2005 Ratemaking Seminar


The beads next to the session title indicate the level of difficulty for each session.

No prior knowledge of the subject matter is assumed.
Little or no technical content.
General knowledge of the subject matter is assumed.
Moderate technical content.
Working knowledge of the subject matter is assumed.
Moderate to highly technical content.
Extensive technical/theoretical knowledge of the subject matter is assumed.
Highly technical content.

Introductory Sessions

INT-1 · Basic Techniques for an Overall Indication
Session panelists will address basic issues behind data management, issues of privacy and confidentiality, the actuarial standards concerning data quality, issues concerning how to control the data, and the need to be concerned about data quality.

Moderator:
 M. Charles Parsons, Actuary, Allstate Insurance Company
Panelist:
 Brandon L. Emlen, Pricing Manager, State Farm Mutual Automobile Insurance Company

INT- 2 · Introduction to Ratemaking Relativities
Covering the basic foundations of the ratemaking process, this session's topics will include data organization for premium and losses, data adjustments such as current rate level, loss development and trend, and the determination of the expense provision.
(Not intended for those preparing for Exam 5).

Panelists:
 Brian M. Donlan, Actuarial Assistant, Allstate
Theresa A. Turnacioglu, Manager and Assistant Actuary, ISO

INT-3 · The Indication--Is That Your Final Answer?
Inexperienced actuaries believe that their work is complete once the indication has been developed. However, this is just the first step. The indication is just that-an indication-not the final answer. Actuaries must interpret the indication for its validity as a projection. For example, were there any anomalies in the data that distort the indication? Actuaries must then evaluate the marketplace and competitive position, including impact on customer retention, agent reaction, and potential adverse selection. These evaluations give alternative views of how much of a rate the actuary could take. Finally, the actuary must evaluate means other than base rate changes to affect revenue that can address the induction such as expense modifications and underwriting guidelines. Once an approach is determined, the actuary can also stress test the planned action through scenario modeling and other methods. Session panelists will develop these concepts through various examples and alternative approaches.

Panelists:
 Elizabeth Bassett DePaolo, Actuary, Travelers Insurance
Guo Harrison, Associate Actuary and Actuarial Manager, Medical Mutual Liability Insurance Society of Maryland

INT-4 · Introduction to Excess, Deductible, ILFs Rating
In addition to general concepts of increased limits ratemaking, session panelists will discuss methods for using loss experience to develop increased limits factors. The session will also provide an overview of excess and deductible pricing.

Moderator/Panelist:
 Joseph M. Palmer, Assistant Vice President, ISO

INT-5 · Introduction to Reinsurance Pricing
Session attendees will learn the fundamentals of pricing reinsurance contracts. The session includes an overview of the basic types of reinsurance a pricing actuary will encounter, including quota share, excess of loss, and catastrophe covers. Using practical examples, panelists will discuss the different approaches used in pricing each type of contract, and the data and assumptions required to price these contracts. Also emphasized will be qualitative factors and negotiating strategies that often enter into reinsurance pricing.

Moderator/Panelist:
Nolan E. Asch, Principal, ISO

INT-6 · Introduction to Profit Provision Calculations
This session will examine several alternative methods that actuaries use to calculate the profit provision component of indicated premium. The focus will be on understanding the key concepts that underlie each method. The session will explore:

  • How the choice of a model affects the selection of parameters, such as the interest rate.
  • Why there are different definitions of Return on Equity (ROE).
  • Which methods are more appropriate for rate filings and which are better suited for internal company profit analysis.
Some simple examples will be shown and observations will also be made on the sensitivity of results to relevant input parameters. In keeping with the introductory nature of the session, no advanced topics will be discussed.

Moderator/Panelist:
Ira L. Robbin, Senior Pricing Actuary, Partner Reinsurance Company Limited

Data/Technology Sessions

Data/Tech-1 · Introductory Data Management
Session panelists will address basic issues behind data management, including privacy and confidentiality, the actuarial standards for data quality, methods for controlling data, and the need to be concerned about data quality.

Moderator:
Arthur R. Cadorine, Assistant Vice President, ISO
Panelists:
Alan J. Hapke, Vice President, Meadowbrook Insurance Company
Nathan William Root, Actuarial Manager, CNA Insurance Companies

Data/Tech-2 · Data Warehousing on The Cheap
Warehousing data can prove to be a very expensive prospect and In addition it may be difficult to convince management of the benefits. One approach is to develop a database using traditional methods and data warehousing principles. As the utility of the increased availability of information becomes apparent, increased investment in the project may become less difficult to justify. This session will illustrate the creation of databases that evolve into useful warehouses.

Moderator/Panelist:
John A. Stenmark, Vice President and Actuary, Southern Farm Bureau Casualty Insurance Company
Panelist: Patricia Saporito, Sr. P & C Insurance Industry Consultant, NCR Corporation

Data/Tech - 3 · Theatrical Skit on Data Management
Performed by the Not-Ready-For-Anytime Players
"The Case of the Missing Data" is an amusing look at the dilemma created when an actuary, and those who report to him, acts with an undue lack of diligence to the importance of data. Actuary, I. M Nerdy, finds himself unable to extricate himself from this problem and only after the long arm of law closes around him is he able to see the error of his ways.

Written by:
John A. Stenmark, Vice President and Actuary, Southern Farm Bureau Casualty Insurance Company

The Not-Ready-For-Anytime Players
Joe Friday:
Francois L. Morissette, Principal, Mercer Oliver Wyman, Inc.

Bill Gannon:
Cheng-Sheng P. Wu, Director, Deloitte & Touche LLP

Barbee Buseasabee:
Sara E. Schlenker, Independent Consultant, Sara E. Schlenker

I. M. Nerdy:
Robert F. Wolf, Principal, Mercer Oliver Wyman

Panel Discussion follows: Actuaries depend on data for their work, and they need that data to be accurate. What can be done to ensure (or at least improve) the accuracy of the data used?

Moderator:
Jason L. Russ, Consulting Actuary, Milliman, Inc.
Panelists:
 Gary Knoble, Vice President, The Hartford
Peter Marotta, Prinicpal, ISO
Michael L. Toothman, Consultant Actuarial & Risk Consulting Services

Data/Tech - 4 · Workers Compensation Data Quality Issues
A panel of experts from workers compensation industry data collection organizations will discuss the importance of data quality, the current state of industry data quality, data quality successes and challenges, and the impact of poor quality on the system. Panelists will also discuss the underlying processes and procedures used by insurers and their trading partners (insureds, TPAs, insurers, regulators, data collection organizations, vendors, etc.) that can negatively or positively affect data quality, industry best practices around the collection and reporting of data, potential improvements, and next steps.

Moderator:
Peter Marotta, Principal Data Management Consulting, ISO
Panelists:
 Arthur R. Cadorine, Assistant Vice President, ISO
Ia Hauck, Director and Actuary, National Council on Compensation Insurance, Inc.
Bruce Tollefson, President, Minnesota Workers Compensation Rating Bureau
Timothy L. Wisecarver, President, Pennslyvania & Delaware Compensation Rating Bureaus

Workers Compensation Sessions

WC-1 · Basic Techniques for Workers Compensation Ratemaking
The panel will review the essential components of a typical rate filing from the perspectives of NCCI, other bureaus, and companies in loss cost jurisdictions. The discussion will highlight coverages, exposure bases, and data sources used for workers compensation ratemaking.

Moderator/Panelist:
 Andrew Doll, Chief Actuary, Winterthur North America
Panelists:
Jim Davis, Director and Actuary, National Council on Compensation Insurance, Inc.
Jay A. Rosen, Director and Actuary, National Council on Compensation Insurance, Inc.

WC-2 · Experience Rating-Current Challenges
The recent performances of the NCCI-Filed Experience Rating Plan and the California Plan (with primary focus on small risks) are the top items for discussion in this session. Session panelists will explore various questions, including how the plans perform for small risks, what the loss experience is for smaller risks, and how average experience rating modifications vary by risk size. The panelist will also discuss how the experience rating eligibility threshold should be determined. Summarized data and statistics will be presented to provide answers and insight into these questions.

Moderator/Panelist:
Anthony M. DiDonato, Director and Senior Actuary, National Council on Compensation Insurance, Inc.
Panelist:
David M. Bellusci, Senior Vice President and Chief Actuary, Workers Compensation Insurance Rating Bureau of California

WC-3 · Workers Compensation-Selected State Issues
The panel will present key issues in the states of Louisiana and Florida. An overview of the Louisiana market, including emerging issues such as medical inflation, Second Injury Fund funding, market competitiveness and conditions, as well as the 2005 economic forecast for Louisiana will be discussed. Reinsurance recoverables and other policy issues will also be covered from the perspective of the Louisiana's largest writer. Florida topics to be addressed include statutory reforms, administrative rules and the role of the Florida Division of Workers Compensation.

Moderator/Panelist:
Stephen W. Cavanaugh, Chief Executive Officer, Louisiana Workers Compensation Corporation
Panelist:
Daniel Y. Sumner, Department of Financial Services, Florida Division of Workers' Compensation

WC-4 · Workers Compensation-Current Issues
In this overview of the current state of the workers compensation line, panelists will review financial results and recent trends as well as discuss where the WC line might be headed.

Moderator/Panelist:
Nancy R. Treitel, Vice President and Chief Actuary, Liberty Mutual Group
Panelist:
Barry Lipton, Practice Leader and Senior Actuary, National Council on Compensation Insurance, Inc.

WC-5 · Large Account Issues
The panel will discuss the recent changes to the NCCI’s excess loss factor (ELF) methodology, give a brief overview of how insurers and reinsurers use ELFs, and also cover how intermediaries help their clientele design and implement large risk insurance programs that help mitigate the volatility associated with excess workers compensation layers. Basic principles and recent developments related to actual programs, including the trends in the types of plans written, risk appetites of large insureds, and use of alternative market mechanisms will also be discussed.

Moderator/Panelist:
 Greg Engl, Director and Actuary, National Council on Compensation Insurance, Inc.
Panelists:
Brian Ingle, Vice President, Converium
Edward C. Stone, Principal, Mercer Oliver Wyman, Inc.

Commercial Lines Sessions

COM-1 · Emerging and Latent Risks for Commercial Liability
Latent claims activity continues to impact insurers balance sheets. This session will explore several major areas of continuing claim litigation; Construction Defects, and Asbestos and Environmental. With impacts that can extend decades after policies are written, insurers must exercise caution in providing and pricing coverages. Construction Defect claims litigation has continued to develop not only in California, but in other jurisdictions as well affecting a widening circle of classes. Mr. Mack will discuss the background of Construction Defect claims, as well as current trends, developments, and prospects for the future. Ms. Biggs will discuss current developments in Asbestos including historical perspective, impacts on insurers, and current legislative initiatives. She will also touch on the latest developments in Environmental and Silicosis.

Moderator:
 G. Chris Nyce, Senior Manager, KPMG LLP
Panelist:
Jennifer L. Biggs, Consulting Actuary, Towers Perrin
Peter Mack, Senior Claims Specialist, Markel Corporation

COM-2 · Product Development
This session will focus on some practical examples of challenges in the area of product development from both personal and commercial lines perspectives.

With respect to personal lines, the insurance landscape is littered with examples of carriers who have made enthusiastic entries into new markets (states, lines of business, distribution channels) only to find higher than expected costs and a far longer payback period than initially anticipated. The personal lines portion of this session will focus on lessons learned from successful and unsuccessful entries into new markets and ways to lessen the risks inherent in such forays. Implications for pricing, product design, underwriting, claims, and marketing will be discussed. With respect to commercial lines, the session will focus on a practical example involving major revisions to a business owners policy. This part of the session will "walk through" the steps in the process-from identifying the changes to be made; working with underwriters and product managers to build pricing around new, expanded, and revised coverages; introducing new rating features; working with IT to program and test the changes; to modeling the disruption to insureds around the new product. Considerations surrounding integration of programs of two carriers in a merger situation will also be discussed.

Moderator:
 Klayton N. Southwood, Consulting Actuary, Towers Perrin
Panelists:
 Daniel G. Carr, Senior Vice President & Actuary, St. Paul Travelers
Dave W. McLaughry, Actuary, Farmers Insurance Group

COM-3 · Considerations for Small Business Owners Policies
Polices for small business risks have unique eligibility and underwriting considerations. As the types of business written under business owner’s policies increase, these issues become more important. Insurers are examining the fundamentals of underwriting small business risks and moving towards a more efficient approach to underwriting these risks. The concept of scoring finds application in more and more industries and certainly in the property/casualty insurance business. This panel will focus on those fundamentals as well as various approaches modeling the use of credit scores and other available risk characteristics.

Moderators/Panelists:
 A. Katherine Phinney, Director of Analytics, Insurity
Robert J. Walling III, Principal and Consulting Actuary, Pinnacle Actuarial Resources, Inc.

COM-4 · Commercial Property Terrorism Exposure
In recent years, loss estimation models have become an essential pricing tool for natural catastrophes such as hurricanes and earthquakes. With the tragic events of September 11, 2001, and the continuing worldwide threat of terrorism, the insurance industry is struggling to prepare for these types of extreme events. While no computer model can predict when or where terrorists will strike next, increasingly sophisticated models have been developed to help estimate loss potential deriving from terrorist acts. This session will discuss terrorism modeling and resulting pricing considerations for commercial property, perhaps the most vulnerable line of business. . The discussion will cover the two main attack categories: conventional and nuclear/biological/chemical. The session will also summarize the Federal Backstop Program ( TRIA) and its impact on pricing.

Moderator:
 George Burger, Assistant Vice President, ISO
Panelist:
David A. Lalonde, Senior Vice President, AIR Worldwide Corporation

COM-5 · Pricing Programs, Excess, and Surplus Lines
The importance of alternative mechanisms to underwriting property and casualty insurance has increased as market cycles have impacted the traditional markets. This session will explore two of these mechanisms, excess and surplus lines and programs. Pricing Actuaries working in companies underwriting this business often function in close alignment with other disciplines such as underwriting and marketing. The speakers represent companies underwriting business in each of these segments. Differences in business characteristics, regulation, marketing, and types and classes of business underwritten will be discussed. Also covered will be the approaches pricing actuaries use to address the unique challenges these differences create as well as changes in these markets over the past few years.

Moderator:
 Ronald Herrig, Assistant Vice President and Actuary, Markel Corporation
Panelist:
Letitia M. Saylor, Vice President, American Reinsurance Company

COM-6 · Pricing and Market Considerations: Financial Lines
This session will focus on market conditions and considerations for financial lines of insurance. Conditions in the US have strained the environment for insurers of financial lines such as Surety and Executive Protection. Major bankruptcies and corporate scandals have led to claims activity at levels greater than historically envisioned. This panel will discuss the market response to these changing conditions, and the resulting outlook for insurers of financial lines. Mr. Perler will speak from the perspective of senior management for Surety lines. Mr. Fidlow will speak from the perspective of actuarial management for Executive Protection lines. Both speakers will also address the role of actuaries in managing these respective lines of business.

Panelists:
Ben Fidlow, Vice President & Senior Actuary, Axis Specialty Insurance
Dennis Perler, President, Liberty Mutual Surety

COM-7 · Medical Professional Liability
In this session, we will review recent financial performance for professional liability insurers, and trends in the frequency and severity of losses for physicians, surgeons, and hospital professional liability. We’ll then discuss the issues often faced by actuaries in a soft market and how they affect the adequacy of rates. Finally, we’ll discuss recent tort reform activity, and how actuaries might consider the impact of tort reform in the ratemaking process.

Panelists:
Linda A. Dembiec, Consulting Actuary, Select Actuarial Services
John H. Mize, Consulting Actuary, Tillinghast-Towers Perrin

COM-8 · Price Monitors: Survival Strategies for a Soft Market
Insurers managing operations in a changing market have come to rely increasingly on quantitative measures of price change on both the new and renewal books of business. The advent of Sarbanes-Oxley has also influenced many insurers to increase their internal controls regarding the tracking of price changes over time as an important part of reserving for recent accident years. This session will explore practical challenges and considerations in constructing and interpreting price monitors. There will also be a discussion on the implementation of price monitors, resulting benefits, pitfalls, and best practices from a company wide perspective to help practitioners in making the most of price monitoring reporting.

Moderator:
G. Chris Nyce, Senior Manager, KPMG LLP
Panelists:
John D. Ferraro, Pricing Actuary, Philadelphia Insurance Companies

Personal Lines Sessions

PL - 1 · How About a Little Credit Here? An Update on the Issues
The use of credit in insurance has been a hotly debated topic for the last several years. Many parties are involved in the debate, including insurers, consumers, regulators, and federal and state government officials. This session will update attendees on insurer's use of credit as well as the political and regulatory issues surrounding credit. Topics to be discussed will include different ways insurers are using credit, state regulatory and legislative actions, correlation/disproportionate impact/disparate impact, and the Federal Trade Commission Study.

Moderator:
Roosevelt C. Mosley, Consulting Actuary, Pinnacle Actuarial Resources, Inc.
Panelists:
Daniel J. Davis, Senior Actuary, Louisiana Department of Insurance
Richard A. Smith, Consultant, Towers Perrin
John Wilson, ChoicePoint

PL-2 · The Matrix Inverted-A Primer in GLM Theory
The use of generalized linear models (GLMs) is gaining momentum within the North American property/casualty insurance industry and is starting to replace traditional one-way actuarial analyses. Previous CAS presentations have given an overview of GLMs and discussed applications in areas such as ratemaking, underwriting, and retention analysis. This session is designed to provide the actuary with a primer in the theory of GLMs-a practitioner's "need to know." The session will begin with an explanation on the formularization of GLMs-understanding the linear predictor, link function, offset term, error term, and the like. Building upon this foundation, the session will discuss typical model forms, the effect of different assumptions, and model diagnostics.

Moderator/Panelist:
Claudine Modlin, Senior Consultant, Watson Wyatt Insurance & Financial Services
Panelist:
Serhat Guven, EMB America

PL - 3 · The Rest of the Story: Applications and
Practical Considerations of GLM & Predictive Modeling
Predictive modeling, including methods such as Generalized Linear Modeling, has become extremely popular with actuaries and researchers in insurance companies. However, applying predictive modeling in insurance does not come without its challenges. This session will focus briefly on common insurance applications and practical modeling issues, such as data preparation, factor categorization, and implementation. This session will also focus on applying predictive modeling to other areas, such as alternative approaches to modeling claim counts, extreme value modeling, and the use of geo-statistics.

Moderator:
Roosevelt C. Mosley, Jr., Senior Consultant, Pinnacle Actuarial Resources, Inc.
Panelists:
 Don Brockmeier, Assistant Vice President, Pricing Research, Ohio Casualty Group
A. Katherine Phinney, Director of Analytics, Insurity
Matthew J. Flynn, SAS Institute, Inc.

PL-4 · State-Specific Issues in Personal Lines
Personal lines issues in Florida and Massachusetts and the lessons they impart are the subjects of this session. Panelists will discuss how the four hurricanes that hit Florida in 2004 affected the property insurance market, and what other states or regions can learn regarding insuring property in catastrophe-prone areas. Panelists will also discuss the Massachusetts private passenger market, which has been in the process of reform for the last two years.

Moderator/Panelists:
 Katharine Barnes, Consulting Actuary, Towers Perrin
Cara M. Blank, Property Casualty Actuary, Massachusetts Division of Insurance
Frederick M. Strauss, Shared Markets Director, Allstate Insurance Company

PL-5 · Update on SUV Auto Insurance Costs/Other Make/Model Symbol Issues
The increase in size and types of vehicles on the road today coupled with the market leaders' desires for greater granularity in price points has resulted in a renewed focus in the necessity to price individual vehicles accurately - for both liability and physical damage coverages. The panel will present a discussion of the current pricing issues related to rating individual makes and model of automobiles including a discussion of the various "symbol rating" programs in use by insurers in the U.S. and in Canada.

Moderator:
Jeffrey L. Kucera, Senior Consultant, Pinnacle Actuarial Resources, Inc.
Panelist:
Kim Hazelbaker, Senior Vice President, Highway Loss Data Institute

PL-6 · Rating Plan Design-Where the Rubber meets the Road in Ratemaking
The Statement of Principles on Ratemaking give guidance as to the estimation of costs associated with the transfer of risk. But what happens once these rates are out our door and on the street? This panel discussion will offer an operational view of rating plan design. An understanding of the operational aspects of implementing certain rating plan components, such as verification and maintenance, is essential to developing sound, effective rating plans. Additionally, the panel will discuss potential sources of data from the operational side that can complement our ratemaking data.

Moderator:
 Kathy A. Olcese, Assistant Vice President, Allstate Insurance Company
Panelists:
Ellen A. Berning, Segmentation Director, Allied Insurance Company
Jeffrey Thompson, Director, Risk Management, Allstate Insurance Company

PL-7 · Quantifying Impact of Non-Modeled Catastrophes
Focusing on non-hurricane and non-earthquake catastrophes, session panelists will tackle the problem of how to account for non-modeled events with long, but difficult to determine, return periods. A number of pricing techniques will be examined, and advantages and disadvantages of various ways to adjust for such events will be considered.

Moderator:
David R. Chernick, Senior Consultant, Actuarial Group, Inc.
Panelists:
 Michael Devine, Associate Actuary, State Farm Insurance Companies
Eric D. Huls, Senior Actuarial Assistant, Allstate Insurance Company

PL-8 · Incorporating Reinsurance Costs and Risk Loads into Personal Lines Rates
Although much has been written on how to properly determine reinsurance rates, relatively little literature exists on how the primary insurer, once it pays that rate, should incorporate the cost of reinsurance in its rate level indication. In the first part of this session, the presenter will discuss the two basic, theoretically identical approaches of including the cost of reinsurance in the indication, review the pros and cons of each, and provide an example of the preferred approach, the "Net Cost of Reinsurance" method.

An alternative to reinsurance is the use of internal capital. However, if an insurer chooses to use internal capital, an adequate risk-adjusted return must be earned on that capital. In many instances, insurers have found it difficult to convince regulators to allow actuarially sound risk loads in property lines. This has had unintended consequences, increasing the size of residual markets and the use of expensive reinsurance. The second half of this session will examine how regulators may be able to improve the availability and afford ability of property insurance by creating incentives for insurers to tap internal capital to support Homeowners writings.

Moderator:
David Appel, Principal and Director, Milliman USA
Panelists:
 Eric D. Huls, Assistant Actuary, Allstate Insurance Company
Rade T. Musulin, Vice President Operations, Public Affairs, & Reinsurance, Florida Farm Bureau Insurance Companies

PL-9 · How to Determine Territory Boundaries
Geographical risk classifications (i.e., fire protection classes, rating territories, and zones) have traditionally been defined in the U.S. based on physical surveys, engineering studies and data analyses. This session will discuss the application of spatial smoothing techniques to situations where the underlying claims experience in small geographic areas may not be fully credible.

The panel will demonstrate:

  1. the mechanics of spatial smoothing techniques that take into account the loss experience "in the neighborhood;"
  2. the determination of the optimum number of territories;
  3. the use of publicly available, non-claims data, when insurance loss data are not available or are too "thin;"
  4. actual analyses conducted on auto and homeowners data from Texas and North Carolina.
  5. actual results of spatial smoothing techniques from various world markets, including a discussion of the volume of data required.

Moderator:
James B. Rowland, Senior Product Manager, Allstate Insurance Company
Panelists:
 Duncan Anderson, Partner, Watson Wyatt LLP
Michael J. Miller, Consulting Actuary, Tillinghast-Towers Perrin

Regulatory Sessions

REG-1 · Actuary as an Expert Witness
The possibility that an actuary will need to testify in an administrative setting is something every actuary should be aware of. This session will discuss the various circumstances where an actuary may be called upon to provide expert testimony. In addition, there will be a real “mock” hearing where actual testimony from a rate hearing will be reenacted to demonstrate the type of questions and responses actuaries get and receive while “on the stand." Finally, the expert witnesses and other panelists will comment on their experiences and field questions from the audience.

Moderator:
 Steven D. Armstrong, Senior Actuary, Allstate Insurance Company
Panelists:
 Chuck McClenahan, Director, Mercer Oliver Wyman
Michael J. Miller, Consulting Actuary, Tillinghast-Towers Perrin
R. Michael Strickland, Managing Partner, Young Moore & Henderson
Marvin M. Spivey, Jr., Attorney, Young Moore & Henderson

REG-2 · Regulatory Roundtable Discussion
Each member of this panel of regulators will present a short overview of the topics of the day in their state and throughout the nation. A roundtable group discussion will follow, with audience participation strongly encouraged. Auto insurance rates and availability in urban areas will be featured prominently. Credit scoring, deregulation, and other issues will also be discussed.

Moderator:
Chester J. Szczepanski, Chief Actuary, Pennsylvania Insurance Department
Panelist:
 Randolph L. Rohrbaugh, Deputy Commissioner, Pennsylvania Insurance Department

REG-3 · What makes a good rate filing?
What makes a good rate filing? It depends on whom you ask. Now is your opportunity to ask several individuals with very different opinions: a regulator, a bureau actuary responsible for state filings, a consultant with a similar responsibility and a company actuary.

Moderator:
Charles A. Romberger, Actuarial Supervisor, Pennsylvania Insurance Department
Panelists:
 Timothy L. Wisecarver, President, Pennsylavnia & Delaware Compensation Rating Bureaus
Theodore J. Zubulake, Director, Mercer Oliver Wyman, Inc.

Reinsurance Sessions

REI-1 · Exposure and Experience Rating
Building on the reinsurance topics presented in the introductory track, this session will focus on experience and exposure ratings in excess of loss reinsurance contracts and the reconciliation between the two. Distinction will be made between property and liability exposures. Panelists will also discuss the pricing of more advanced contract features such as annual aggregate deductibles and reinstatement provisions in these contracts.

Moderator:
Michael E. Angelina, Consulting Actuary, Tillinghast-Towers Perrin
Panelists:
Jonathan D. Levy, Consultant, Tillinghast-Towers Perrin
Wendy Spirit, Ace Tempest Reinsurance

REI-2 · Catastrophe Modeling from the Reinsurance Point of View
As catastrophe models have become more advanced and accepted throughout the property/casualty industry, they have become invaluable in the pricing and structuring of catastrophe reinsurance agreements. At the same time, the introduction of new and more difficult man-made exposures into the equation has presented additional hurdles to pricing these contracts. This session will provide an overview of catastrophe models, their evolution, and state of the art. Panelists will also look at how these models are applied in pricing both natural and man-made exposures in reinsurance contracts.

Moderator:
Jonathan B. Hayes, Senior Vice President, Guy Carpenter Instrat
Panelists:
James M. Maher, Senior Vice President, Platinum Re
James J. Matusiak, Chief Actuary, PXRe

REI-3 · Finite Reinsurance and Risk Transfer Issues
Finite reinsurance (often being referred to as structured or alternative reinsurance) has been in the headlines frequently of late. This session will discuss what finite reinsurance is, the evolution of applicable accounting standards, current legal developments, risk transfer tests and accounting practices, and finite reinsurance's place in the current environment.

Moderator:
Thomas J. Duffy, Consulting Actuary, Milliman, Inc.
Panelists:
Norris W. Clark, Insurance Financial & Regulatory Consultant, Lord Bissell Brook LLP
William J. Kelty, III, Partner, Lord Bissell Brook LLP
Lisa Walsh, Senior Vice President, Benfield

Risk and Capital Management Sessions
It is recommended that attendees take these sessions in chronological order.

RCM-1 · Current Research on Risk and Return Methodologies in Ratemaking
The panelists will discuss and critique current research to data with regards to estimating the cost of capital for the purposes of reflecting it in the profit and contingency load in ratemaking. Among the topics discussed are the Cummings/Phillips paper utilizing the Fama/French three factor model and various methodologies in allocating the cost of capital to line of business. Among the considerations are comparing the techniques of Myers/Read, Merton/Perold, and Capital Consumption vs. Capital Allocation models.

Moderator:
Louise Francis, Consulting Principal, Francis Analytics & Actuarial Data Mining, Inc.
Panelist:
Donald F. Mango, Director of Research & Development, Employers Re Corporation
Richard D. Phillips, Faculty, Georgia State University

RCM-2 · Risk and Return Analysis in Ratemaking: Are we Still Debating?

Continuing on prior years' debates, issues discussed will include the best use of risk metrics, compare and contracts the different methodologies and philosophies of “capital appropriation to line” techniques, how to best address correlation and parameter risk considerations, and a host of other topics. Rest assured, the discussions will be lively and entertaining as the session will be structured as a socratic dialogue between the moderator, who will serve as host in the audience, the panelists, and the audience themselves. There have been heated arguments in the past. In continuing efforts of the CAS Research and Development Committees to optimize research efforts commensurate with the CAS's Centennial Goal, may we achieve an ultimate goal in forming another research working party? Those interested in being a member of a developing research working party or who would like to express corresponding ideas and views should attend this session.

Moderator:
Robert F. Wolf, Principal, Mercer Oliver Wyman
Panelists:
Donald F, Mango, Director of Research & Development, Employers Re Corporation
Glenn G. Meyers, Chief of Actuarial Research and assistant Vice President, ISO
Russell Bingham, Director of Research and Development, The Hartford
Chuck McClenahan, Director, Mercer Oliver Wyman
Richard D. Phillips, Faculty, Georgia State University

RCM-3 · Risk and Return: Considerations of the Benefits and Costs of Reinsurance
A textbook function of reinsurance is to reduce the need for capital. Now capital costs money and reinsurance costs money. The risk management problem faced by insurers is to find the right combination of capital and reinsurance that minimize the sum of the cost of capital and the cost reinsurance. This session will illustrate a practical approach to this problem. In addition this session will highlight some of corporate culture issues that arise when this approach is implemented.

Moderator/Panelist:
Glenn G. Meyers, Chief of Actuarial Research and Assistant Vice President, ISO

RCM-4 · From Enterprise Risk Management to Ratemaking
The four risk quadrants of enterprise risk management are defined as hazard, financial, operational, and strategic risks. As true enterprise risk incorporates a holistic view of risk from all of the divisions of an entire insurance group, how then does a holistic treatment of all risks inherent in a corporation drill down to the ratemaking silo. The panelists will address this and many more issues with regards to the relationships of enterprise risk management, corresponding risk and return analysis, and the ultimate ratemaking processes.

Moderator:
Donald F. Mango, Director of Research & Development, Employers Re Corporation
Panelists:
Russell Bingham, Director of Research and Development, The Hartford
Kevin G. Dickson, Director, Allstate Insurance Company

Special Interest Sessions

SPE-1 · Professionalism in Ratemaking-Do I Really Want to do That?
Presented by members of the Committee on Professionalism Education, this session will explore the CAS Code of Conduct in light of the current environment in the insurance and financial services industries. Fictional case studies will be presented, followed by discussion and debate regarding what may or may not be acceptable behavior in a ratemaking environment. Audience participation is encouraged.

Moderator:
 Steven D. Armstrong, Senior Actuary, Allstate Insurance Company
Panelists:
Tricia Lynne Johnson, Actuarial Analyst, State Farm Mutual Autombile Insurance Company
Matthew W. Kunish, Vice President and Profit Center Actuary, Crum & Forester

SPE-2 · Credibility- a Primer on Practical Applications
Credibility is and continues to be one of the cornerstones of the ratemaking process. In this session, credibility will be reviewed in the context of ratemaking concepts. Both classical and Bühlmann models will be described. The session will include a review of variables affecting credibility, credibility formulas, and practical techniques for applying and increasing credibility.

Moderator/Panelist:
 Paul Brehm, Senior Vice President and Chief Actuary, St. Paul Companies, Inc

SPE-3 · Policyholder Retention and Its Impact on Pricing
Policyholder retention and its affect on profitability have long been overlooked in actuarial literature. As insurance draws closer to other financial services industries, the emphasis those markets place on retention, lifetime customer value, and the economic value of the current client base are getting increased attention. This session will present possible measures of retention, a discussion of how different market segments may respond to rate changes, and an approach to modeling prospective retentions by market segment.

Moderator/Panelist:
 Claudine Modlin, Senior Consultant, Watson Wyatt Insurance & Financial Services
Panelist:
Robert J. Walling III, Principal and Consulting Actuary, Pinnacle Actuarial Resources, Inc.

SPE-4 · Loss Models-With an Emphasis on Model Selection
While maximum likelihood estimation is a good way to set parameter values for a given distribution, what can be done to pick the appropriate distribution? Graphical and statistical methods will be presented along with various philosophies of model selection.

Moderator:
 Stuart Klugman, Principal Financial Group Professor of Actuarial Science, Drake University

Call Paper Sessions

CALL-1 · "Generalized Minimum Bias Models"
Luyang Fu, Ph.D. & Cheng-sheng Peter Wu

In their paper the authors show that all the multiplicative minimum bias models along with commonly used Generalized Linear Modes are special cases of GMBM.

The authors present the following advantages of their approach:

  • There is no assumption of a specific form of distribution, increasing application appropriateness and model-selection flexibility.
  • It improves accuracy and goodness of fit for classification rates.
  • It is easy to understand and does not require advanced statistical knowledge.

Anyone who regularly employs minimum bias methods or Generalized Linear Models, or who wants to gain further understanding of them, will find this paper helpful and interesting.

CALL-2 ·
"The Effect of Changing Exposure Levels on Calendar Year Loss Trends"
Chris Styrsky

The Author demonstrates an underlying problem in using calendar year data to estimate loss trends. He demonstrates that as exposure levels change, calendar year loss trends could be distorted due to the mismatch of losses and exposures. The author then proceeds to demonstrate a method for overcoming this problem, by calculating adjusted loss trends that pair past exposures with the losses they produced.

"Pitfalls in Evaluating Proposed Tort Reforms"
Gail E. Tverberg

The Author explores ten problems actuaries should consider when analyzing changes to a state’s tort law. Actuaries who file medical liability rates have encountered requirements from states to reflect changes in tort law in their rate filings. Company management also needs to gain an appreciation for the potential changes in future losses due to these changes in law. The author gives the reader important tips and advice for approaching this problem. Regulators and actuaries involved in lines affected by tort reform will gain insight into the difficulties associated with the many changes we’ve seen recently.

CALL-3 ·
"Ratemaking for Captives and Alternative Market Vehicles"
Ann M. Conway

The Author provides an introduction to captives and some of the issues encountered in ratemaking for them. The author describes various capture structures and domiciles, and discusses the reasons for forming these entities, as well as the many issues encountered in estimating rates. Actuaries who need to gain a quick understanding of what captives are and how to approach ratemaking for them will find this paper helpful.

"D&O Reinsurance Pricing - A Financial Market Approach"
Athula Alwis (presenting), Vladimir Kremerman and Junning Shi

Those who are involved in directors and officers liability reinsurance will want to read this paper. The authors start with some interesting data showing settlements in the largest securities class action suits, along with the most successful plaintiffs’ law firms. They continue with a discussion the history of this market and current ratemaking practices. They then present a proposed methodology that incorporates market capitalization, frequency of lawsuits, loss as a function of market capitalization, and correlation between and within industry sectors.

Data Management Call Papers Sessions

Data/Call-1 ·
"Dancing with Dirty Data - Methods for Exploring and Cleaning Data"
-Louise A. Francis, Principal, Francis Analytics and Actuarial Data Mining, Inc.

Much of the data that actuaries work with contains errors, miscodings, missing values and other flaws that affect the validity of analysis performed with such data. This paper will give an overview of methods that can be used to detect errors and remediate data problems.

"Actuarial Data Management in a High-Volume Transactional Processing Environment"
-Joseph Strube, Senior Manager, Actuarial Data Management, GMAC Insurance Group / Motors Insurance Corporation
-Bryant Russell, Senior Team Leader, Actuarial Department, GMAC Insurance Group / Motors Insurance Corp.

The development and management of data resources that support property/casualty actuarial work are very challenging undertakings, especially in a high-volume transactional processing environment. This paper examines the evolution of the actuarial data management function in the context of end user computing, and highlights the key roles and processes that comprise an effective data management operation in a modern property/casualty actuarial department.

Data/Call-2 ·
"Insurance Industry Decision Support: Data Marts, OLAP and Predictive Analytics"
-George Bukhbinder, President, Palisades Research, Inc.
-Michael Krumenaker, Senior Project Manager, Palisades Research, Inc.
-Abraham Phillips, Millstone Data Solutions

Data Warehouses and Data Marts increase the power and efficiency of an Insurance company's Business Intelligence capabilities by supporting queries, OLAP and data mining. Data warehouse/data mart implementation streamlines information delivery for decision support and significantly simplifies development of general linear predictive models that have become more popular with actuaries and statisticians in recent years.

"The Games We Play: the Future of DFA Models' Interfaces"
-Aleksey S. Popelyukhin, 2 Wings Risk Services

The future generations of DFA software should employ cardinally different interfaces in order to reflect growing complexity and provide necessary flexibility for the models. The software product with the "ideal" DFA interface is neither analytical nor calculational package, but a game, a computer simulation game.

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