Casualty Actuarial Society

Professional Education

Seminar on Ratemaking
March 7-9, 2007

CONCURRENT SESSIONS

The peach 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.

Core Sessions

INT–1: Overall Indication and Ratemaking Relativities calculator

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, determination of the expense provision and formulation of rate relativities. The presentation will have an emphasis toward personal lines. Not intended for those preparing for Exam 5.

Moderator:
Gavin X. Lienemann, Actuarial Analyst, State Farm Insurance Companies
Panelist:
Amy Ann Juknelis, Assistant Actuary, Allstate Insurance Company

INT–2 Profit Provision Calculations calculator

This session will examine the various methods that actuaries use to calculate the profit provision component of indicated premium. In this regard, the focus will be on understanding the key concepts that underlie each method. The session will also examine the true nature of the pricing actuary's role in a competitive market. 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.
  • How methods and techniques facilitate efficient reaction to competitive markets.

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:

Chet Szczepanski, Vice President & Chief Actuary, Donegal Mutual Insurance Group

INT-3: Introduction to Increased Limits Ratemakingcalculator

This session will present an overview of increased limits ratemaking. Initially, the session will cover general concepts, such as calculating Limited Average Severities, and practical problems with developing Increased Limits Factors (ILFs) from a distribution of loss data. The session will also provide an overview of Excess and Deductible pricing. Finally, the session will discuss common approaches for calculating ILFs.

Moderator:
Arthur R. Cadorine, Assistant Vice President, ISO
Panelist:
Joseph M. Palmer, Assistant Vice President & Actuary, ISO

INT-4: REINSURANCE calculator

The basic functions and principles related to reinsurance ratemaking will be the focus of this session. “Reinsurance Phobia” will be cured! After that, we will introduce the basics of how the reinsurance market actually operates and the reasons and basics as to why excess of loss “layering” is so common in US reinsurance. All this is meant to help prepare you for the reinsurance experience and exposure rating session that follows.

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

INT-5: Credibility calculatorcalculator

Considering credibility in the context of ratemaking concepts, this session will review variables affecting credibility and credibility formulas, as well as practical techniques for applying and increasing credibility. Both classical and Bühlmann models will be described.

Moderator/Panelist:
Keith Jeremy Sunvold, Vice President, Guy Carpenter & Company, Inc.

INT-6: Workers Compensation Ratemaking—An Overview calculator

The panel will review the essential components of a typical rate filing from the perspective of NCCI, other bureaus, and from the view of companies in loss cost jurisdictions. The discussion will highlight coverages, exposure bases, and data sources used for workers compensation ratemaking.

Moderator:
James R. Davis, Director and Actuary, National Council on Compensation Insurance, Inc.
Panelists:
Andrew J. Doll, Vice President and Chief Actuary - Commercial Business, Fireman's Fund Insurance Company
Jay Rosen, Director and Actuary, National Council on Compensation Insurance, Inc.

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Data/Technology

DATA-1: Data Preparation for Predictive Modeling calculator

A crucial step in predictive modeling, data preparation is the most time consuming step in many projects. Data preparation involves exploring and cleaning data as well as augmenting data with externally and internally derived variables.

The first part of the session will begin with an introduction to exploratory data analysis. EDA, which uses graphical and statistical techniques to perform initial exploration of data prior to a modeling or analytical project. It is used both to find data glitches and to learn about the structure of the data that might be helpful in later analysis. This session will introduce EDA applications in familiar environments such as Microsoft Excel. No previous exposure to statistics or to EDA is assumed. The most common procedures used to augment data with derived variables will be presented.

The second part of the session will focus on common difficulties faced in preparing data for predictive modeling. The session will also discuss basic data organization techniques that will help resolve many of these common problems. Some of the topics that can be discussed are:

  • Handling large amounts of data
  • Bringing together data from disparate systems with in the insurance organization
  • Linking past information with future
  • Learning differences among preparing data for first modeling effort, model use, and periodic model recalibration
Moderator:
John A. Stenmark, Vice President, Actuary Southern Farm Bureau Casualty Insurance Company
Panelists:
Louise A. Francis, Consulting Principal, Francis Analytics & Actuarial Data Mining, Inc.
Ravi Kumar, Senior Manager, Advanced Quantitative Services, Deloitte Consulting LLP

DATA-2: Getting More From Your Data calculator

As actuaries, we prefer to base our decisions on data. It follows that better data (e.g. more complete, more correct, more appropriate) should lead to better actuarial decisions. This session will begin with the case for data quality and then give tips and examples on how to pursue data quality. The emphasis will be on:

  1. Techniques that should be easy for most actuaries and analysts to apply right away,
  2. Aspects of data quality that actuaries, not data managers, are best able to fulfill.

This session is drawn from the work of the C.A.S. Data Management and Information Educational Materials Working Party (Research Working Party 5).

Moderator:
Robert Neil Campbell, Director, Commercial Lines Actuarial, Lombard Canada, Ltd. Panelists:
Gary W. Knoble, Senior Advisor, Insurance and Finance Professional Education Consulting, Beijing
Peter Marotta, Principal, ISO
Aleksey Popelyukhin, Vice President, Information Systems

DATA-3: DIRTY DATA ON BOTH SIDES OF THE POND: THE GIRO DATA QUALITY WORKING PARTY calculator calculator

Poor data quality is a pervasive issue affecting actuaries around the world. In 2005, a group of actuaries formed a working party to address poor data quality. The working party, a collaboration of CAS and UK actuaries, performed original research on data quality to measure the extent of the problem and raise awareness about the consequences of poor quality. Their report was presented at the 2006 GIRO conference in Vienna. Members of the working party will present topics from their report:

  • Data quality horror stories from both insurance and non-insurance industries,
  • The results of a survey,
  • The results of a data quality experiment, and
  • Recommended actions to address the problem will also be presented.
Moderator:
Louise Francis, Consulting Principal, Francis Analytical & Actuarial Mining, Inc.
Panelist:
Robert Neil Campbell, Director, Commercial Lines Actuarial, Lombard Canada, Ltd.

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Workers Compensation

WC-1: Workers Compensation—Selected State Issues calculator

The panel will present key issues for the states of Georgia and Florida. For Georgia, several legislative changes will be discussed along with their impact on the state’s workers compensation system. In addition, an overview of current market conditions, the status of SERFF in Georgia and an update on the current session of the General Assembly will be provided. For Florida, it has been three years since the state adopted sweeping workers compensation reforms aimed at lowering costs for employers, increasing employer and carrier compliance, reducing attorney involvement, and improving the medical delivery benefit system. Specific statutes, rules and initiatives will be reviewed and discussed that have contributed to the reform goals being met or exceeded. In addition, the presentation will include an outlook on possible legislative or regulatory changes that may occur in 2007.

Moderator/Panelist:
Steve Manders, Assistant Director, Property and Casualty Division, Georgia Department of Insurance
Panelist:
Andrew Sabolic, Chief, Bureau of Compliance & Policy Coordinator, Florida Department of Financial Services

WC-2: Workers Compensation—State of the Market calculator

An overview of the current state of the workers compensation line will be presented, including a review of financial results, recent trends, and a discussion of where the line might be headed.

Moderator/Panelist:
Tony DiDonato, Director and Senior Actuary, National Council on Compensation Insurance, Inc.
Panelist:
Jennifer L. Tomilin, Senior Vice President, Zurich North America

WC-3: Perspectives on Pricing Large Accounts calculatorcalculator

This session will focus on some aspects of the design and pricing in the marketplace of large risk insurance programs. Hazard groups are one way to distinguish individual risks. The panel will discuss the recent changes to NCCI’s mapping of classes to hazard groups—with an emphasis on the impact of the new hazard groups on the ELFs. Some comparisons of the old and new hazard groups will be given as well a brief discussion of the methodology. In addition, basic principles and recent developments related to large account pricing, including discussion of credibility, loss limitation and pricing model application will also be discussed.

Moderator/Panelist:
Greg Engl, Director and Actuary, National Council on Compensation Insurance, Inc.
Panelist:
Brian Ingle, Vice President, Converium Reinsurance (North America), Inc.

WC-4: Key Drivers of Workers Compensation Costs—Economic Perspectives calculator

This session will focus on recent research by NCCI’s economists that examines two primary drivers of workers compensation costs: (i) frequency and (ii) the aging of the workforce. Research will be presented that explains the decline in frequency over the past 50 years with a specific focus on the most recent decades. As the aging workforce is likely to result in somewhat offsetting pressures on workers compensation total costs—frequency is lower for older workers, but severity is greater—research will be presented that a) explains differences in severity between younger and older workers and b) estimates the likely impact that an aging workforce has on cost trends.

Moderator/Panelist:
Harry Shuford, Practice Leader and Chief Economist, National Council on Compensation Insurance, Inc.
Panelist:
Tanya Restrepo, Associate Economist, National Council on Compensation Insurance, Inc.

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Commercial Lines

COM-1: Emerging and Latent Risks for Commercial Liability calculator

Latent claims activity continues to impact insurer balance sheets. This session will explore several major areas of continuing claim litigation including Asbestos and Environmental claims and emerging sources of latent claim emergence. With impacts that can extend decades after policies are written, insurers must exercise caution in providing and pricing coverages. Discussed will be current developments in Asbestos including an historical perspective, impacts on insurers, and tort reform efforts. While much of asbestos litigation involves coverage provided decades ago, new sources of latent and/or mass tort claims continue to emerge. The panel will also discuss the sources of more recently emerging claims, share insights into the possible scope of emergence, and implications for coverages and prices in the current market.

Moderator/Panelist:
Smitesh Davé, Second Vice President and Senior Actuary, St. Paul Travelers
Panelist:
Steven C. Lin, Consulting Actuary, Tillinghast Towers Perrin

COM-2: Product Development: Practical Considerations from Both Commercial and Personal Lines Perspectives calculator

In a role outside of the traditional pricing and loss reserving functions, an actuary can make a substantial contribution to product development. This session is designed to illustrate applications in personal and commercial lines.

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. This portion of this session will focus on lessons learned from entries into new markets utilizing external competitive intelligence and ways to lessen the risks inherent in such forays. Implications for pricing, product design, underwriting, tier placement, and insurance scoring will be discussed, along with monitoring techniques post-implementation.

For commercial lines, as new insurance coverages are developed, the actuary must determine pricing without the reliance on traditional insurance data. This portion of the session will discuss the process of developing pricing for non-traditional insurance coverages and the use of more advanced predictive analytical tools for traditional commercial insurance coverages.

Moderator:
Kelleen D. Arquette, Actuarial Associate, Towers Perrin
Panelists:
Beth E. Fitzgerald, Assistant Vice President & Actuary, ISO
Keith Toney, Vice President of Insurance Analytics, ChoicePoint

COM-3: Managing General Agents: Managing for Success calculator

Use of Managing General Agents (MGA's) has traditionally been a component of insurers underwriting processes. In some cases, the flexibility afforded by MGA's has enabled insurers to enter new markets and take advantage of opportunities more quickly than competitors. In other cases the business control delegated to MGA's can work to the detriment of the insurer. This session will explore the characteristics that make MGA business unique, which business characteristics to look for to increase the chance for success, and what actions on the part of insurers and actuaries support successful MGA generated books of business.

Moderator:
Wayne S. Keller, Vice President and Actuary, Arch Insurance Group
Panelists:
Cameron J. Vogt, Vice President, Munich Reinsurance America, Inc.

COM-4: Medical Malpractice Market Update calculator calculator

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 recent tort reform activity and issues often faced by actuaries in a soft market and how they affect the adequacy of rates. Finally, we’ll discuss the pricing of free tails, including theoretical development, balancing pricing with reserving for this benefit, accounting related issues and reinsurance issues.

Moderator:
Michael J. Miller, Consulting Actuary, Tillinghast – Towers Perrin
Panelists:
Linda A. Dembiec, Consulting Actuary, Select Actuarial Services
James D. Hurley, Principal, Tillinghast-Towers Perrin

COM-5: Price Governance I: Price Monitoring for Standard and Middle Market Commercial Lines calculator

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, the first of two on price governance, 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/Panelist:
G. Christopher Nyce, Senior Manager, KPMG LLP
Panelist:
Brian Hughes, Senior Vice President and Chief Actuary, Arch Insurance Group

COM-6: Price Governance II – Implementing Price Governance for Complex Lines calculator

This session will focus on aspects of price governance beyond the technical price monitoring process from a perspective including the Reinsurance industry and the London Market. Especially for complex lines where the actuarial price by nature requires judgment, the final price is not based exclusively on the technical price indications determined using actuarial methods. Significant input from underwriters and marketing, as well as external factors such as markets and intermediaries is often factored into final pricing to account for factors such as operational and environmental changes. Discussion will include effectiveness of current price governance in the insurance industry and existing trends, the role of various constituents and stakeholders including actuaries. Drawing on personal experiences, panelists will discuss typical pitfalls, and successful techniques for integrating all disciplines into an effective price governance system.

Moderator:
G. Chris Nyce, Senior Manager, KPMG LLP-US
Panelists:
Fiachra McLoughlin, Executive Advisor, KPMG LLP-UK
Isaac Mashitz, Chief Pricing Actuary, Swiss Re

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Personal Lines Sessions

PL-1: Credit Scoring Update calculator

The use of credit in insurance continues to be a topic that is hotly debated by insurers, consumers, regulators, and other 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:
Mary T. Hosford, Actuary, Liberty Mutual Group
Panelists:
Richard A. Smith, Consultant, Towers Perrin
John B. Wilson, Assistant Vice President, Analytics, ChoicePoint

PL-2: Hurricane Modeling calculator

After the historical hurricane seasons of 2004 and 2005, the use of hurricane models by insurance and reinsurance companies for decision-making were heavily scrutinized. Modeling companies reacted by providing event sets that reflected short-term estimates of increased frequency and severity and many insurance and reinsurance companies took steps to decrease exposure concentrations in hurricane prone areas.

A relatively calm 2006 hurricane season provides an opportunity for reflection on steps that could enhance hurricane models. In this session, the panelists, who include a modeling expert from a reinsurance broker and a representative from one of the modeling firms, will discuss modeling from both a technical and a practical point of view. They will also discuss recent changes to the models, as well as the importance of data quality.

Moderator/Panelist:
David Langdon, Vice President, Towers Perrin Reinsurance
Panelist:
David LaLonde, Senior Vice President, AIR Worldwide Corporation

PL-3: Update on SUV Auto Insurance Costs/Other Make/Model Symbol Issuescalculatorcalculator

The increase in size and types of vehicles on the road today coupled with the market leaders' desire 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. Recent experience also points to significantly higher loss costs for performance versions of some makes and models. What can be done in the ratemaking process to adequately account for these differences?

The panel will present a discussion of the current pricing issues related to rating individual makes and models of automobiles including a discussion of the various "symbol rating" programs in use by insurers in the US.

Moderator/Panelist:
Christopher S. Carlson, Consultant, Pinnacle Actuarial Resources, Inc.
Panelist:
Kim Hazelbaker, Senior Vice President, Highway Loss Data Institute

PL-4: Determination of Statistically Indicated Territory Boundariescalculatorcalculator

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:

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

Moderator/Panelist:
Klayton N. Southwood, Senior Consultant, Towers Perrin
Panelist:
James Tanser, Senior Consultant, Watson Wyatt

PL-5: California Automobile: Prop 103 Revisited calculatorcalculator

In July of 2006, new class plan regulations were implemented in California that are expected to have a significant impact on the personal auto insurance market. The panelists will describe the new regulations, present the pros and cons of the current California auto insurance regulations from the viewpoint of both the insurance industry and the consumer, and engage the audience for additional perspectives.

Moderator:
Christopher Wayne Hurst, Consultant, Towers Perrin
Panelists:
Shawna S. Ackerman, Principal & Consulting Actuary, Pinnacle Actuarial Resources, Inc.
Mark Savage. Senior Attorney. Consumers Union of United States, Inc. Counsel for Petitioners
Samuel Sorich, President, Association of California Insurance Companies

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Predictive Modeling

PM-1: Predictive Modeling: What is Out There? calculatorcalculator

A wide variety of predictive modeling techniques are in use today; this session will provide an overview of predictive modeling and a discussion of the different methods. The session will begin with a discussion of tree-based modeling, as exemplified by the "Classification And Regression Tree" (CART) algorithm. Additional topics to be covered will include Generalized Additive Models (GAMs), Neural Networks, and MARS (Multiple Additive Regression Splines). Relations of the various techniques with regression and Generalized Linear Models, as well as the methods' advantages and disadvantages, will be pointed out.

Moderator/Panelist:
Serhat Guven, Consultant, EMB America LLC

PM-2: An Introduction to GLM Theorycalculatorcalculator

The use of generalized linear models (GLMs) has taken the North American property/casualty insurance industry by storm, in many cases replacing traditional one-way actuarial analyses. This session is designed to provide the actuary with an overview of the statistical theory of GLMs and give illustrative examples and intuitive explanations that clarify the theory. 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, model diagnostics and the use of interaction variables. (Practical applications of GLM theory will be covered in another panel session.)

Moderator:
Louis Mak, Consultant, Watson Wyatt Worldwide
Panelist:
Geoffrey Todd Werner, Senior Consultant, EMB America LLC

PM-3: GLM: Practical Applicationscalculatorcalculator

Predictive modeling, including methods such as Generalized Linear Models, has become extremely popular with actuaries and researchers in insurance companies. This session will begin with an overview of common insurance applications. The presenters will then provide practical insights into data preparation/manipulation, challenges with factor selection and model interpretation, and issues surrounding implementation.

Moderator:
Roosevelt C. Mosley, Consulting Actuary, Pinnacle Actuarial Resources, Inc.
Panelists:
Richard A. Smith, Consultant, Towers Perrin
James Tanser, Senior Consultant, Watson Wyatt

PM-4: Implementation of Rates Based on Predictive Modeling calculator

Predictive modeling using multi-variate analysis is a relatively new hot topic for the P&C industry in the U.S. Although some companies have already gone down this road, there are a number of small to midsize companies that are just starting. As assistant vice president of property and casualty research for a company that has recently developed and implemented a new rating structure based on predictive modeling, this session's panelist will share his company's experiences in developing and implementing this large project.

Some of the topics covered will include time and resources required, data issues, blending the new model into the existing rate review and systems environments and testing. Because the model was initially rolled out in late 2005, some enhancements to the model and some post-implementation results will also be shared.

Moderator:
Klayton N. Southwood, Senior Consultant, Towers Perrin
Panelist:
Donald L. Closter, Assistant Vice President Property & Casualty Pricing, Horace Mann Companies

PM-5: Scoring for Small Business Ownerscalculator

Policies for small business risks have unique eligibility and underwriting considerations. As the types of business written under business owners’ policies increases, these issues become more important. Insurers are examining the fundamentals of underwriting and rating small business risks and moving towards a more efficient approach for 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 of underwriting and rating including the application of statistical modeling.

Moderator:
Robert Neil Campbell, Director, Commercial Lines Actuarial, Lombard Canada, Ltd.
Panelist:
Robert J. Walling III, Principal and Consulting Actuary, Pinnacle Actuarial Resources, Inc.

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Risk and Capital Management

RCM-1: Reflecting Economic Profit in Ratemaking- an Evolutionary Process from 5% to Cost of Economic capitalcalculatorcalculator

This session is intended to provide an historical review, overview, reflection on the issues, procedures, rationale, and methodologies in incorporating profit loads in the ratemaking process.

The progression, which is still evolving, begins from the arbitrary 5% on premiums benchmark which lacks no financial theory at all to the reflection today on time value of money, risk, cost of economic capital, cost of reinsurance, and the marginal returns on capital as current considerations in profit loads. The evolution is continuous. Where is it heading?

Moderator:
Glenn Meyers, Chief of Actuarial Research and Assistant Vice President, ISO
Panelist:
Richard Derrig, President, Opal Consulting LLC
Russell Bingham, Director of Research and Development, The Hartford

RCM-2: Logic, Fallacies, and Paradoxes in Risk/Profit Loading in Ratemaking: A Socratic Dialoguecalculatorcalculatorcalculator

The CAS research forums, including the Committee on the theory of Risk and the VALCON e-mail forum sponsored by COTOR, have produced numerous thought-provoking issues and considerations in determining profitability benchmarks within the property/casualty insurance products. Issues discussed and debated will include, but not be limited to, the best use of risk metrics, comparing and contrasting the different philosophies of capital appropriation to line, use of risk-adjusted discount rates rather than a separately calculated risk load, the usefulness of CAPM theory, and a host of other topics. Is there a true market value to consider and how is it best measured? How is the time value of risk reflected? 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.

Moderator:
Louise Francis, Consulting Principal, Francis Analytics & Actuarial Data Mining, Inc,
Panelists:
Richard Derrig, President, Opal Consulting
Leigh Halliwell, Chief Manager, L.J.Halliwell, LLC
Glenn G. Meyers, Chief Actuary, ISO Innovative Analytics
Members of the Committee on The Theory of Risk

RCM-3: Ratemaking: Putting it All Together in an Enterprise Risk Management Frameworkcalculatorcalculator

ERM envisions a holistic treatment of risk - both positive and negative - across an enterprise. Ratemaking and reserving are the traditional actuarial functions. How does the ratemaking silo relate to an insurer's enterprise-wide ERM process? How is ratemaking an ERM function? The panelists will address this and many more issues regarding ERM, risk and return analysis, and the ratemaking function.

Moderator/Panelist:
Robert Wolf, Director, Navigant Consulting, Inc.
Panelists:
Russell Bingham, Director of Research and Development, The Hartford
Curtis M. Parker, Vice President and Chief Actuary, Grange Insurance Companies

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Regulatory

REG-1: Regulatory Roundtable Discussion calculator

Each member of this panel of regulators will present a short overview of the rate regulatory climate and process in their state. “Hot Button” issues will be identified and discussed. A roundtable group discussion will follow, with audience participation strongly encouraged. The differences and the similarities in regulatory approach will be highlighted. In addition, panelists will comment on their experiences and field questions from the audience.

Moderator:
Sarah K. McNair-Grove, Actuary, Alaska Division of Insurance
Panelists:
Charles A. Romberger, Actuarial Supervisor – Pennsylvania Insurance Department
Kevin Conley, Chief Actuary, North Carolina State Insurance Department

REG-2: Rate-Filing Best Practices calculator

What makes a good rate filing? It depends on whom you ask. Now is your opportunity to ask several individuals with very different opinions. Both regulatory and company viewpoints will be represented.

Moderator:
Chester John Szczepanski, Vice President & Chief Actuary – Donegal Insurance Group
Panelists:
Sarah K. McNair-Grove, Actuary, Alaska Division of Insurance
Janet Silverman, Supervising Casualty Actuary – New York Department of Insurance

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Reinsurance

REI-1: State of the Reinsurance Market calculator

As I write this in late October 2006 my own view of the January 1, 2007 renewal market for Property Reinsurance business has changed drastically from just 2 months ago. In March 2007 we will have the benefit of 20/20 hindsight to see how “the 1/1/2007 season” unfolded and why and where it may be going (and why). Speakers will represent many of the players in this market; Reinsurers, Reinsurance Brokers and Insurers.

Moderator:
Nolan E. Asch, Principal, Reinsurance Division, ISO
Panelists:
Scott C. Belden, Managing Director, Reinsurance, Travelers Insurance
Jeffrey L. Dollinger, Senior Vice President and Chief Actuary, Endurance Reinsurance Corporation of America
Stephen J. Mildenhall, Executive Vice President, Aon Re Services

REI-2: Introduction to Exposure and Experience Rating calculatorcalculator

This session will start with a simplified Case Study including a description of the data required to perform standard exposure and experience rating methodologies. The session will include a game atmosphere, including bingo style cards and gaming chips to simulate what transpires in the real world.

Moderator:
John W. Buchanan, Senior Vice President, Platinum Underwriters Reinsurance Inc.
Panelists:
Kathy H. Garrigan, Senior Vice President & Chief Pricing Actuary, Endurance Services Limited
Tice R. Walker, Assistant Vice President, Munich Reinsurance America, Inc.

REI-3: Solving the Puzzle: Reconciliation of Exposure and Experience Ratingcalculatorcalculator

A simple yet powerful method will be presented that takes the approach that each account is a puzzle to be solved. That is, "With perfect modeling and data, the results under the experience and exposure methods will be identical". A practitioner’s approach will be taken. This session will be a continuation of the REI-2 Case Study that introduces the basic rating methods.

Moderator:
Stephen W. Philbrick, Vice President, Swiss Reinsurance America Corporation
Panelists:
Michael E. Angelina, Chief Actuary & Chief Risk Officer, Endurance Specialty
John W. Buchanan, Senior Vice President, Platinum Underwriters Reinsurance Inc.

REI-4: Roundtable: The Role of the Reinsurance Pricing Actuary Contrasted with Primarycalculator

In an informal setting we will be talking about the differences in these roles. The differences in data quantity and quality, in procedural context, in scope and in the essential qualities needed for effectiveness and “success”. Audience participation and questioning will be encouraged and a number of “war stories” that are quite revealing will be related.

Moderator:
Nolan E. Asch, Principal, Reinsurance Division, ISO
Panelists:
Michael E. Angelina, Chief Actuary & Chief Risk Officer, Endurance Specialty
Alice M. Underwood, Senior Vice President, Willis Re, Inc.

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Special Interest

SPE-1: Policyholder Retention & Impact on Pricing calculatorcalculator

Policyholder retention and its effect 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:
Jeffrey L. Kucera, Senior Consultant, EMB America LLC
Panelists:
Kari B. Murphy, Partner, EMB Consultancy LLP

SPE-2: Simpson's Paradox, Confounding Variables and Insurance Ratemaking calculatorcalculatorcalculator

The insurance process is complex, with numerous factors combining to produce both premiums and losses. While compiling rates, actuaries often aggregate data from more than one source, while at the same time stratifying the data to achieve homogeneity. However, such exercises may lead to biased and sometimes even surprising results, called Simpson's Paradox, because the variables involved in the aggregation process or the stratification process are confounded by the presence of other variables. In this session, we will introduce to P&C actuaries Simpson's Paradox and confounding and the statistical underpinning associated with those phenomena. We will further discuss how such bias may exist in P&C actuarial rating applications and solutions that can resolve the bias.

Moderator:
Ravi Kumar, Senior Manager, Advanced Quantitative Services, Deloitte Consulting LLP
Panelist:
John A. Stenmark, Vice President - Actuary, Southern Farm Bureau Casualty Insurance Company
Cheng-Sheng Peter Wu, Director, Deloitte & Touche LLP

SPE-3: Actuarial Analysis of Catastrophes & Terrorism for Commercial Insurance calculator

Subsequent to September 11, 2001 the insurance industry has been struggling to prepare for large-scale terrorist attacks. Sophisticated catastrophe models for terrorism have been developed and continue to evolve. This session will discuss the challenges actuaries face in translating the output from catastrophe models into financially meaningful numbers, such as rate indications and solvency analyses. In particular, modeling the impact of TRIA necessitated combining catastrophe model output with complicated assumptions about the allocation of losses to individual companies throughout the industry. In the future, actuaries are likely to be faced with many more similar requests at all scales of the insurance enterprise.

Moderator:
Thomas J. Duffy, US Chief Actuary, Kingsway America
Panelist:
David Lalonde, Senior Vice President, AIR Worldwide Corporation
Rimma Maasbach, Actuarial Consultant, ISO

SPE-4: What's Your Final Answer? calculator

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.

Moderator/Panelist:
Jerome A. Degerness, Senior Vice President and Actuary, Benfield
Panelist:
Steven D. Armstrong, Senior Actuary, Allstate Insurance Company

SPE-5: International calculatorcalculator

For commercial lines, international programs often involve local policies (due to statutory reasons), master policies to cover DIC (Differences in Conditions) and DIL (Differences in Limits) and captives. The programs are quite complex and present pricing, cost allocation and reserving and reporting challenges. We will be discussing some of the key issues in developing, pricing and monitoring such programs. For personal lines pricing in Europe, many companies are performing very detailed competitive market analyses. These analyses are used to determine how rates should be set for certain classes of risks, once the "indicated" relativities have been evaluated. The analyses can reflect the elasticity of demand for the insurance product, and can be used in performing price optimization reviews.

Moderator:
Katharine Barnes, Consulting Actuary, Towers Perrin
Panelists:
Claus S. Metzner, Consulting Actuary, Milliman, Inc.
Alessandro Santoni, Senior Consultant, Tillinghast-Towers Perrin

SPE-6: Captive Insurance Market Update calculatorcalculator

In this session, panelists will briefly describe various capture structures and domiciles, and discuss reasons for forming a captive, as well as the many issues encountered in estimating rates. Current developments in fronting arrangements, captive expenses, and regulatory changes will be discussed.

Moderator:
Michael J. Miller, Consulting Actuary, Tillinghast – Towers Perrin
Panelists:
Ann M. Conway, Principal, Tillinghast – Towers Perrin
Christopher J. Ridge, Managing Director, Liberty Mutual Alternative Markets

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Discussion Papers

“An Exposure Based Approach to Automobile Warranty Ratemaking and Reserving”
Authors:
John Kerper
Lee M. Bowron, LLC Member/Manager, Kerper and Bowron LLC

“Catastrophes and Workers Compensation Ratemaking”
Author:
Thomas V. Daley, Director & Actuary, National Council on Compensation Insurance

"Forecasting Workers Compensation Severities and Frequency Using the Kalman Filter"
Authors:
Jonathan Palmer Evans, Actuary, National Council on Compensation Insurance
Frank A. Schmid, Director and Senior Economist, National Council on Compensation Insurance (NCCI) Actuarial and Economic Services

"IRR, ROE, PVI/PVE"
Ira L. Robbin, Assistant Vice-President and Senior Pricing Actuary, Endurance US Insurance

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