Travelers 2014 Annual Report Download - page 63

Table of Contents
Overall, our competitive position in our various businesses is based on many factors, including but not limited to our:
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ability to profitably price our business, retain existing customers and obtain new business;
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premiums charged, contract terms and conditions, products and services offered (including the ability to design customized
programs);
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agent, broker and client relationships;
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ability to keep pace relative to our competitors with changes in technology and information systems;
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speed of claims payment;
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ability to provide our products and services in a cost effective manner;
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perceived overall financial strength and corresponding ratings assigned by independent rating agencies;
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reputation, experience and qualifications of employees;
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geographic scope of business; and
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local presence.
We may have difficulty in continuing to compete successfully on any of these bases in the future. If competition limits our ability to retain
existing business or write new business at adequate rates, our results of operations could be materially and adversely affected. See "Competition"
sections of the discussion on business segments in "Item 1—Business."
We may not be able to collect all amounts due to us from reinsurers and reinsurance coverage may not be available to us in the future at
commercially reasonable rates or at all. Although the reinsurer is liable to us to the extent of the ceded reinsurance, we remain liable as the direct
insurer on all risks reinsured. As a result, ceded reinsurance arrangements do not eliminate our obligation to pay claims. Accordingly, we are
subject to credit risk with respect to our ability to recover amounts due from reinsurers.
In the past, certain reinsurers have ceased writing business and entered into runoff. Some of our reinsurance claims may be disputed by the
reinsurers, and we may ultimately receive partial or no payment. This is a particular risk in the case of claims that relate to insurance policies written
many years ago, including those relating to asbestos and environmental claims. In addition, in a number of jurisdictions, particularly the European
Union and the United Kingdom, a reinsurer is permitted to transfer a reinsurance arrangement to another reinsurer, which may be less creditworthy,
without a counterparty's consent, provided that the transfer has been approved by the applicable regulatory and/or court authority.
Included in reinsurance recoverables are amounts related to certain structured settlements. Structured settlements are annuities purchased
from various life insurance companies to settle certain personal physical injury claims, of which workers' compensation claims comprise a
significant portion. In cases where we did not receive a release from the claimant, the structured settlement is included in reinsurance recoverables
and the related claim cost is included in the liability for claims and claim adjustment expense reserves, as we retain the contingent liability to the
claimant. If it is expected that the life insurance company is not able to pay, we would recognize an impairment of the related reinsurance
recoverable if, and to the extent, the purchased annuities are not covered by state guaranty associations. In the event that the life insurance
company fails to make the required annuity payments, we would be required to make such payments.
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