Capital & Risk Management

As a large property and casualty insurance enterprise, Travelers is exposed to many risks. These risks are a function of the environments within which we operate. Since certain risks can be correlated with other risks, an event or a series of events can impact multiple areas of our business simultaneously. These exposures require us to take an entity-wide, aggregate view of risk and understand the potential impact on all aspects of our operations. Our Enterprise Risk Management activities involve both the identification and assessment of a broad range of risks and an execution of synchronized strategies to effectively manage these risks. Through our Enterprise Risk Management, we also manage our risk-taking to be within our risk appetite in a prudent and balanced effort and determine our risk capital needs, taking into account regulatory requirements, financial strength and credit rating considerations, among other factors.


Enterprise Risk Management (ERM) is a company-wide initiative that involves the identification and assessment of a broad range of risks that could affect our ability to fulfill our business objectives, as well as the development of plans to mitigate their effects. Our Board of Directors oversees our ERM process. The Risk Committee and the other committees of the Board, as well as our separate management-level enterprise risk and underwriting risk committees, are key elements of our ERM structure and help to establish and reinforce our strong culture of risk management. For example, having both a Board Risk Committee that oversees operational risks and our ERM activities, and a management-level enterprise risk committee that reports regularly to the Board Risk Committee, enables a high degree of coordination between management and the Board.

Board Oversight of Risk

While the Board Risk Committee has oversight responsibility generally for ERM activities, the Board has allocated and delegated risk oversight responsibility to various committees of the Board. Accordingly, all committees of the Board share responsibility for oversight of strategic objectives, risk management and the sustainability of our business. We believe that allocating responsibility for specific topics to a committee with a particular skill set and experience improves the effectiveness of the overall oversight of risks and opportunities.

Audit Committee

Responsible for oversight of risks related to integrity of financial statements, including oversight of financial reporting principles and policies and internal controls; the process for establishing insurance reserves; and risks related to regulatory and compliance matters generally. Audit Committee Charter.

Compensation Committee

Responsible for oversight of risks related to compensation programs, including formulation, administration and regulatory compliance with respect to compensation matters. Compensation Committee Charter.

Investment and Capital Markets Committee

Responsible for oversight of risks in our investment portfolio (including valuation and credit risks), capital structure, financing arrangements and liquidity. Investment and Capital Markets Committee Charter.

Nominating and Governance Committee

Responsible for oversight of risks related to corporate governance matters, including succession planning, director independence and related person transactions; diversity and inclusion efforts; public policy initiatives and community relations. Nominating and Governance Committee Charter.

Risk Committee

Responsible for oversight of risks related to business operations, including insurance underwriting and claims; reinsurance; catastrophe risk and the impact of changing climate conditions; credit risk in insurance operations; information technology, including cybersecurity; and business continuity planning. Risk Committee Charter.

Risk Management Leadership & Methods

A senior executive team, which includes the Chief Risk Officer and the Chief Underwriting Officer, oversees the ERM process. This team facilitates risk assessments and collaborates with others throughout the enterprise to implement effective risk management strategies for Travelers. This team also works across Travelers to enhance effective and realistic risk modeling capabilities as part of our overall effort to understand and manage our portfolio of risks.

Travelers uses various analyses and methods, including proprietary and third-party computer modeling processes, to make underwriting and reinsurance decisions designed to manage the company’s exposure to catastrophic events. In addition to catastrophe modeling and analysis, we model and analyze our exposure to other extreme events. We also utilize proprietary and third-party computer modeling processes to evaluate capital adequacy. These analytical techniques are an integral component of our ERM process and further support our long-term financial strategy and business objectives.

Our approach to ERM is reinforced by our compensation structure, which is designed to encourage a careful balance of risk and reward, both on an individual risk basis and in the aggregate on a company-wide basis. Importantly, our compensation program promotes and drives a long-term perspective to managing our business. This long-term perspective is especially important in the property and casualty insurance industry where a short-term focus could create incentives for management to relax the company’s underwriting or investment standards to increase revenue and reported profit in the near term but creating excessive risk for shareholders over the longer term. Moreover, results in the property and casualty insurance industry can vary significantly when measured year-to-year due to a variety of factors, including the periodic occurrence of significant catastrophes, such as in 2017 and 2018. Accordingly, we believe that the right way to manage our business is with a long-term perspective and to create value over time. See our Proxy Statement for a comprehensive discussion of how our compensation program incorporates this long-term perspective.

Balanced Approach to Capital Management

Travelers has consistently satisfied policyholders while delivering strong returns over time. Integral to our long-term financial strategy is a balanced approach to rightsizing capital and generating capital in excess of our growth needs. Our capital models first address our need to comply with risk-based capital requirements and our desire to maintain strong financial strength and credit ratings and ensure that we can satisfy the claim payouts and other obligations of our business.

To meet these objectives, we monitor our cash inflows (e.g., premiums, service fees, investment income) and outflows (e.g., claim payments, capital investments, operating expenses) on an ongoing basis. Since most of our policies renew on an annual basis, we reassess our pricing and risk appetite against our capital needs each year.

Our capital management strategy has been an important driver of shareholder value creation over time. As we have said many times, our first objective for the capital we generate is to reinvest it — organically and inorganically — in our business to create shareholder value. We will continue to retain capital to support growth in our business and invest capital to further our ambitious innovation agenda and advance other strategic objectives. Today, we are making strategic investments in everything from talent to technology. Having said that, we are disciplined stewards of our shareholders’ capital, and to the extent that we continue to generate capital that we cannot reinvest consistent with our objective of generating industry-leading returns over time, we will manage it the same way we have for more than a decade — by returning it to our shareholders.

Our financial success and balance sheet strength have enabled Travelers to grow dividends per share at an average annual rate of 10% while increasing our book value per share by 101% in each case over the last 10 years. These accomplishments are on top of returning approximately $43 billion of excess capital to the company’s shareholders, an amount that exceeds the company’s market capitalization of approximately $30 billion at the time the repurchase program was initially authorized in 2006. Our financial strength is also reflected in our strong credit ratings with four of the major rating agencies.

Our Drivers of Sustained Value

Business Strategy & Competitive Advantages
Capital &
Risk Management
Data Privacy &
Disaster Preparedness
& Response
Diversity &
Ethics &
Human Capital
Public Policy
Safety &