Travelers 2012 Annual Report Download - page 44

Prudential Regulation Authority (‘‘PRA’’), as prudential regulator, and The Financial Conduct
Authority (‘‘FCA’’), as conduct regulator.
TRV’s managing agency is licensed to write business in over 75 jurisdictions throughout the world
by virtue of Lloyd’s international licenses. In each such jurisdiction, TRV’s managing agency, as part of
Lloyd’s, is subject to the laws and insurance regulation of that jurisdiction. In addition, TRV’s
managing agency has an underwriting agency 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 conducted through an Irish branch of
Travelers Insurance Company Limited which is regulated by the Insurance Supervision Departments of
the Central Bank of Ireland (as to conduct) and also 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.
Solvency II. 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. Solvency II is currently required to be implemented
on January 1, 2014; however, the effective implementation date may be delayed. 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 with the NAIC in the U.S.) 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 is currently not expected that the capital management
strategies for the Company’s U.S. or European Union operations will be materially impacted.
International Association of Insurance Supervisors (IAIS) Guidance for Determining Global
Systemically Important Insurers. The IAIS is working with the Financial Stability Board (FSB) created
by the G-20 and is developing a methodology for determining whether and which, if any, insurance
companies pose a systemic risk to the global economy. Such insurers would be designated ‘‘global
systemically important insurers’’ (G-SIIs) and would likely be subject to higher capital requirements,
enhanced supervision or both. The IAIS has released for comment proposed methodology for
identifying potential G-SIIs but has not yet decided upon the criteria for or the consequences of such
designation. Upon finalizing the assessment methodology and determining the consequences of a G-SII
designation, the FSB along with national authorities expect to publish the list of G-SIIs in April 2013.
See ‘‘Part I—Item 1A—Risk Factors—New regulations outside of the U.S., including in the European
Union, could adversely impact our results of operations and limit our growth.’’
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
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