When an executive from S&P Global Ratings asked Alan Schnitzer, the CEO of Travelers, how challenges like tariff instability, inflation, and geopolitical tensions influenced the company’s strategy, Schnitzer responded in a way that might have surprised Larry Wilkinson, the head of U.S. Property/Casualty Insurance at S&P.

“Not much, actually,” Schnitzer remarked during the early session of the 41st Annual S&P Global Ratings Insurance Conference in June.

Wilkinson had referred to the economic and geopolitical risks highlighted by Neil Stein, Managing Director & Property/Casualty Sector Lead, who included them on the rating agency’s watchlist. While Schnitzer acknowledged the impact of social inflation and the broader economic consequences of geopolitical uncertainty, he emphasized that an insurer’s approach should always focus on the long-term.

“You can’t rapidly reposition an insurance company without doing it gracefully,” Schnitzer said. “Running an insurance company requires thinking in the long term. There’s always some degree of uncertainty that we must be mindful of,” he explained, adding that the specific risks mentioned by S&P analysts were always on Travelers’ radar.

Schnitzer reflected on a moment during the initial weeks of the COVID-19 pandemic when he and Travelers’ Chief Financial Officer undertook scenario planning. “What could really hurt Travelers? What would a bad day for us look like?” They spent two weeks discussing every possible risk. “We stress-tested every aspect of our business and couldn’t find a major threat,” he stated, underlining the company’s robust business model and financial foundation. This allowed them to advance over $100 million in commissions to partners during the early days of the pandemic, helping those facing liquidity issues.

“Running a business while anticipating uncertainty is just part of our DNA,” he added.

Managing Catastrophic Risks

Schnitzer also shared insights about a strategic shift Travelers implemented over a decade ago to refine its approach to managing catastrophe (cat) risks. This foresight has been key to the company’s success, culminating in what Schnitzer described as the insurer’s best bottom line during a catastrophic year in the U.S. in 2024, posting $5 billion in net income.

Instead of managing all catastrophe risks with a single team, Travelers decided to specialize by peril. “We built separate teams for hurricanes, wind and hail, and wildfires,” Schnitzer explained. The company also invested heavily in hiring data scientists, climatologists, environmental engineers, and other specialists to enhance its understanding of various natural disasters.

The goal was two-fold: first, to become the industry leader in understanding the science behind these risks, and second, to apply that scientific knowledge to underwriting practices. Schnitzer recalled that before implementing these changes, Travelers’ losses from natural catastrophes were aligned with the company’s market share, which was considered typical. However, after these adjustments, the company significantly outperformed its market share, continuing to grow its business while managing risk effectively.

Travelers also invested heavily in its claims strategies, aiming to resolve 90% of claims within 30 days of a natural disaster. Schnitzer emphasized that this efficiency could make a huge difference for policyholders. “After a hurricane, being able to settle a claim quickly is the difference between spending the holidays in a hotel ballroom or at home,” he said.

“Claims don’t age well,” he added. “The faster we process claims, the faster we settle on a fair price, and the better it is for both our customers and our shareholders.”

Climate Change: A Small Part of the Bigger Picture

While Schnitzer described himself as a “climate change believer” with a personal commitment to addressing the issue for the sake of future generations, he clarified that, according to Travelers’ data and external research, climate change itself is only a small part of the reason for the increasing costs of catastrophic losses.

Population growth, economic inflation, and factors such as aging infrastructure and outdated building codes are more significant contributors to the rising costs of disasters. Schnitzer made it clear that while he fully supports climate action, when it comes to allocating capital, it’s essential to take a data-driven, evidence-based approach.

“You need to understand all the contributing factors before you commit capital to a solution,” he said. “This allows you to develop the best possible strategies and present data-driven solutions to policymakers, especially in the context of climate change.”

The Importance of Scale in the Future of Insurance

Schnitzer also discussed the role of scale in the future of insurance, particularly in light of Travelers’ investments in technology and artificial intelligence (AI). He explained that the increasing complexity of the industry would make it more challenging for smaller, niche players to compete.

“Scale is going to become increasingly important in the insurance industry,” Schnitzer predicted. “In the past, being small and niche could work, but that’s becoming harder and harder to sustain.”

He continued, “I don’t think Travelers is uniquely positioned, but I also don’t think there are many companies investing large sums of money in such effective ways—developing technology and AI that will transform the way we operate. We have the data to fuel that technology, and the balance sheet to manage the uncertainties and volatility in the market.”

Schnitzer noted that the growing importance of scale would affect the availability and cost of reinsurance, further consolidating premium business with large, well-capitalized companies that can leverage technology effectively.

“Over time, the industry will experience a gravitational pull, with premium consolidation moving from companies without scale to those that are both large and leveraging their scale effectively,” he added.

The Impact of AI on Insurance Operations

Earlier in the discussion, Schnitzer made a bold statement about the transformative potential of AI in insurance. “The impact of AI on the industry is going to be profound,” he said. Schnitzer highlighted practical examples of how AI is already enhancing Travelers’ operations, from AI-assisted first notice of loss to the automated processing of about half of all claims.

In particular, he shared how AI had improved the efficiency of underwriting in specialty insurance. In the past, handling submissions—often coming in unstructured formats like emails or faxes—took an average of two hours. But after integrating AI, the process now takes just two minutes.

“We’re now handling thousands of submissions more efficiently each month,” Schnitzer explained. “Our agents and brokers tell us that in many cases, the first quote gets the business. That’s a major competitive advantage for us.”

Conclusion

Schnitzer’s insights reveal a focus on long-term thinking, scale, and technological investment as the core pillars of Travelers’ strategy. By focusing on managing risks effectively, investing in specialized teams, and using advanced technologies like AI, the company aims to position itself to not just survive but thrive in an increasingly uncertain world. The message is clear: for an insurance company to succeed in the future, it must not only be able to navigate immediate challenges but also scale efficiently and think strategically for the long haul.