Travelers 2014 Annual Report Download - page 54

Table of Contents
commercial property and casualty insurance premium for the preceding calendar year, the federal government will reimburse us for 85% of our
losses attributable to certain acts of terrorism which exceed this deductible up to a total industry program cap of $100 billion. Our estimated
deductible under the program is $2.38 billion for 2015. Over the six
- year life of the reauthorized program, the federal government reimbursement
percentage will fall from 85% to 80%. In addition, because the interpretation of this law is untested, there is substantial uncertainty as to how it will
be applied to specific circumstances. It is also possible that future legislation could change 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. Worldwide financial markets have, from time to time, experienced significant disruption. For example, during the financial crisis that
started approximately seven years ago, 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. Financial markets may again experience
significant and prolonged disruption, including as a result of unanticipated events. 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. During this time, the
United States has experienced a slow rate of economic growth. Even if economic growth continues in the United States, or other regions in which
we do business, it may be at a slow or slower rate for an extended period of time. 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 could disrupt financial markets and/or could adversely impact the value of our investment portfolio or general
economic conditions.
Financial market disruption or economic downturns could be exacerbated by actual or potential economic and geopolitical instability in many
regions of the world. This can impact our business even if we do not conduct business in the region subject to the instability. For example, due to
globalization, instability in one region can spread to other regions where we do business. In Europe, uncertainty in recent years has included 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 potential events on global financial institutions and capital markets generally. Actions or
inactions of European governments may impact these actual or perceived risks. In the United States, future actions or inactions of the United
States government can also impact economic conditions. For example, 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
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