Travelers 2010 Annual Report Download - page 24

insurance coverage to insureds within target markets. This methodology enables Financial,
Professional & International Insurance to streamline its risk selection process and develop pricing
parameters.
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.
General Liability provides coverage for specialized liability exposures as described above in more
detail in the ‘‘Business Insurance’’ section of this report.
International provides coverage for 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, surety, marine, aviation, personal accident and kidnap & ransom. Marine
provides coverage for ship hulls, cargoes carried, private yachts, marine-related liability, offshore
energy, ports and terminals, fine art and terrorism. 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 the Company faces in the United States.
Other coverages include Property, Workers’ Compensation, Commercial Automobile and
Commercial Multi-Peril, which are described above in more detail in the ‘‘Business Insurance’’ section
of this report. Other coverages also include personal automobile and household coverages.
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, 2011. 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, to up to $16.2 million per policy after
the Company retains an aggregate layer of expected losses. For surety protection, where insured limits
are often significant, 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 are usually limited to
$16.0 million, after reinsurance. 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.
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