Travelers 2014 Annual Report Download - page 24

Table of Contents
As a result of the evaluation of the reinsurance agreements with Long Point Re III, the Company concluded that it was a VIE because the
conditions described in items (a) and (b) above were present. However, while Long Point Re III was determined to be a VIE, the Company
concluded that it did not have a variable interest in the entity, as the variability in its results, caused by the reinsurance 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 Corporate Catastrophe Excess
- of - Loss Reinsurance Treaty and its
multi - year catastrophe bonds, the Company also is party to a northeast general catastrophe reinsurance treaty which provides up to $850 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, 2014 through June 30, 2015. 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.
Business and International Insurance Earthquake Excess
- of - Loss Reinsurance Treaty. For the period July 1, 2014 through June 30, 2015, the
Company has entered into an earthquake excess
- of - loss treaty that provides for up to $150 million part of $165 million of coverage, subject to a
$60 million retention, for losses arising from an earthquake, including fire following and sprinkler leakage incurred under policies written by
Technology, Public Sector Services and Commercial Accounts in the Company's Business and International Insurance segment.
Personal Insurance Earthquake Excess
- of - Loss Reinsurance Treaty. For the period January 1, 2015 through December 31, 2015, 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.
Canadian Property Catastrophe Excess
- of - Loss Reinsurance Contract. This contract, effective for the period July 1, 2014 through and
including June 30, 2015, covers the accumulation of net property losses arising out of one occurrence on business written by the Company's
Canadian businesses. The treaty covers all property written by the Company's Canadian businesses for Canadian insureds, including, but not
limited to, habitational property, commercial property, inland marine, ocean marine and auto physical damages exposures, with respect to risks
located worldwide, written for Canadian insureds. The treaty provides coverage for 100% of loss retained in excess of C$50 million (US$43 million at
December 31, 2014) up to C$900 million (US$775 million at December 31, 2014).
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 commensurate with the size of the respective local balance sheet. The Company conducts an ongoing review of its risk and
catastrophe coverages and makes changes as it deems appropriate.
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