Travelers 2008 Annual Report Download - page 25

Operations—Catastrophe Modeling.’’ The Company also utilizes reinsurance to manage its aggregate
exposures to catastrophes. See ‘‘—Reinsurance.’’
Product Lines
Fidelity and Surety provides fidelity insurance coverage, which protects an insured for loss due to
embezzlement or misappropriation of funds by an employee, and surety, which is a three-party
agreement whereby the insurer agrees to pay a third party or make complete an obligation in response
to the default, acts or omissions of an insured. Surety is generally provided for construction
performance, legal matters such as appeals, trustees in bankruptcy and probate and other performance
bonds. In addition to the business written in the United States, this product line includes surety
business written in the following subsidiaries of the Company: Travelers Guarantee (Canada) and
Travelers Casualty and Surety Company of Europe (United Kingdom).
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,
architects and engineers) is sometimes also known as professional liability insurance.
International provides coverage through domestic operations in the United Kingdom, Canada and
the Republic of Ireland, and through the Company’s operations at Lloyd’s. The coverage provided in
those markets includes employers’ liability (similar to workers’ compensation coverage in the United
States), public and product liability (the equivalent of general liability), professional indemnity (similar
to professional liability coverage), motor (similar to automobile coverage in the United States),
property (similar to property in the United States), marine, aviation, personal accident and kidnap &
ransom. Marine provides coverage for ship hulls, cargoes carried, private yachts, marine-related liability,
offshore energy and ports and terminals. Aviation provides coverage for worldwide aviation risks
including physical damage and liabilities for airline, aerospace, general aviation, aviation war and space
risks. Personal accident provides financial protection in the event of death or disablement due to
accidental bodily injury, while kidnap & ransom provides financial protection against kidnap, hijack,
illegal detention and extortion. While the covered hazards may be similar to those in the U.S. market,
the different legal environments can make the product risks and coverage terms potentially very
different from those in the United States.
Other coverages include Property, Workers’ Compensation, Commercial Automobile and
Commercial Multi-Peril, which are described in more detail in the ‘‘Business Insurance’’ section of this
narrative.
Net Retention Policy
The following discussion reflects the Company’s retention policy with respect to the Financial,
Professional & International Insurance segment as of January 1, 2009. In the U.S. operations for third
party liability, including but not limited to umbrella liability, professional liability, directors’ and
officers’ liability, and employment practices liability, Financial, Professional & International Insurance
generally limits net retentions, through the use of reinsurance, up to $15.3 million per policy after
retaining a layer of expected losses. For surety protection, the Company generally retains up to
$55.0 million probable maximum loss (PML) per principal but may retain higher amounts based on the
type of obligation, credit quality and other credit risk factors. In the International operations, per-risk
retentions range from $4.0 million to $19.5 million. Reinsurance treaties often have aggregate limits or
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