Travelers 2007 Annual Report Download - page 20

The Company continually monitors its exposure to natural and manmade peril catastrophic losses
and attempts to manage such exposure. In order to manage the Company’s exposure to catastrophe
losses, Business Insurance limits the writing of new property business and selectively takes underwriting
action on existing business in some markets. In addition, the Company has tightened underwriting
standards, implemented price increases in some catastrophe-prone areas and put in place deductibles
specific to hurricane-, wind- and hail-prone areas. The Company uses various analyses and methods,
including sophisticated computer modeling techniques, to analyze underwriting risks of business in
hurricane-prone, earthquake-prone and target risk areas. The Company relies upon this analysis to
make underwriting decisions designed to manage its exposure on catastrophe-exposed business. The
Company also utilizes reinsurance to manage its aggregate exposures to catastrophes. See
‘‘—Reinsurance.’’
Product Lines
Commercial Multi-Peril provides a combination of property and liability coverage. Property
insurance covers damages such as those caused by fire, wind, hail, earthquake, water, theft, vandalism
and terrorism, and protects businesses from financial loss due to business interruption resulting from a
covered loss. Liability coverage insures businesses against third parties from accidents occurring on
their premises or arising out of their operations, such as injuries sustained from products sold.
Workers’ Compensation provides coverage for employers for specified benefits payable under state
or federal law for workplace injuries to employees. There are typically four types of benefits payable
under workers’ compensation policies: medical benefits, disability benefits, death benefits and
vocational rehabilitation benefits. The Company emphasizes managed care cost containment strategies,
which involve employers, employees and care providers in a cooperative effort that focuses on the
injured employee’s early return to work, cost-effective quality care and customer service in this market.
The Company offers the following types of workers’ compensation products:
• guaranteed cost insurance products, in which policy premium charges are fixed for the period of
coverage and do not vary as a result of the insured’s loss experience;
• loss-sensitive insurance products, including large deductible and retrospectively rated policies, in
which fees or premiums are adjusted based on actual loss experience of the insured during the
policy period;
• service programs, which are generally sold to the Company’s National Accounts customers,
where the Company receives fees rather than premiums for providing loss prevention, risk
management, and claim and benefit administration services to organizations under service
agreements.
The Company also participates in state assigned risk pools as a servicing carrier and pool
participant.
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 from the ownership, maintenance or use of
automobiles and trucks in a business.
Property provides coverage for loss of or damage to buildings, inventory and equipment from
natural disasters, including hurricanes, 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—Catastrophe Reinsurance—Terrorism Risk Insurance Acts.’’
Property also includes specialized equipment insurance, which provides coverage for loss or damage
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