Travelers 2010 Annual Report Download - page 20

wildfires, severe winter weather, floods, volcanic eruptions, 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 resulting from the mechanical breakdown of boilers and machinery, and ocean and
inland marine insurance, which provides coverage for goods in transit and unique, one-of-a-kind
exposures.
General Liability coverage insures businesses against third-party claims arising from accidents
occurring on their premises or arising out of their operations, including as a result of injuries sustained
from products sold. 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.
Commercial Multi-Peril provides a combination of the property and liability coverages described in
the foregoing product line descriptions.
Net Retention Policy
The following discussion reflects the Company’s retention policy with respect to the Business
Insurance segment as of January 1, 2011. For third-party liability, Business Insurance generally limits its
net retention, through the use of reinsurance, to a maximum of $18.8 million per insured, per
occurrence after the Company retains an aggregate layer of expected losses. The net retained amount
per risk for property exposures is generally limited to $17.0 million, after reinsurance. The Company
generally retains its workers’ compensation exposures. Reinsurance treaties often have aggregate limits
or caps which may result in larger net per-risk retentions if the aggregate limits or caps are reached.
The Company utilizes facultative reinsurance to provide additional limits capacity or to reduce
retentions on an individual risk basis. The Company may also retain amounts greater than those
described herein based upon the individual characteristics of the risk.
Geographic Distribution
The following table shows the geographic 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, 2010:
% of
State Total
California .................................................. 13.2%
New York ................................................. 7.8
Texas ..................................................... 7.5
Illinois .................................................... 4.6
Florida ................................................... 4.3
Pennsylvania ................................................ 4.2
New Jersey ................................................ 3.6
Massachusetts .............................................. 3.5
All others(1) ............................................... 51.3
Total ................................................... 100.0%
(1) No other single state accounted for 3.0% or more of the total direct written premiums
written in 2010 by the Business Insurance segment.
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