Travelers 2014 Annual Report Download - page 36

Table of Contents
Services Act of 2012, including approval of the PRA and FCA. Some of TRV's other insurance subsidiaries are domiciled in, or authorized to
conduct insurance business in, Canada. Authorized insurers in Canada are subject to change of control restrictions in Section 407 of the Insurance
Companies Act, including approval of the Office of the Superintendent of Financial Institutions. JMalucelli and its subsidiaries are subject to
change of control and other share transfer restrictions and requirements in insurance laws and regulations in Brazil, mainly in Decree 73/1966 and
CNSP Resolution no. 166/2007, which may include the need for prior approval of the insurance regulator, Superintendencia de Seguros Privados.
These requirements may deter, delay or prevent transactions affecting the control of or the ownership of common stock, including transactions
that could be advantageous to TRV's shareholders.
Regulatory Developments
For a discussion of domestic and international regulatory developments, see "Item 1A—Risk Factors" including "Changes in federal
regulation could impose significant burdens on us and otherwise adversely impact our results" and "New regulations outside of the United States,
including in the European Union, could adversely impact our results of operations and limit our growth."
ENTERPRISE RISK MANAGEMENT
As a large property and casualty insurance enterprise, the Company is exposed to many risks. These risks are a function of the environments
within which the Company operates. Since certain risks can be correlated with other risks, an event or a series of events can impact multiple areas
of the Company simultaneously and have a material effect on the Company's results of operations, financial position and/or liquidity. These
exposures require an entity
- wide view of risk and an understanding of the potential impact on all aspects of the Company's operations. It also
requires the Company to manage its risk
- taking to be within its risk appetite in a prudent and balanced effort to create and preserve value for all of
the Company's stakeholders. This approach to Company
- wide risk evaluation and management is commonly called Enterprise Risk Management
(ERM). ERM activities involve both the identification and assessment of a broad range of risks and the execution of synchronized strategies to
effectively manage such risks. Effective ERM also includes the determination of the Company's risk capital needs, which takes into account
regulatory requirements and credit rating considerations, in addition to economic and other factors.
ERM at the Company is an integral part of its business operations. All corporate leaders and the board of directors are engaged in ERM. ERM
involves risk
- based analytics, as well as reporting and feedback throughout the enterprise in support of the Company's long - term financial
strategies and objectives.
The Company uses various methods, including proprietary and third
- party computer modeling processes, to continually monitor and analyze
catastrophic events and the risks associated with them. These analyses and methods are used in making underwriting and reinsurance decisions as
part of managing the Company's exposure to catastrophic events. In addition to catastrophe modeling and analysis, the Company also models and
analyzes its exposure to other extreme events. The Company also utilizes proprietary and third - party computer modeling processes to evaluate
capital adequacy. These analytical techniques are an integral component of the Company's ERM process and further support the Company's long
-
term financial strategies and objectives.
In addition to the day - to - day ERM activities within the Company's operations, key internal risk management functions include, among others,
the Management and Operating Committees (comprised of the Company's Chief Executive Officer and the other most senior members of
management), the Enterprise and Business Risk Committees of management, the Credit Committee, the Chief Compliance Officer, the Corporate
Actuarial group, the Corporate Audit group, the Accounting Policy
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