Travelers 2011 Annual Report Download - page 44

regulated by the FSA, which has delegated certain regulatory responsibilities to the Council of Lloyd’s.
The FSA will be merged into the Bank of England during 2012.
Through Lloyd’s, TRV is licensed to write business in over 75 countries throughout the world by
virtue of Lloyd’s international licenses. In each such country, TRV’s managing agency, as part of
Lloyd’s, is subject to the laws and insurance regulation of that country. In addition, TRV’s Lloyd’s
managing agency has an underwriting agency and a service company in Singapore, the operations of
which are regulated by the Monetary Authority of Singapore. A TRV subsidiary, Travelers Casualty and
Surety Company, has a representative office in China. The representative office is regulated by the
China Insurance Regulatory Commission. A TRV subsidiary, TCI Global Services, Inc., has a liaison
office in India. Insurance business in India is regulated by the Insurance Regulatory and Development
Authority.
TRV’s insurance operations in the Republic of Ireland are regulated by the Insurance Supervision
Departments of the Central Bank of Ireland. Such operations are conducted through an Irish branch of
Travelers Insurance Company Limited which, as mentioned above, is regulated by the FSA. 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. TRV has an interest in JMalucelli, a
joint venture holding company in Brazil. JMalucelli’s subsidiaries operate in the insurance and
reinsurance business in Brazil and are regulated by the Superintendencia de Seguros Privados.
Regulators require insurance companies to maintain certain levels of capital depending on the type
and amount of insurance policies in-force.
The European Union’s executive body, the European Commission, is implementing new capital
adequacy and risk management regulations called Solvency II that would apply to the Company’s
businesses across the European Union beginning as soon as the first quarter of 2013. However, the
European Parliament has scheduled a vote in 2012 on whether to delay the implementation date.
Under Solvency II, it is possible that the U.S. parent of a European Union subsidiary could be subject
to certain Solvency II requirements if the regulator determines that the subsidiary’s capital position is
dependent on the parent company and the U.S. company is not already subject to regulations deemed
‘‘equivalent’’ to Solvency II. In addition, regulators in countries where the Company has operations are
working with the International Association of Insurance Supervisors (and in the U.S., with the NAIC)
to consider changes to insurance company supervision, including group supervision. While it is not
certain how or if these actions will impact the Company, it does not currently expect the capital
management strategies for its U.S. operating companies or its European Union operating companies
will be materially impacted.
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.
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