GM » Topics » Reserves for Insurance Losses and Loss Adjustment Expense

This excerpt taken from the GM 10-K filed Mar 28, 2006.
Reserves for Insurance Losses and Loss Adjustment Expense
The following table provides a reconciliation of the activity in the reserves for insurance losses and loss adjustment expenses.
                           
Year ended December 31,            
($ in millions)   2005   2004   2003
 
Balance at beginning of year
  $ 2,505     $ 2,340     $ 2,140  
Reinsurance recoverables
    (775 )     (871 )     (812 )
 
Net balance at beginning of year
    1,730       1,469       1,328  
Incurred related to
                       
 
Current year
    2,471       2,344       2,252  
 
Prior years (a)
    (116 )     27       36  
 
Total incurred (b)
    2,355       2,371       2,288  
Paid related to
                       
 
Current year
    (1,682 )     (1,567 )     (1,579 )
 
Prior years
    (619 )     (558 )     (582 )
 
Total paid
    (2,301 )     (2,125 )     (2,161 )
Other (c)
    (12 )     15       14  
 
Net balance at end of year (d)
    1,772       1,730       1,469  
Reinsurance recoverables
    762       775       871  
 
Balance at end of year
  $ 2,534     $ 2,505     $ 2,340  
 
(a)    Incurred losses and loss adjustment expenses during 2005 related to events of prior year are attributable to decreases in reserve estimates primarily for private passenger auto in both the United States and internationally and certain reinsurance coverages, which are based on additional knowledge available to us during 2005. During 2004, incurred losses related to events of prior years are attributed to changes in reserve estimates for claims, which are based on additional knowledge available to us during 2004. In addition, also includes $29 related to reinsurance agreements we decided to commute during 2004. During 2003, incurred losses related to events of prior year are attributed to the development of additional information indicating probable additional ultimate losses on U.S. assumed auto reinsurance and U.S. direct auto business.
(b)    Reflected net of reinsurance recoveries totaling $342, $312 and $374 for the years ended December 31, 2005, 2004 and 2003, respectively.
(c)    Effects of exchange rate changes for the years ended December 31, 2005, 2004 and 2003.
(d)    Includes exposure to asbestos and environmental claims from the reinsurance of general liability, commercial multiple peril, homeowners and workers’ compensation claims. Reported claim activity to date has not been significant. Net reserves for loss and loss adjustment expenses for such matters were $6, $8 and $10 at December 31, 2005, 2004 and 2003, respectively.
         
 
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