Travelers 2013 Annual Report Download - page 63

exceed this deductible up to a total industry program cap of $100 billion. Our estimated deductible
under the program is $2.35 billion for 2014. In addition, because the interpretation of this law is
untested, there is substantial uncertainty as to how it will be applied to specific circumstances. The
program is due to expire at the end of 2014; however, legislation to extend the program has been
introduced in Congress. It is possible that Congress could decide not to renew the program or could
otherwise modify or eliminate the program, which could adversely affect our business by increasing our
exposure to terrorism losses, or by lowering our business volume through efforts to avoid that exposure.
Because of the risks set forth above, catastrophes such as those caused by various natural events or
man-made events such as a terrorist attack, including ‘‘unconventional’’ acts of terrorism involving
nuclear, biological, chemical or radiological events, could materially and adversely affect our results of
operations, financial position and/or liquidity. Further, we may not have sufficient resources to respond
to claims arising from a high frequency of high severity natural catastrophes and/or of man-made
catastrophic events involving conventional means. In addition, while we seek to manage our exposure to
man-made catastrophic events involving conventional means, we may not have sufficient resources to
respond to claims arising out of one or more man-made catastrophic events involving nuclear,
biological, chemical or radiological means.
During or following a period of financial market disruption or economic downturn, our business
could be materially and adversely affected. Over the past seven years and particularly during the
financial crisis, worldwide financial markets have experienced significant disruption. During a portion of
this period, the United States and many other economies experienced a prolonged economic downturn,
resulting in heightened credit risk, reduced valuation of certain investments and decreased economic
activity. While economic conditions have generally stabilized and improved, there is continued
uncertainty regarding the duration and strength of the economic recovery. Even if growth continues, it
may be at a slow rate for an extended period of time, and other economic conditions, such as
employment rates, may continue to be weak.
Furthermore, financial markets may again experience significant and prolonged disruption. In
recent years, the federal government, particularly the Federal Reserve, has taken extraordinary steps to
stabilize financial markets, encourage economic growth and keep interest rates low. While inflation has
recently been limited and that trend may continue, it is possible that the steps taken by the federal
government to stabilize financial markets and improve economic conditions could lead to an
inflationary environment. Further, such steps may be ineffective and, in the case of the Federal
Reserve, actual or anticipated efforts to continue to unwind some of such steps (including the so-called
‘‘tapering’’ of quantitative easing) could disrupt financial markets and/or could adversely impact the
value of our investment portfolio or general economic conditions.
Economic uncertainty has been exacerbated in recent years by the increased potential for default
by one or more European sovereign debt issuers, the potential partial or complete dissolution of the
Eurozone and its common currency and the negative impact of such events on global financial
institutions and capital markets generally. Actions or inactions of European governments may impact
these actual or perceived risks. In the U.S. during 2011, one rating agency downgraded the U.S.’s
long-term debt credit rating from AAA. Future actions or inactions of the United States government,
including a failure to increase the government debt limit or a shutdown of the federal government,
could increase the actual or perceived risk that the U.S. may not ultimately pay its obligations when
due and may disrupt financial markets, including capital markets. Further, issues related to the U.S.
Federal budget and taxes, implementation of the Affordable Care Act and the regulatory environment
have added to the uncertainty regarding economic conditions generally.
If economic conditions deteriorate, or if financial markets experience significant disruption, it
could materially adversely affect our results of operations, financial position and/or liquidity. Several of
the risk factors discussed below identify risks that result from, or are exacerbated by, an economic
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