Travelers 2010 Annual Report Download - page 208

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. REINSURANCE (Continued)
through 2014. The Program excludes from participation the following types of insurance: Federal crop
insurance, private mortgage insurance, financial guaranty insurance, medical malpractice insurance,
health or life insurance, flood insurance, and reinsurance, commercial automobile, professional liability
(other than directors and officers’), surety, burglary and theft, and farm-owners multi-peril. In the case
of a war declared by Congress, only workers’ compensation losses are covered by the Program. All
commercial property and casualty insurers licensed in the United States are generally required to
participate in the Program. Under the Program, a participating insurer is entitled to be reimbursed by
the Federal Government for 85% of subject losses, after an insurer deductible, subject to an annual
cap.
The deductible for any calendar year is equal to 20% of the insurer’s direct earned premiums for
covered lines for the preceding calendar year. The Company’s estimated deductible under the Program
is $2.08 billion for 2011. The annual cap limits the amount of aggregate subject losses for all
participating insurers to $100 billion. Once subject losses have reached the $100 billion aggregate
during a program year, participating insurers will not be liable under the Program for additional
covered terrorism losses for that program year. The Company has had no terrorism-related losses since
the Program was established. Since the interpretation of this law is untested, there is substantial
uncertainty as to how they will be applied to specific circumstances. It is also possible that future
legislative action could change the Acts. Further, given the unpredictable frequency and severity of
terrorism losses, as well as the limited terrorism coverage in the Company’s own reinsurance program,
future losses from acts of terrorism, particularly ‘‘unconventional’’ acts of terrorism involving nuclear,
biological, chemical or radiological events, could be material to the Company’s operating results,
financial position and/or liquidity in future periods. While the Company seeks to manage its exposure
to man-made catastrophic events involving conventional means, there can be no assurance that the
Company would have sufficient resources to respond to claims arising out of one or more man-made
catastrophic events involving so-called weapons of mass destruction, including nuclear, biological,
chemical or radiological means.
6. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The following table presents the carrying amount of the Company’s goodwill by segment at
December 31, 2010 and 2009:
(in millions) 2010 2009
Business Insurance ................................................. $2,168 $2,168
Financial, Professional & International Insurance ........................... 557 557
Personal Insurance ................................................. 613 613
Other .......................................................... 27 27
Total ......................................................... $3,365 $3,365
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