Travelers 2006 Annual Report Download - page 21

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Commercial Automobile provides coverage for businesses against losses incurred from personal bodily
injury, bodily injury to third parties, property damage to an insured’s vehicle and property damage to other
vehicles and other property resulting fromthe ownership, maintenance or use of automobiles and trucks in
a business.
Property provides coverage for loss or damage to buildings, inventory andequipment from natural
disasters, includinghurricanes, windstorms, earthquakes, hail, and severe winter weather. Also covered are
manmade events such as theft, vandalism, fires, explosions, terrorism and financial loss due to business
interruption resulting from covered property damage. For additional information on terrorism coverages,
see “Reinsurance—Terrorism Risk Insurance Act of 2002 and Terrorism Risk Insurance Extension Act of
2005.” Property also includes specialized equipment insurance, which provides coverage for loss or damage
resulting from the mechanical breakdown of boilers and machinery, and ocean and inland marine, which
provides coverage for goods in transit and unique, one-of-a-kindexposures.
General Liability provides coverage for liability exposures including bodily injury and property
damage arising from products sold and general business operations. Specialized liability policies may also
include coverage for directors’ and officers’ liability arising in their official capacities, employment
practices liability insurance, fiduciary liability for trustees and sponsors of pension, health and welfare, and
other employee benefit plans, errors and omissions insurance for employees, agents, professionals and
others arising from acts or failures to act under specified circumstances, as well as umbrella and excess
insurance. Errors and omissions insurance for professionals (such as lawyers, accountants, doctors and
other health care providers) is sometimes also known as professional liability insurance.
Net Retention Policy
The following discussion reflects the Company’s retention policy as of January 1, 2007. For third party
liability, Business Insurance generally limits its net retention to a maximum of $13 million per insured, per
occurrence after reinsurance. The net retained amount per risk for property exposures is generally limited
to $15 million, after reinsurance. The Company also utilizes facultative reinsurance to provide additional
limits capacity or to reduce retentions on an individual risk basis. TheCompany may also retain amounts
greater than those described herein based upon the individual characteristics of the risk.
Geographic Distribution
The following table shows the distribution of Business Insurance’s direct written premiums for the
states that accounted for the majority of premium volume for the year ended December 31, 2006:
State
% of
Total
California........................................................... 12.1%
New York ........................................................... 7.9
Texas............................................................... 7.3
Florida.............................................................. 5.7
Illinois .............................................................. 4.6
New Jersey .......................................................... 4.1
Massachusetts........................................................ 4.1
Pennsylvania ......................................................... 3.8
All Others(1)........................................................ 50.4
Total 100.0 %
(1)No other single state accounted for 3.0% or moreof the total direct written premiums written in 2006
by the domestic operations of the Business Insurance segment.