Travelers 2014 Annual Report Download - page 120

Table of Contents
reductions in arctic sea ice may contribute to rising sea levels that could impact flooding in coastal areas. Accordingly, the Company may be
subject to increased losses from catastrophes and other weather
- related events. Additionally, the Company's catastrophe models may be less
reliable due to the increased unpredictability, frequency and severity of severe weather events or a delay in the recognition of recent changes in
climate conditions.
The Company discusses how potentially changing climate conditions may present other issues for its business under "Risk Factors" in
Item 1A of this report and under "—Outlook" herein. For example, among other things:
•
Increasingly unpredictable and severe weather conditions could result in increased frequency and severity of claims under policies
issued by the Company. See "Risk Factors—Catastrophe losses could materially and adversely affect our results of operations, our
financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of
reinsurance" and "—Outlook—Underwriting Gain/Loss."
•
Changing climate conditions could also impact the creditworthiness of issuers of securities in which the Company invests. For
example, water supply adequacy could impact the creditworthiness of bond issuers in the Southwestern United States, and more
frequent and/or severe hurricanes could impact the creditworthiness of issuers in the Southeastern United States, among other
areas. See "Risk Factors—Our investment portfolio may suffer reduced returns or material realized or unrealized losses."
•
Increased regulation adopted in response to potential changes in climate conditions may impact the Company and its customers.
For example, state insurance regulation could impact the Company's ability to manage property exposures in areas vulnerable to
significant climate driven losses. If the Company is unable to implement risk based pricing, modify policy terms or reduce exposures
to the extent necessary to address rising losses related to catastrophes and smaller scale weather events (should those increased
losses occur), its business may be adversely affected. See "Risk Factors—Catastrophe losses could materially and adversely affect
our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital
and the availability and cost of reinsurance."
•
The full range of potential liability exposures related to climate change continues to evolve. Through the Company's Emerging
Issues Committee and its Committee on Climate, Energy and the Environment, the Company works with its business units and
corporate groups, as appropriate, to identify and try to assess climate change
- related liability issues, which are continually evolving
and often hard to fully evaluate. See "Risk Factors—The effects of emerging claim and coverage issues on our business are
uncertain."
Climate change regulation also could increase the Company's customers' costs of doing business. For example, insureds faced with carbon
management regulatory requirements may have less available capital for investment in loss prevention and safety features which may, over time,
increase loss exposures. Also, increased regulation may result in reduced economic activity, which would decrease the amount of insurable assets
and businesses.
The Company regularly reviews emerging issues, such as changing climate conditions, to consider potential changes to its modeling and the
use of such modeling, as well as to help determine the need for new underwriting strategies, coverage modifications or new products.
REINSURANCE RECOVERABLES
The Company reinsures a portion of the risks it underwrites in order to control its exposure to losses. For additional discussion regarding the
Company's reinsurance coverage, see "Part I—
Item 1 —Reinsurance."
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