When an S&P Global Ratings executive asked the leader of Travelers how current challenges like tariff uncertainty, inflation, geopolitical risks influence the insurer’s strategy, Alan Schnitzer delivered an answer that Larry Wilkinson may not have expected.
“Really not much,” said Schnitzer, the chair and chief executive officer of The Travelers Companies during an early session of the S&P Global Ratings 41st Annual Insurance Conference in early June.
Wilkinson, the head of U.S. Property/Casualty Insurance at S&P, referenced the economic and geopolitical headwinds after Managing Director & Property/Casualty Sector Lead Neil Stein listed them as watchlist items for the rating agency at the session before the interview with Schnitzer. And while Schnitzer later agreed that social inflation and the overall economic fallout of geopolitical uncertainty were challenges “of the moment,” offering his take on strategies to deal with such risks, the CEO said, “You can’t reposition an insurance company quickly, and do it gracefully.”
“You always have to be thinking about the longer term when running an insurance company,” Schnitzer said. “Some degree of uncertainty is always in our consciousness,” he said, noting the specific current risks highlighted by S&P analysts are things Travelers executives think about all the time.
He went on to recall scenario planning he and the insurer’s chief financial officer did during the first two weeks of the COVID pandemic. “What could happen? What would really be a very bad day for Travelers,?” the two men asked one another during two weeks of phone conversations back in 2020. “Honestly, we stress-tested every aspect of our business and we couldn’t come up with one,” he said.
At the time, he said, many distribution partners were “in a real liquidity crunch.”
“Our confidence in our business and our balance sheet and our liquidity and our business model put us in a position where we could actually…advance more than a hundred million dollars in commissions to our trading partners” in the early days of the pandemic,” he said. “Running this business for uncertainty is just a way of life for us.”
Managing Each Cat Peril
Later, he described long-range planning work that the leadership team undertook about a decade ago to change its approach to catastrophe underwriting—work that helped Travelers post its best bottom-line during the work cat year in the U.S. in 2024, $5 billion of net income.
“Approaching catastrophe management with one team isn’t the way to run the railroad anymore. We decided to build a separate team for every peril,” he said, noting that not only did Travelers build separate hurricane, wind and hail, and wildfire teams, but that the carrier also invested in hiring data scientists, climatologists, environmental engineers and professionals in various disciplines beyond meteorology.
The strategy had two objectives: “One, to build the industry-leading understanding of these perils. What’s the science behind these perils? We’re going to be the industry leader in understanding that. And two, we’re going to be the industry leader in an applying underwriting to that scientific background and knowledge.”
Schnitzer reported that before putting his strategy in place, Travelers’ losses from cat perils were consistent with its market share. “And honestly, that’s what you hope for. You cross your fingers after the hurricane blows through and you just think, I hope I’m not overexposed.”
“In the decade since we’ve done that, we’ve meaningfully outperformed our market share. And that wasn’t by shrinking,” Schnitzer said. “We’ve continued to grow the book.”
In addition to understanding the science behind climate perils and applying the right underwriting to it, the CEO said Travelers invested in its cat claims strategies—positioning the insurer to resolve 90% of claims within 30 days after a natural catastrophe. That’s “highly consequential,” Schnitzer said.
“If you are impacted by a hurricane in the late summer or early fall, that’s the difference between whether you’re celebrating Thanksgiving and Christmas in a hotel ballroom versus your own living room,” he stated.
“Claims don’t age well,” he added, underscoring the importance of the investments in this area. “The faster we can understand those claims, the faster we can get the right price on it, the faster we can get it resolved for our customer, and the better it is for a shareholder.”
Beyond Climate Change
Schnitzer also took the opportunity to “editorialize” about the fact that climate change “is actually a relatively small contributor to the increase in catastrophic losses.”
“I’m a climate change believer. For my kids and my grandkids, I feel absolutely urgent about it. And so nobody should hear me say anything other than that.”
Still, he said Travelers’ data and independent data reveal that the real drivers of catastrophe loss activity are population growth and economic inflation, along with factors like building codes and aging infrastructure.
“I’m not trying to divert anybody’s attention away from the climate change movement… But when you’re committing capital to a problem, you really need to be evidence-based about the problem. You really need to take all of those things that are contributing to the losses, you need to pick those threads apart, understand them as best you can, and that puts you in the best possible position to commit capital to it,” he said, adding that evidence-based presentations are also needed to help public policy makers think about climate solutions.
The Future of Insurance: Scale vs. Niche
In addition to describing Travelers’ long-range strategies and investments devoted to cat management, Schnitzer spoke to Wilkinson about spending $1.5 billion per year on technology and AI initiatives, and about long-term strategies to deal with social inflation—including hires of behavioral scientists, and about changes in the workforce generally. Ultimately, he said carriers will need scale to afford to compete in the future.
“Twenty years ago, to run an insurance company you needed an underwriter, an actuary, a financial person, and I’ll throw a lawyer because I was one. But today, to run an insurance company, you need the roboticists, you need the data scientists, you need the climatologists…”
Alan Schnitzer, Travelers
Specifically, Wilkinson asked Schnitzer to make a bold prediction about the future of insurance in three-to-five years.
“Scale is increasingly going to matter in the insurance industry…. Going back decades, you could be small and niche-y and be successful [but] that’s going to be harder and harder.”
He continued: “I don’t think Travelers is uniquely positioned, but I [also] don’t think there are that many companies that are spending large sums of money in very effective ways and developing technology that’s going to be consequential in the way we run this business—that have the data to fuel that technology and artificial intelligence, that have the balance sheet that positions you to deal with the uncertainty and the weather volatility.
“All of that impacts the availability of cost of reinsurance. So, I think it’s going to be harder and harder to not be ‘at scale.’ I think over time, that results in just a gravitational pull—premium consolidation of premium from the companies that aren’t ‘of scale’ to the ones that are two things: one, ‘of scale,’ and two, leveraging that scale effectively.”
Earlier in the session, Schnitzer predicted that the impact of AI on the insurance industry “is going to be profound,” going on to describe AI-assisted first notice of loss as well as straight-through processing of about half of Travelers’ claims among tangible examples of AI and advanced technologies at Travelers.
On the underwriting side, Travelers has even seen efficiency gains in specialty insurance businesses like management liability, the CEO reported. In that line, he said, submission information comes in an unstructured way—through emails or faxes—resulting in an intake process that averaged two hours per submission.
“We now have unleashed AI on that, and we now do that whole process in two minutes,” he said, highlighting the time savings across the thousands of submissions the carrier handles every month. “Our agent and broker partners tell us that in a high percentage of cases, the first quote gets the business,” he added, suggesting that the AI assistance puts Travelers “in a position to operate more effectively and to win more often.”
