Travelers 2012 Annual Report Download - page 46

The Company uses various methods, including proprietary and third-party computer modeling
processes, to continually monitor and analyze catastrophic events and the risks associated with them.
These analyses and methods are used in making underwriting and reinsurance decisions as part of
managing the Company’s exposure to catastrophic events. In addition to catastrophe modeling and
analysis, the Company also models and analyzes its exposure to other extreme events. The Company
also utilizes proprietary and third-party computer modeling processes to evaluate capital adequacy.
These analytical techniques are an integral component of the Company’s ERM process and further
support the Company’s long-term financial strategies and objectives.
In addition to the day-to-day ERM activities within the Company’s business units, other key
internal risk management functions include the Management and Operating Committees (comprised of
the Company’s Chief Executive Officer and the other most senior members of management), the
Enterprise and Underwriting Risk Committees of management, the Credit Committee, the Chief
Compliance Officer, the Business Conduct Officer, the Corporate Actuarial group, the Corporate Audit
group, the Accounting Policy group, the Enterprise Underwriting group and many others. A senior
executive oversees the ERM process. The mission of this executive is to facilitate risk assessment and
to collaborate in implementing effective risk management strategies throughout the Company. Another
strategic ERM objective of this executive includes working across the Company to enhance effective
and realistic risk modeling capabilities as part of the Company’s overall effort to understand and
manage its portfolio of risks to be within its risk appetite. Board oversight of ERM is provided by the
Risk Committee of the board of directors, which reviews the strategies, processes and controls
pertaining to the Company’s insurance operations and oversees the implementation, execution and
performance of the Company’s ERM program.
The Company’s ERM efforts build upon the foundation of an effective internal control
environment. ERM expands the internal control objectives of effective and efficient operations, reliable
financial reporting and compliance with applicable laws and regulations, to fostering, leading and
supporting an integrated, risk-based culture within the Company that focuses on value creation and
preservation. However, the Company can provide only reasonable, not absolute, assurance that these
objectives will be met. Further, the design of any risk management or control system must reflect the
fact that there are resource constraints, and the benefits must be considered relative to their costs. As a
result, the possibility of material financial loss remains in spite of the Company’s significant ERM
efforts. An investor should carefully consider the risks and all of the other information set forth in this
annual report, including the discussions included in ‘‘Item 1A—Risk Factors,’’ ‘‘Item 7A—Quantitative
and Qualitative Disclosures About Market Risk,’’ and ‘‘Item 8—Financial Statements and
Supplementary Data.’’
OTHER INFORMATION
Customer Concentration
In the opinion of the Company’s management, no material part of the business of the Company
and its subsidiaries is dependent upon a single customer or group of customers, the loss of any one of
which would have a material adverse effect on the Company, and no one customer or group of
affiliated customers accounts for 10% or more of the Company’s consolidated revenues.
Employees
At December 31, 2012, the Company had approximately 30,500 employees. The Company believes
that its employee relations are satisfactory. None of the Company’s employees are subject to collective
bargaining agreements.
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