Travelers 2014 Annual Report Download - page 52

Table of Contents
Item 1A. RISK FACTORS
You should carefully consider the following risks and all of the other information set forth in this report, including our consolidated financial
statements and the notes thereto.
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. Our property and casualty insurance operations
expose us to claims arising out of catastrophes. Catastrophes can be caused by various natural events, including, among others, hurricanes,
tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions and other naturally
-
occurring events, such as solar flares. Catastrophes can also be man - made, such as terrorist attacks and other intentionally destructive acts
(including those involving nuclear, biological, chemical or radiological events), explosions and infrastructure failures. The geographic distribution
of our business subjects us to catastrophe exposures in the United States and Canada, which include, but are not limited to: hurricanes from Maine
through Texas; tornadoes throughout the Central, Mid
- Atlantic and Southeastern regions of the United States; earthquakes in California, the New
Madrid region and the Pacific Northwest region of North America; wildfires, particularly in western states and Canada; and terrorism in major cities
in the United States. In addition to our operations in the United States and Canada, our international operations subject us to catastrophe
exposures in the United Kingdom and the Republic of Ireland, as well as to a variety of world
- wide catastrophe exposures through our Lloyd's
operations, and in Brazil through our joint venture investment.
The incidence and severity of catastrophes are inherently unpredictable, and it is possible that both the frequency and severity of natural and
man
- made catastrophic events could increase. Severe weather events over the last decade have underscored the unpredictability of future climate
trends, and potentially changing climate conditions could add to the frequency and severity of natural disasters and create additional uncertainty
as to future trends and exposures. For example, over the last decade, hurricane activity has impacted areas further inland than previously
experienced by us, thus expanding our potential for losses from hurricanes. Additionally, both the frequency and severity of tornado and hail
storms in the United States have been more volatile in recent years. Moreover, we could experience more than one highly severe catastrophic event
in any given period.
All of the catastrophe modeling tools that we use, or that we rely on from outside parties, to evaluate certain of our catastrophe exposures are
based on assumptions and judgments that are subject to error and mis
- estimation and may produce estimates that are materially different than
actual results. In addition, compared to models for hurricanes, models for earthquakes are less reliable due to there being a more limited number of
significant historical events to analyze, while models for tornadoes and hail storms are newer and may be even less reliable due to the highly
random geographic nature and size of these events. As a result, models for earthquakes and tornado and hail storms may have even greater
difficulty predicting risks and estimating losses. Further, changes in climate conditions could cause our underlying modeling data to be less
predictive, thus limiting our ability to effectively evaluate and manage catastrophe risk. See "We may be adversely affected if our pricing and
capital models provide materially different indications than actual results" below as well as "Item 7—Management's Discussion and Analysis of
Financial Condition and Results of Operations—Catastrophe Modeling" and "—Changing Climate Conditions."
The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the
severity of the event. Increases in the value and geographic concentration of insured property and the effects of inflation could increase the
severity of claims from catastrophic events in the future. For example, the specific geographic location impacted by tornadoes is inherently random
and unpredictable and the specific location impacted by a tornado may or may not be highly populated and may or may not have a high
concentration of our insured exposures.
51