Travelers 2011 Annual Report Download - page 23

Principal Markets and Methods of Distribution
Within the Financial, Professional & International Insurance segment, Bond & Financial Products
distributes the vast majority of its products in the United States through approximately 6,200 of the
same independent agencies and brokers that distribute the Business Insurance segment’s products.
These independent agencies and brokers are located throughout the United States. Bond & Financial
Products, in conjunction with the Business Insurance segment, continues to make investments in
enhanced technology utilizing internet-based applications to provide real-time interface capabilities with
its independent agencies and brokers. Bond & Financial Products builds relationships with
well-established, independent insurance agencies and brokers. In selecting new independent agencies
and brokers to distribute its products, Bond & Financial Products considers, among other attributes,
each agency’s or broker’s profitability, financial stability, staff experience and strategic fit with its
operating and marketing plans. Once an agency or broker is appointed, its ongoing performance is
closely monitored. In addition, Bond & Financial Products sells its surety products through independent
brokers in the United Kingdom.
The International market distributes its products principally through brokers in the domestic
markets of each of the countries in which it operates. It also writes business at Lloyd’s, where its
products are distributed through Lloyd’s wholesale and retail brokers. By virtue of Lloyd’s worldwide
licenses, Financial, Professional & International Insurance has access to international markets across
the world. In late 2008, the Company commenced an exclusive relationship with a broker in the
Republic of Ireland that significantly increased the 2009 volume of personal automobile coverage
written and also resulted in the Company writing personal household coverages. The Company ceased
writing business through this relationship in the fourth quarter of 2010 and ceased writing all remaining
personal insurance business in the Republic of Ireland in the fourth quarter of 2011.
Pricing and Underwriting
Financial, Professional & International Insurance has developed underwriting and pricing
methodologies that incorporate dedicated underwriting, claims, engineering, actuarial and product
development disciplines. This approach is designed to maintain high quality underwriting and pricing
discipline, based on an in-depth knowledge of the specific account, industry or country. Underwriters
use industry and proprietary data gathered and analyzed over many years to assess and evaluate risks
prior to quotation, and then use proprietary forms (for non-Lloyd’s and non-surety markets) to tailor
insurance coverage to insureds within target markets. This methodology enables Financial,
Professional & International Insurance to facilitate its risk selection process and develop pricing
parameters.
Product Lines
The Financial, Professional & International Insurance segment writes the following types of
coverages:
•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
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