Travelers 2008 Annual Report Download - page 20

the creditworthiness of the customer and the nature of the insured risks. Business Insurance continually
monitors the credit exposure on individual accounts and the adequacy of collateral.
The Company continually monitors its exposure to natural and man-made 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 for terrorism. The Company relies, in part,
upon this analysis to make underwriting decisions designed to manage its exposure on catastrophe-
exposed business. See ‘‘Item 7—Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Catastrophe Modeling.’’ 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 party claims arising 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 and cost-effective quality care. 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
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