Travelers 2013 Annual Report Download - page 34

agreements, is expected to be absorbed entirely by the investors in the catastrophe bonds issued by
Long Point Re III and residual amounts earned by it, if any, are expected to be absorbed by the equity
investors (the Company has neither an equity nor a residual interest in Long Point Re III).
Accordingly, the Company is not the primary beneficiary of Long Point Re III and does not
consolidate that entity in the Company’s consolidated financial statements. Additionally, because the
Company has no intention to pursue any transaction that would result in it acquiring interest in and
becoming the primary beneficiary of Long Point Re III, the consolidation of that entity in the
Company’s consolidated financial statements in future periods is unlikely.
The Company has not incurred any losses that have resulted or are expected to result in a recovery
under the Long Point Re III agreements since their inception.
Northeast General Catastrophe Reinsurance Treaty. In addition to its general catastrophe treaty and
its multi-year catastrophe bonds, the Company also is party to a northeast general catastrophe
reinsurance treaty which provides up to $600 million of coverage, subject to a $2.25 billion retention,
for certain losses arising from hurricanes, tornados, hail storms, earthquakes and winter storm or freeze
losses from Virginia to Maine for the period July 1, 2013 through June 30, 2014. Losses from a covered
event (occurring over several days) anywhere in the United States, Canada, the Caribbean and Mexico
and waters contiguous thereto may be used to satisfy the retention. Recoveries under the catastrophe
bonds (if any) would be first applied to reduce losses subject to this treaty.
General Catastrophe Aggregate Excess-of-Loss Reinsurance Treaty. For the period January 1, 2014 to
December 31, 2014, the Company has entered into a reinsurance agreement that covers the
accumulation of certain property losses arising from multiple occurrences. For each occurrence,
qualifying losses are 90% of $1.4 billion in excess of $100 million. The treaty covers aggregate
qualifying losses during 2014 for 40% of $1.0 billion in excess of $1.5 billion. The treaty covers all of
the Company’s exposures in the United States and Canada and their possessions, and waters contiguous
thereto, the Caribbean and Mexico.
Business Insurance Earthquake Excess-of-Loss Reinsurance Treaty. For the period July 1, 2013
through June 30, 2014, the Company has entered into an earthquake excess-of-loss treaty that provides
for up to $200 million of coverage, subject to a $160 million retention, for losses arising from an
earthquake, including fire following and sprinkler leakage incurred under policies written by the
National Property, Technology and Public Sector business units and the Commercial Accounts market
group.
Personal Insurance Earthquake Excess-of-Loss Reinsurance Treaty. For the period January 1, 2014
through December 31, 2014, the Company has entered into an earthquake excess-of-loss treaty that
provides for up to $200 million of coverage, subject to a $150 million retention, for losses arising from
an earthquake, including fire following and sprinkler leakage incurred under policies written by the
Company’s Personal Insurance segment.
Dominion Property and Automobile Physical Damage Catastrophe Excess-of-Loss Reinsurance
Contract. This contract, effective for the period January 1, 2014 through and including June 30, 2014,
covers the accumulation of net property losses arising out of one occurrence which may accrue to
Dominion. The treaty covers all of Dominion’s habitational property, commercial property and auto
physical damages exposures with respect to risks located in Canada, written for Canadian insureds,
including such insureds’ interests abroad. The treaty provides coverage for 100% of loss retained by
Dominion in excess of $15 million, up to $700 million.
Other International Reinsurance Treaties. For other business underwritten in Canada, as well as for
business written in the United Kingdom, Republic of Ireland and in the Company’s operations at
Lloyd’s, separate reinsurance protections are purchased locally that have lower net retentions more
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