be relied on sooner, primarily because CNA’s history includes a sufficient number of years to cover the entire period over which paid and incurred losses are expected to change. However, CNA may also use the loss ratio, Bornhuetter-Ferguson and frequency times severity methods for short-tail exposures. For other more complex reserve groups where the above methods may not produce reliable indications, CNA uses additional methods tailored to the characteristics of the specific situation.

CNA’s reserving methodologies for mass tort and A&EP are similar as both are based on detailed reviews of large accounts with estimates of ultimate payments based on the facts in each case and CNA’s view of applicable law and coverage litigation.

Gross and Net Carried Reserves

The following tables present the gross and net carried reserves:

	Property		Other
	and Casualty		Insurance
December 31, 2019	Operations		Operations		Total
(In millions)
Gross Case Reserves	$	6,276	$	4,713	$	10,989
Gross IBNR Reserves		9,494		1,237		10,731
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	15,770	$	5,950	$	21,720
Net Case Reserves	$	5,645	$	3,533	$	9,178
Net IBNR Reserves		8,508		199		8,707
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	14,153	$	3,732	$	17,885
December 31, 2018
Gross Case Reserves	$	6,671	$	4,724	$	11,395
Gross IBNR Reserves		9,287		1,302		10,589
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	15,958	$	6,026	$	21,984
Net Case Reserves	$	6,063	$	3,460	$	9,523
Net IBNR Reserves		8,290		152		8,442
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	14,353	$	3,612	$	17,965

Net Prior Year Development

Changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development (“development”). These changes can be favorable or unfavorable. 

The following table and discussion presents detail of the development in CNA’s Property & Casualty Operations:

Year Ended December 31	2019		2018		2017
(In millions)
Medical professional liability	$	75	$	47	$	30
Other professional liability and management liability		(69)		(127)		(126)
Surety		(92)		(70)		(84)
Commercial auto		(25)		1		(35)
General liability		54		32		(24)
Workers’ compensation		(13)		(32)		(63)
Other		(3)		(32)		(6)
Total pretax favorable development	$	(73)	$	(181)	$	(308)

Development Tables

For CNA’s Property & Casualty Operations, the following tables present further detail and commentary on the development reflected in the financial statements for each of the periods presented. Also presented are loss reserve development tables that illustrate the change over time of reserves established for claim and allocated claim adjustment expenses arising from short duration insurance contracts for certain lines of business within CNA’s  Property & Casualty Operations. Not all lines of business are presented based on their context to CNA’s overall loss reserves, calendar year reserve development, or calendar year net earned premiums. Insurance contracts are considered to be short duration contracts when the contracts are not expected to remain in force for an extended period of time. The Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses tables, reading across, show the cumulative net incurred claim and allocated claim adjustment expenses relating to each accident year at the end of the stated calendar year. Changes in the cumulative amount across time are the result of CNA’s expanded awareness of additional facts and circumstances that pertain to the unsettled claims. The Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses tables, reading across, show the cumulative amount paid for claims in each accident year as of the end of the stated calendar year. The Net Strengthening or (Releases) of Prior Accident Year Reserves tables, reading across, show the net increase or decrease in the cumulative net incurred accident year claim and allocated claim adjustment expenses during each stated calendar year and indicates whether the reserves for that accident year were strengthened or released.

The information in the tables is reported on a net basis after reinsurance and does not include the effects of discounting. The information contained in calendar years 2018 and prior is unaudited. To the extent CNA enters into a commutation, the transaction is reported on a prospective basis. To the extent that CNA enters into a disposition, the effects of the disposition are reported on a retrospective basis by removing the balances associated with it.

The amounts reported for the cumulative number of reported claims include direct and assumed open and closed claims by accident year at the claimant level. The number excludes claim counts for claims within a policy deductible where the insured is responsible for payment of losses in the deductible layer. Claim count data for certain assumed reinsurance contracts is unavailable.

In the loss reserve development tables, IBNR includes reserves for incurred but not reported losses and expected development on case reserves. CNA does not establish case reserves for allocated loss adjusted expenses (ALAE), therefore ALAE reserves are also included in the estimate of IBNR.

2019

Unfavorable development in medical professional liability was primarily due to higher than expected severity in accident years 2016 through 2018 in CNA’s aging services business, higher than expected severity in accident year 2013 in the allied healthcare business, unfavorable outcomes on individual claims and higher than expected severity in accident year 2017 in the dentists business.

Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency and favorable outcomes on individual claims in accident years 2017 and prior related to financial institutions, lower than expected large claim losses in recent accident years in CNA’s public company directors and officers liability business and lower than expected loss adjustment expenses across accident years 2010 through 2018.

Favorable development in surety was due to lower than expected frequency for accident years 2018 and prior.

Favorable development in commercial auto was primarily due to continued lower than expected severity across accident years 2015 and prior and a decline in bodily injury frequency in accident year 2018.

Unfavorable development in general liability was primarily due to higher than expected emergence in mass tort exposures, primarily from accident years 2016, 2015 and prior to 2010.

Favorable development in other coverages was due to lower than expected paid loss emergence on vehicle products in warranty, favorable medical trends driving lower than expected severity in accident years 2012 through 2018 in workers’ compensation, lower than expected claim severity related to catastrophe events in accident years 2017 and 2018 in property and other in Commercial and lower than expected large losses and claim severity in accident years 2018 and prior in Hardy, Europe and Canada in casualty. This was mostly offset by unfavorable development driven by higher than expected claims in Hardy on 2018 accident year Asian catastrophe events in property in International and potential design and construct exposures in professional indemnity within Europe financial lines in accident years 2017 and 2018.

2018

Unfavorable development in medical professional liability was primarily due to higher than expected severity in accident years 2014 and 2017 in CNA’s hospitals business. In addition, there was higher than expected frequency and severity in aging services in accident years 2014 through 2017 combined, partially offset by lower than expected frequency in accident year 2015.

Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency in recent accident years related to financial institutions and professional liability errors and omissions (“E&O”), favorable severity in accident years 2015 and prior related to professional liability E&O and favorable outcomes on individual claims in financial institutions in accident years 2013 and prior.

Favorable development in surety was due to lower than expected loss emergence for accident years 2017 and prior.

Unfavorable development in general liability was driven by higher than expected claim severity in unsupported umbrella in accident years 2013 through 2016.

Favorable development in workers’ compensation was driven by lower frequency and severity experience and favorable impacts from California reforms.

Favorable development in other coverages was driven by lower than expected claim severity in catastrophes in accident year 2017 for property in Commercial, better than expected frequency in the liability portion of the package business in Canada and general liability in Europe in casualty and better than expected large loss frequency in the energy book in accident year 2017, as well as a reduction in incurred losses within the Europe marine discontinued portfolio in energy and marine and lower than expected frequency in accident years 2015 and prior in Europe in healthcare and technology for International. This was partially offset by unfavorable development primarily driven by higher than expected severity in Canada and higher than expected frequency in Hardy, both in accident year 2017 in property and increased loss severity in the accident year 2017 in Europe professional indemnity in specialty for International.

2017

Unfavorable development in medical professional liability was primarily due to continued higher than expected frequency in aging services and higher than expected severity for hospitals in recent accident years. This was partially offset by favorable development in hospitals in prior accident years as well as favorable development related to unallocated claim adjustment expenses.

Favorable development in other professional liability and management liability was primarily due to favorable settlements on closed claims and a lower frequency of large losses for accident years 2011 through 2015 for professional and management liability, lower than expected claim frequency in accident years 2012 through 2015 for professional liability and lower than expected severity in accident years 2014 through 2015 for professional liability.

Favorable development in surety coverages was primarily due to lower than expected frequency of large losses in accident years 2015 and prior.

Favorable development in commercial auto was primarily due to lower than expected severity in accident years 2013 through 2016, as well as a large favorable recovery on a claim in accident year 2012.

Favorable development in general liability was due to lower than expected severity in life sciences.

Favorable development in workers’ compensation was primarily related to decreases in frequency and severity in recent accident years, partially attributable to California reforms impacting medical costs. This was partially offset by unfavorable development related to an adverse arbitration ruling on reinsurance recoverables from older accident years as well as the recognition of loss estimates associated with earned premium from a prior exposure year.

Unfavorable development for other coverages was primarily due to higher than expected severity in accident year 2015 arising from the management liability business, partially offset by favorable development in accident years 2014 and prior. Additional unfavorable development was related to adverse large claims experience in the CNA Hardy political risks portfolio, relating largely to accident year 2016. This was partially offset by favorable development related to better than expected frequency in accident years 2014 through 2016 in property and in energy and marine.

Property & Casualty Operations – Line of Business Composition

The table below presents the net liability for unpaid claim and claim adjustment expenses, by line of business for Property & Casualty Operations:

December 31	2019
(In millions)
Medical professional liability	$	1,429
Other professional liability and management liability		2,739
Surety		369
Commercial auto		404
General liability		3,176
Workers’ compensation		3,932
Other		2,104
Total net liability for unpaid claim and claim adjustment expenses	$	14,153

Medical Professional Liability

																					December 31, 2019
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																							Cumulative
																							Number of
December 31	2010 (a)		2011 (a)		2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019		IBNR		Claims
(In millions, except reported claims data)
Accident Year
2010	$	402	$	412	$	423	$	426	$	415	$	395	$	365	$	360	$	356	$	369	$	1		14,624
2011				429		437		443		468		439		434		437		437		439		2		16,526
2012						464		469		508		498		493		484		493		499		8		17,724
2013								462		479		500		513		525		535		545		27		19,510
2014										450		489		537		530		535		529		16		19,723
2015												433		499		510		494		488		29		18,029
2016														427		487		485		499		63		15,823
2017																412		449		458		127		14,636
2018																		404		429		216		13,760
2019																				430		364		10,467
																		Total	$	4,685	$	853

Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2010	$	10	$	86	$	173	$	257	$	306	$	326	$	337	$	346	$	350	$	353
2011				17		109		208		295		347		375		398		409		414
2012						14		117		221		323		388		427		457		479
2013								17		119		255		355		414		462		495
2014										23		136		258		359		417		472
2015												22		101		230		313		384
2016														18		121		246		339
2017																19		107		235
2018																		21		115
2019																				17
																		Total	$	3,303
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,382
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																				22
Liability for unallocated claim adjustment expenses for accident years presented																				25
Total net liability for unpaid claim and claim adjustment expenses																			$	1,429

Net Strengthening (Releases) of Prior Accident Year Reserves
Years Ended
December 31																									Total
Accident Year
2010	$	10	$	11	$	3	$	(11	)	$	(20	)	$	(30	)	$	(5	)	$	(4	)	$	13		$	(33	)
2011				8		6		25			(29	)		(5	)		3			-			2			10
2012						5		39			(10	)		(5	)		(9	)		9			6			35
2013								17			21			13			12			10			10			83
2014											39			48			(7	)		5			(6	)		79
2015														66			11			(16	)		(6	)		55
2016																	60			(2	)		14			72
2017																				37			9			46
2018																							25			25
Total net development for the accident years presented above																	65			39			67
Total net development for accident years prior to 2010																	(28	)		9			6
Total unallocated claim adjustment expense development																	(7	)		(1	)		2
Total																$	30		$	47		$	75

(a)    Data presented for these calendar years is required supplemental information, which is unaudited.

Other Professional Liability and Management Liability

																					December 31, 2019
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																							Cumulative
																							Number of
December 31	2010 (a)		2011 (a)		2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019		IBNR		Claims
(In millions, except reported claims data)
Accident Year
2010	$	828	$	828	$	848	$	848	$	847	$	837	$	824	$	827	$	821	$	821	$	9		17,891
2011				880		908		934		949		944		911		899		888		885		21		18,738
2012						923		909		887		878		840		846		833		831		18		18,499
2013								884		894		926		885		866		863		850		45		17,928
2014										878		898		885		831		835		854		74		17,553
2015												888		892		877		832		807		120		17,390
2016														901		900		900		904		188		17,890
2017																847		845		813		308		18,015
2018																		850		864		460		19,468
2019																				837		714		16,722
																		Total	$	8,466	$	1,957

Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2010	$	31	$	204	$	405	$	541	$	630	$	670	$	721	$	752	$	784	$	790
2011				71		314		503		605		683		726		781		796		828
2012						56		248		400		573		651		711		755		792
2013								54		249		447		618		702		754		771
2014										51		223		392		515		647		707
2015												60		234		404		542		612
2016														64		248		466		625
2017																57		222		394
2018																		54		282
2019																				64
																		Total	$	5,865
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	2,601
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																				88
Liability for unallocated claim adjustment expenses for accident years presented																				50
Total net liability for unpaid claim and claim adjustment expenses																			$	2,739

Net Strengthening (Releases) of Prior Accident Year Reserves

Years Ended
December 31																										Total
Accident Year
2010	$	-	$	20	$	-		$	(1	)	$	(10	)	$	(13	)	$	3		$	(6	)	$	-		$	(7	)
2011				28		26			15			(5	)		(33	)		(12	)		(11	)		(3	)		5
2012						(14	)		(22	)		(9	)		(38	)		6			(13	)		(2	)		(92	)
2013									10			32			(41	)		(19	)		(3	)		(13	)		(34	)
2014												20			(13	)		(54	)		4			19			(24	)
2015															4			(15	)		(45	)		(25	)		(81	)
2016																		(1	)		-			4			3
2017																					(2	)		(32	)		(34	)
2018																								14			14
Total net development for the accident years presented above																		(92	)		(76	)		(38	)
Total net development for accident years prior to 2010																		(27	)		(44	)		(17	)
Total unallocated claim adjustment expense development																		(7	)		(7	)		(14	)
Total																	$	(126	)	$	(127	)	$	(69	)

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

Surety

																					December 31, 2019
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																							Cumulative
																							Number of
December 31	2010 (a)		2011 (a)		2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019		IBNR		Claims
(In millions, except reported claims data)
Accident Year
2010	$	112	$	112	$	111	$	84	$	76	$	66	$	63	$	59	$	61	$	61	$	-		5,982
2011				120		121		116		87		75		70		66		62		62		2		5,813
2012						120		122		98		70		52		45		39		38		1		5,568
2013								120		121		115		106		91		87		83		3		5,062
2014										123		124		94		69		60		45		4		5,078
2015												131		131		104		79		63		11		4,976
2016														124		124		109		84		36		5,379
2017																120		115		103		54		5,496
2018																		114		108		76		5,451
2019																				119		102		3,549
																		Total	$	766	$	289

Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2010	$	13	$	34	$	50	$	55	$	57	$	58	$	55	$	52	$	52	$	53
2011				19		42		55		58		60		60		56		57		57
2012						5		32		34		35		35		36		37		37
2013								16		40		69		78		78		78		77
2014										7		30		38		36		38		38
2015												7		26		38		40		42
2016														5		37		45		45
2017																23		37		41
2018																		5		25
2019																				12
																		Total	$	427
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	339
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																				10
Liability for unallocated claim adjustment expenses for accident years presented																				20
Total net liability for unpaid claim and claim adjustment expenses																			$	369

Net Strengthening (Releases) of Prior Accident Year Reserves

Years Ended
December 31																											Total
Accident Year
2010	$	-	$	(1	)	$	(27	)	$	(8	)	$	(10	)	$	(3	)	$	(4	)	$	2		$	-		$	(51	)
2011				1			(5	)		(29	)		(12	)		(5	)		(4	)		(4	)		-			(58	)
2012							2			(24	)		(28	)		(18	)		(7	)		(6	)		(1	)		(82	)
2013										1			(6	)		(9	)		(15	)		(4	)		(4	)		(37	)
2014													1			(30	)		(25	)		(9	)		(15	)		(78	)
2015																-			(27	)		(25	)		(16	)		(68	)
2016																			-			(15	)		(25	)		(40	)
2017																						(5	)		(12	)		(17	)
2018																									(6	)		(6	)
Total net development for the accident years presented above																			(82	)		(66	)		(79	)
Total net development for accident years prior to 2010																			1			(4	)		(3	)
Total unallocated claim adjustment expense development																			(3	)		-			(10	)
Total																		$	(84	)	$	(70	)	$	(92	)

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

Commercial Auto

																					December 31, 2019
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																							Cumulative
																							Number of
December 31	2010 (a)		2011 (a)		2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019		IBNR		Claims
(In millions, except reported claims data)
Accident Year
2010	$	267	$	283	$	287	$	291	$	298	$	293	$	289	$	288	$	288	$	288	$	1		48,035
2011				268		281		288		302		300		294		294		294		291		-		47,909
2012						275		289		299		303		307		299		299		297		3		46,288
2013								246		265		265		249		245		245		241		2		39,429
2014										234		223		212		205		205		201		3		33,622
2015												201		199		190		190		183		7		30,418
2016														198		186		186		186		7		30,414
2017																199		198		200		9		30,850
2018																		229		227		47		33,959
2019																				257		128		31,455
																		Total	$	2,371	$	207

Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2010	$	74	$	141	$	203	$	246	$	271	$	281	$	286	$	287	$	287	$	287
2011				79		145		199		248		274		284		287		289		289
2012						78		160		220		259		282		285		290		291
2013								74		135		168		200		225		234		238
2014										64		102		137		166		187		196
2015												52		96		130		153		172
2016														52		93		126		154
2017																58		107		150
2018																		66		128
2019																				77
																		Total	$	1,982
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	389
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																				1
Liability for unallocated claim adjustment expenses for accident years presented																				14
Total net liability for unpaid claim and claim adjustment expenses																			$	404

Net Strengthening (Releases) of Prior Accident Year Reserves

Years Ended
December 31																								Total
Accident Year
2010	$	16	$	4	$	4	$	7	$	(5	)	$	(4	)	$	(1	)	$	-		$	-		$	21
2011				13		7		14		(2	)		(6	)		-			-			(3	)		23
2012						14		10		4			4			(8	)		-			(2	)		22
2013								19		-			(16	)		(4	)		-			(4	)		(5	)
2014										(11	)		(11	)		(7	)		-			(4	)		(33	)
2015													(2	)		(9	)		-			(7	)		(18	)
2016																(12	)		-			-			(12	)
2017																			(1	)		2			1
2018																						(2	)		(2	)
Total net development for the accident years presented above																(41	)		(1	)		(20	)
Total net development for accident years prior to 2010																4			1			(4	)
Total unallocated claim adjustment expense development																2			1			(1	)
													Total		$	(35	)	$	1		$	(25	)

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

General Liability

																					December 31, 2019
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																							Cumulative
																							Number of
December 31	2010 (a)		2011 (a)		2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019		IBNR		Claims
(In millions, except reported claims data)
Accident Year
2010	$	646	$	664	$	658	$	709	$	750	$	726	$	697	$	691	$	691	$	690	$	19		44,229
2011				591		589		631		677		676		681		670		669		667		20		39,361
2012						587		611		639		636		619		635		635		630		31		35,219
2013								650		655		650		655		613		623		620		27		33,570
2014										653		658		654		631		635		658		57		27,877
2015												581		576		574		589		600		73		23,834
2016														623		659		667		671		166		23,817
2017																632		632		632		226		21,114
2018																		653		644		408		17,889
2019																				680		602		12,916
																		Total	$	6,492	$	1,629

Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2010	$	27	$	145	$	280	$	429	$	561	$	611	$	642	$	652	$	656	$	667
2011				28		148		273		411		517		568		602		622		638
2012						28		132		247		374		454		510		559		579
2013								31		128		240		352		450		510		551
2014										31		119		247		376		481		547
2015												19		110		230		357		446
2016														32		163		279		407
2017																23		118		250
2018																		33		107
2019																				25
																		Total	$	4,217
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	2,275
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																				836
Liability for unallocated claim adjustment expenses for accident years presented																				65
Total net liability for unpaid claim and claim adjustment expenses																			$	3,176

Net Strengthening (Releases) of Prior Accident Year Reserves

Years Ended December 31																									Total
Accident Year
2010	$	18	$	(6	)	$	51	$	41	$	(24	)	$	(29	)	$	(6	)	$	-		$	(1	)	$	44
2011				(2	)		42		46		(1	)		5			(11	)		(1	)		(2	)		76
2012							24		28		(3	)		(17	)		16			-			(5	)		43
2013									5		(5	)		5			(42	)		10			(3	)		(30	)
2014											5			(4	)		(23	)		4			23			5
2015														(5	)		(2	)		15			11			19
2016																	36			8			4			48
2017																				-			-			-
2018																							(9	)		(9	)
Total net development for the accident years presented above																	(32	)		36			18
Total net development for accident years prior to 2010																	-			-			29
Total unallocated claim adjustment expense development																	8			(4	)		7
														Total		$	(24	)	$	32		$	54

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

Workers’ Compensation

																					December 31, 2019
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses																							Cumulative
																							Number of
December 31	2010 (a)		2011 (a)		2012 (a)		2013 (a)		2014 (a)		2015 (a)		2016 (a)		2017 (a)		2018 (a)		2019		IBNR		Claims
(In millions, except reported claims data)
Accident Year
2010	$	583	$	632	$	654	$	676	$	698	$	710	$	730	$	733	$	732	$	735	$	55		49,333
2011				607		641		647		659		651		676		676		674		688		40		45,959
2012						601		627		659		669		678		673		671		668		67		42,586
2013								537		572		592		618		593		582		561		93		38,688
2014										467		480		479		452		450		446		99		33,480
2015												422		431		406		408		394		130		31,861
2016														426		405		396		382		144		31,945
2017																440		432		421		138		33,029
2018																		450		440		185		34,647
2019																				452		257		29,795
																		Total	$	5,187	$	1,208

Cumulative Net Paid Claim and Allocated Claim Adjustment Expenses
Accident Year
2010	$	97	$	251	$	359	$	442	$	510	$	542	$	577	$	615	$	625	$	631
2011				99		249		358		438		478		522		564		571		581
2012						87		232		342		416		470		509		524		536
2013								80		213		300		370		417		419		411
2014										61		159		215		258		282		290
2015												51		131		180		212		231
2016														53		129		169		198
2017																63		151		207
2018																		68		163
2019																				71
																		Total	$	3,319
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,868
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																				2,061
Other (b)																				(22	)
Liability for unallocated claim adjustment expenses for accident years presented																				25
Total net liability for unpaid claim and claim adjustment expenses																			$	3,932

Net Strengthening (Releases) of Prior Accident Year Reserves

Years Ended
December 31																								Total
Accident Year
2010	$	49	$	22	$	22	$	22	$	12		$	20		$	3		$	(1	)	$	3		$	152
2011				34		6		12		(8	)		25			-			(2	)		14			81
2012						26		32		10			9			(5	)		(2	)		(3	)		67
2013								35		20			26			(25	)		(11	)		(21	)		24
2014										13			(1	)		(27	)		(2	)		(4	)		(21	)
2015													9			(25	)		2			(14	)		(28	)
2016																(21	)		(9	)		(14	)		(44	)
2017																			(8	)		(11	)		(19	)
2018																						(10	)		(10	)
Total net development for the accident years presented above																(100	)		(33	)		(60	)
Adjustment for development on a discounted basis																(3	)		-			3
Total net development for accident years prior to 2010																39			8			21
Total unallocated claim adjustment expense development																1			(7	)		23
													Total		$	(63	)	$	(32	)	$	(13	)

(a) Data presented for these calendar years is required supplemental information, which is unaudited.

(b) Other includes the effect of discounting lifetime claim reserves.

The table below presents information about average historical claims duration as of December 31, 2019 and is presented as required supplementary information, which is unaudited.

Average Annual Percentage Payout of Ultimate Net Incurred Claim and Allocated Claim Adjustment Expenses in Year:
	1			2			3			4			5			6			7			8			9			10			Total
Medical professional liability		3.8	%		20.0	%		24.3	%		19.4	%		12.4	%		7.8	%		5.1	%		3.1	%		1.1	%		0.8	%		97.8	%
Other professional liability and management liability		6.6			22.6			21.7			16.9			10.5			6.0			4.9			3.3			3.8			0.7			97.0
Surety (a)		20.0			44.5			21.0			4.4			2.2			0.9			(2.5	)		(1.1	)					1.6			91.0
Commercial auto		28.6			24.0			18.6			14.3			9.4			3.2			1.5			0.4									100.0
General liability		4.3			15.8			19.0			20.1			15.7			8.7			6.0			2.5			1.5			1.6			95.2
Workers’ compensation		14.1			21.4			13.9			10.3			7.0			3.7			2.9			2.7			1.4			0.8			78.2

(a) Due to the nature of the Surety business, average annual percentage payout of ultimate net incurred claim and allocated claim adjustment expenses has been calculated using only the payouts of mature accident years presented in the loss reserve development tables.

A&EP Reserves

In 2010, Continental Casualty Company (“CCC”) together with several of CNA’s insurance subsidiaries completed a transaction with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., under which substantially all of CNA’s legacy A&EP liabilities were ceded to NICO (“loss portfolio transfer” or “LPT”). At the effective date of the transaction, CNA ceded approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of $4.0 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third party reinsurance related to these liabilities. CNA paid NICO a reinsurance premium of $2.0 billion and transferred to NICO billed third party reinsurance receivables related to A&EP claims with a net book value of $215 million, resulting in total consideration of $2.2 billion.

In years subsequent to the effective date of the LPT, CNA recognized adverse prior year development on its A&EP reserves resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which CNA recognizes a change in the estimate of A&EP reserves that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders’ benefits on the Consolidated Statements of Income.

The following table presents the impact of the loss portfolio transfer on the Consolidated Statements of Income.

Year Ended December 31	2019			2018			2017
(In millions)
Additional amounts ceded under LPT:
Net A&EP adverse development before consideration of LPT	$	150		$	178		$	60
Provision for uncollectible third-party reinsurance on A&EP		(25	)		(16	)
Total additional amounts ceded under LPT		125			162			60
Retroactive reinsurance benefit recognized		(107	)		(114	)		(68	)
Pretax impact of deferred retroactive reinsurance	$	18		$	48		$	(8	)

Net unfavorable prior year development of $150 million, $178 million and $60 million was recognized before consideration of cessions to the LPT for the years ended December 31, 2019, 2018 and 2017.

The 2019 unfavorable development of $150 million was primarily driven by higher than anticipated defense and indemnity costs on known direct asbestos and environmental accounts and a reduction in estimated reinsurance recoverable. The 2018 unfavorable development of $178 million was driven by higher than anticipated defense and indemnity costs on known direct asbestos and environmental accounts and by paid losses on assumed reinsurance exposures. Additionally, in 2019 and 2018, the company released $25 million and $16 million of its provision for uncollectible third-party reinsurance. The 2017 unfavorable development of $60 million was driven by modestly higher anticipated payouts on claims from known sources of asbestos exposure.

As of December 31, 2019 and 2018, the cumulative amounts ceded under the LPT were $3.2 billion and $3.1 billion. The unrecognized deferred retroactive reinsurance benefit was $392 million and $374 million as of December 31, 2019 and 2018 and is included within Other liabilities on the Consolidated Balance Sheets.

NICO established a collateral trust account as security for its obligations to CNA. The fair value of the collateral trust account was $3.7 billion and $2.7 billion as of December 31, 2019 and 2018. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to CNA’s A&EP claims.

Long Term Care Policyholder Reserves

CNA’s Other Insurance Operations include its run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants. Long term care policies provide benefits for nursing homes, assisted living facilities and home health care subject to various daily and lifetime caps. Generally, policyholders must continue to make periodic premium payments to keep the policy in force and CNA has the ability to increase policy premiums, subject to state regulatory approval.

CNA maintains both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for its long term care business. Claim and claim adjustment expense reserves consist of estimated reserves for long term care policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported. In developing the claim and claim adjustment expense reserve estimates for long term care policies, CNA’s actuaries perform a detailed claim experience study on an annual basis. The study reviews the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration. CNA’s recorded claim and claim adjustment expense reserves reflect management’s best estimate after incorporating the results of the most recent study. In addition, claim and claim adjustment expense reserves are also maintained for the structured settlement obligations. In developing the claim and claim adjustment expense reserve estimates for CNA’s structured settlement obligations, CNA’s actuaries monitor mortality experience on a annual basis. Both elements of the long term care reserves are discounted as discussed in Note 1.

CNA completed its annual long term care claim experience study in the third quarter of 2019 and 2018 which resulted in $56 million and $31 million pretax reductions in claim and claim adjustment expense reserves. The favorable claim reserve development in 2019 and 2018 was primarily due to lower claim severity than anticipated in the reserve estimates. 

Future policy benefit reserves represent the active life reserves related to CNA’s long term care policies which are the present value of expected future benefit payments and expenses less expected future premium. The determination of these reserves requires management to make estimates and assumptions about expected investment and policyholder experience over the life of the contract. Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.

The actuarial assumptions that management believes are subject to the most variability are morbidity, persistency, discount rates and anticipated future premium rate increases. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted. Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death. Discount rates are influenced by the investment yield on assets supporting long term care reserves which is subject to interest rate and market volatility and may also be affected by changes to the Internal Revenue Code. Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown. As a result of this variability, CNA’s long term care reserves may be subject to material increases if actual experience develops adversely to CNA’s expectations.

Annually, in the third quarter, management assesses the adequacy of its long term care future policy benefit reserves by performing a GPV to determine if there is a premium deficiency. Management also uses the GPV process to evaluate the adequacy of its claim and claim adjustment expense reserves for structured settlement obligations not funded by annuities. Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation. The GPV required reserves are then compared to the existing recorded reserves. If the GPV required reserves are greater than the existing recorded reserves, the existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount. Any such increase is reflected in the Company’s results of operations in the period in which the need for such adjustment is determined. If the GPV required reserves are less than the existing recorded reserves, assumptions remain locked in and no adjustment is required. 

Periodically, management engages independent third parties to assess the appropriateness of its best estimate assumptions. The most recent third party assessment, performed in early 2019, validated the assumption setting process and confirmed the best estimate assumptions appropriately reflected the experience data at that time.

In the third quarter of 2019, CNA performed the GPV for the long term care future policy benefit reserves. This GPV indicated a premium deficiency primarily driven by lower discount rate assumptions. Recognition of the premium deficiency resulted in a $216 million pretax charge in policyholders’ benefits reflected in the Company’s results of operations. CNA’s 2018 and 2017 GPV for the long term care future policy benefit reserves indicated the reserves were not deficient and no adjustment was required.