Travelers 2012 Annual Report Download - page 24

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
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.
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, 2013. 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 $16.6 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 up to $18.8
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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