Travelers 2008 Annual Report Download - page 45

The Company cooperated with these subpoenas and requests for information. The Company has also
entered into agreements with several of these regulators to resolve issues related to broker and agent
compensation. As a result of these agreements, the Company has discontinued paying contingent
commissions in the United States on a number of insurance businesses, including excess casualty and
umbrella, personal insurance, boiler and machinery, financial guaranty, fidelity and burglary & theft.
The Company has developed alternative compensation arrangements for these lines of business that
compensate brokers and agents in a manner that differentiates for business performance and is
consistent with all applicable laws. Beginning January 1, 2007, the Company offered an optional fixed
commission program in the U.S. for most commercial insurance lines.
International Regulation
TRV’s insurance underwriting subsidiaries based in the United Kingdom, Travelers Insurance
Company Limited and Travelers Casualty and Surety Company of Europe Limited, are regulated by the
Financial Services Authority (FSA). The FSA’s principal objectives are to maintain market confidence,
promote public understanding of the financial system, protect consumers, and fight financial crime.
TRV’s managing agent (Travelers Syndicate Management Ltd.) of its Lloyd’s syndicate is also regulated
by the FSA, which has delegated certain regulatory responsibilities to the Council of Lloyd’s.
Through Lloyd’s, TRV is licensed to write business in over 70 countries throughout the world by
virtue of Lloyd’s international licenses. In each such country, TRV is subject to the laws and insurance
regulation of that country. In 2007, a TRV subsidiary, Travelers Casualty and Surety Company,
established a representative office in China. The representative office is regulated by the China
Insurance Regulatory Commission. In addition, in 2007, TRV’s Lloyd’s managing operations agency
established a service company in Singapore, the underwriting operations of which are regulated by the
Monetary Authority of Singapore.
TRV’s insurance operations in the Republic of Ireland are regulated by the Irish Financial Services
Regulatory Authority. In Canada, the conduct of TRV’s insurance business is regulated by the Office of
the Superintendent of Financial Institutions under provisions of the Insurance Companies Act, which
requires insurance companies to maintain certain levels of capital depending on the type and amount of
insurance policies in force.
TRV’s branch in runoff in Australia is regulated by the Australian Prudential Regulation Authority.
Insurance Holding Company Statutes
As a holding company, TRV is not regulated as an insurance company. However, since TRV owns
capital stock in insurance subsidiaries, it is subject to state insurance holding company statutes, as well
as certain other laws, of each of its insurance subsidiaries’ states of domicile. All holding company
statutes, as well as other laws, require disclosure and, in some instances, prior approval of material
transactions between an insurance company and an affiliate. The holding company statutes and other
laws also require, among other things, prior approval of an acquisition of control of a domestic insurer,
some transactions between affiliates and the payment of extraordinary dividends or distributions.
Insurance Regulations Concerning Change of Control. Many state insurance regulatory laws contain
provisions that require advance approval by state agencies of any change in control of an insurance
company that is domiciled, or, in some cases, having substantial business that it is deemed to be
commercially domiciled, in that state.
The laws of many states also contain provisions requiring pre-notification to state agencies prior to
any change in control of a non-domestic insurance company admitted to transact business in that state.
While these pre-notification statutes do not authorize the state agency to disapprove the change of
control, they do authorize issuance of cease and desist orders with respect to the non-domestic insurer
if it is determined that some conditions, such as undue market concentration, would result from the
acquisition.
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