Travelers 2013 Annual Report Download - page 24

conjunction with extensive amounts of proprietary data gathered and analyzed over many years, to
facilitate its risk selection process and develop pricing parameters. The Company utilizes both standard
industry forms and proprietary forms for the insurance policies it issues.
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), auto and motor (similar to
automobile coverage in the United States), commercial property, personal 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, 2014. 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 to $25.0 million per policy. For surety protection, where insured limits
are often significant, the Company generally retains up to $75.0 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 limited to a maximum of
$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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