2002 Seminar on Reinsurance Handouts

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Property and Casualty Insurance: A Bad Business Structured for Low Profits?
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The property and casualty industry has recently suffered huge losses arising from a long, soft market, the attack on the World Trade Center, and the collapse of Enron. Much of this poor experience in recent years can be attributed to the following structural weaknesses:

• Not knowing the true cost of the products sold, which gives companies ample opportunity to justify low prices in order to meet revenue targets.
• Exposure to events that were not contemplated in the underwriting and rating processes, such as terrorism.
• An inability to apply credibility correctly to individual risk experience causes many policyholders to get too much credit for good experience (luck).

Speakers will address how the above items and other issues helped to cause the industry's poor results and what changes need to be made to restore the long-term profitability of the industry. Speakers will include industry executives and members of the investment community.

Moderator:
Jeffrey L. Dollinger, FCAS, National Accounts Lead Actuary, Employers Reinsurance Corporation

Panelists:
Todd R. Bault, FCAS, Analyst-Institutional Research, Sanford C. Bernstein & Co., Inc.
Jeffrey Cohen, Principal, MMC Capital

Workers Compensation Catastrophe Modeling
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Prior to September 11, 2001, workers compensation catastrophe reinsurance was written and priced without a true appreciation for its exposure. Insurance companies, reinsurers, and even rating agencies are now in an aggressive pursuit of more appropriate modeling techniques to assess and manage their exposure to loss.

In this session, panelists will present an update of available modeling techniques and discuss how both reinsurer and primary company professionals are using them for pricing and exposure management.

Moderator:
Elizabeth E.L. Hansen, FCAS, Managing Director, Guy Carpenter Instrat.

Panelists:
Seth Ruff, FCAS, Assistant Vice President, Swiss Re Underwriters Agency
Bill Tuttle, Vice President of Product Marketing, Risk Management Solutions
Jay Guin, Ph.D., Vice President, Research and Modeling, Advanced Insurance Research

BASIC TRACK SESSIONS

Basic I: Experience and Exposure Rating
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The panelists will discuss the basic techniques of both experience and exposure rating of excess-of-loss reinsurance contracts. The emphasis for this session will be the calculation of expected losses. This session is intended for nonactuaries and actuarial students who are not familiar with reinsurance pricing methodologies.

Moderator:
George N. Phillips, FCAS, Vice President and Associate Actuary, Transatlantic Reinsurance Company
Panelist:
Christian Svendsgaard, FCAS, Senior Pricing Actuary, Swiss Reinsurance America Corporation
Robert S. Yenke, ACAS, Vice President & Actuary, Folksamerica Reinsurance Company

Basic II: Other Pricing Issues
This session will focus on the pitfalls and the effects of various assumptions on reinsurance pricing. Databases will also be discussed.

Moderator:
Michael E. Angelina, ACAS, Consulting Actuary, Tillinghast-Towers Perrin
Panelists:
Michael E. Angelina, ACAS, Consulting Actuary, Tillinghast-Towers Perrin
Michael A. Coca, FCAS, Senior Vice President, PartnerRe US
David Skurnick, FCAS, Senior Vice President, St. Paul Re

Basic III: Introduction to Finite Reinsurance
Session panelists will present an introductory description of finite reinsurance. Several types of products will be discussed along with accounting and actuarial pricing considerations for each. This session is designed for the actuary or insurance professional with a basic understanding of traditional reinsurance concepts and accounting standards.

Moderator:
Elizabeth E.L. Hansen, FCAS, Managing Director, Guy Carpenter Instrat.
Panelists:
David Lightfoot, CPA, Principal, Guy Carpenter
Elisabeth Stadler, FCAS, Senior Pricing Actuary, Swiss Reinsurance America Corporation

OTHER CONCURRENT SESSIONS

Finite Reinsurance: Emerging Issues
The events of the last year have changed the reinsurance market dramatically. This session will look at the changes taking place in the world of finite reinsurance given the events of September 11, Enron, and HIH. The session will also look at new methods for analyzing the risks contained in typical finite transactions.

Moderator:
David L. Drury, FCAS, Senior Vice President and Chief Actuary, Tempest Re USA, Inc.
Panelists:
Marvin Pestcoe, FCAS, Executive Vice President, New Solutions, PartnerRe U.S.
Peter W. Wildman, FCAS, Vice President, Towers Perrin Reinsurance

Exploding Severity Trends
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In recent years, although general economic inflation remains low, average severity has increased sharply for many casualty- and health care-related lines of business. Despite large rate increases in recent years, these adverse trends could prevent companies from restoring profitability. Another potential implication of these trends is that industry size of loss curves developed using older data may now be too light. In this session, speakers will attempt to quantify and explain these trends and forecast whether these adverse trends will persist. Lines of business to be discussed will include medical stop loss, commercial umbrella, directors and officers, and medical malpractice.

Moderator:
Jeffrey L. Dollinger, FCAS, National Accounts Lead Actuary, Employers Reinsurance Corporation
Panelists:
Carol M. Ferrero, FCAS, Vice President, GeneralCologne Re
Lina S. Cheung, FSA, Consulting Actuary, Milliman USA

Liability Storms
In property, one can't predict where the next storm will hit, but in casualty it may be easier to anticipate where plaintiff attorneys will swarm. This session will review recent areas of attack by plaintiff attorneys and attempt to predict where the next liability storm will come. Potential topics could include nursing home liability, asbestos, laddering, and construction defects.

Moderator:
Michael E. Angelina, ACAS, Consulting Actuary, Tillinghast-Towers Perrin
Panelists:
Jennifer L. Biggs, FCAS, Consulting Actuary, Tillinghast-Towers Perrin
Bruce D. Fell, FCAS, Vice President, Am-Re Consultants, Inc.

Actuaries in Ceded Re
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Actuaries have become an integral part of insurance companies' risk management teams. One of the available tools to mitigate risk is, of course, ceded reinsurance. As the reinsurance market started to harden, the careful analysis of the benefits of reinsurance has become critical to many insurers. Also, the balance sheets of many companies are affected by major uncertainty in recoveries for past events. This session will examine the role of ceded re actuaries and their relationships with the reinsurer and reinsurance actuaries. Issues such as the cost of bad data, assessment of risk, and the "perfect submission" will be discussed.

Moderator:
Sarah Krutov, FCAS, Vice President and Chief Reserving Actuary, SCOR Reinsurance
Panelists:
Scott C. Belden, ACAS, Managing Director, Reinsurance, Travelers Insurance
Brian Z. Brown, FCAS, Consulting Actuary, Milliman USA
Edward P. Lotkowski, FCAS, Vice President, Ceded Reinsurance, Main Street America Group

Cost of Imbedded Contract Provisions
This session will deal with the real options imbedded in most reinsurance contracts. The speaker will identify terms common in many reinsurance contracts that give one of the two parties the option to make a decision, given further information developed over time. The speaker will then discuss methods of assigning value to these imbedded options.

Moderator:
David L. Drury, FCAS, Senior Vice President and Chief Actuary, Tempest Re USA, Inc.
Panelists:
David L. Drury, FCAS, Senior Vice President and Chief Actuary, Tempest Re USA, Inc.
Glen Leibowitz, ACAS, Vice President, Tempest Re US

Property Catastrophe Modeling I: Earthquake
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Catastrophe modeling results are used widely by insurers and reinsurers. Understanding the accuracy and limitation of models has become very important. This session will address earthquake modeling in the western U.S. as well as overseas. Representatives from catastrophe modeling firms will discuss their approach in terms of data used as well as underlying assumptions, parameters, and the latest model development. There will also be discussions on practical issues in the area of optimizing reinsurance and impact of workers compensation loss from an earthquake.

Moderator:
John L. Tedeschi, ACAS, Senior Vice President, Guy Carpenter & Company, Inc.
Panelists:
Jay Guin, Ph.D., Vice President, Research and Modeling, Advanced Insurance Research
Thomas I. Larsen, Senior Vice President, Product Development, EQECAT
Guy Morrow, Head of Engineering and Vulnerability, Global Risk Modeling, Risk Management Solutions

Property Catastrophe Modeling II: Windstorm
Windstorms continue to be a major risk factor for the insurance industry. Keeping the windstorm exposures in check is a complex task. The panel will discuss some of the aspects of the risk analysis, such as uncertainty, inherent in the projections of losses due to windstorms.

Moderator:
Sarah Krutov, FCAS, Vice President and Chief Reserving Actuary, SCOR Reinsurance
Panelists:
Mahmoud Khater, Ph.D., EQECAT/ABS Consulting
Rick Thomas, Ph.D., Group Head of Research, PartnerRe U.S.

Medical Malpractice
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This session will concentrate on the issues that affect projecting losses and future cost levels for medical professional liability. It will also offer methods the actuary can employ to address these issues in their analysis. Specifically, the session will address the following:

• Severity and frequency trend- What was the trend in the past, where is it now, and where is it going? What are the major forces likely to drive trend going forward? How much uncertainty is there in trend estimates?
• Loss development patterns—Are historical patterns relevant? How should historical data be adjusted to project losses and payout patterns? What projection methods should actuaries use?
• What data is publicly available for the actuary to use?
• What impact does tort reform, managed care, nursing storage, the concept of "managed law," and other emerging issues have on pricing this business for primary insurers, quota share reinsurers, and excess of loss reinsurers?

Moderator:
Ernest S. Tistan, FCAS, Chubb Re, Inc.
Panelists:
Elizabeth A. Wellington, FCAS, Principal, Specialty Lines Consulting
Peter J. Schultheiss, FCAS, Assistant Vice President, Zurich North America

D&O: Trends and Expectations in the Wake of Enron
This session will discuss historical and expected future trends in directors and officers insurance and reinsurance resulting from the Enron loss as well as the emergence of laddering claims and other heretofore unknown threats.

Moderator:
Steven Petlick, FCAS, Chief Actuary Global & National, Swiss Reinsurance America Corporation
Panelists:
Mark W. Larsen, Consultant, D&O Survey, Tillinghast-Towers Perrin
Claude D. Yoder, FCAS, First Vice President, Hartford Specialty Insurance

The Actuarial Role in the Client Relationship
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With a panel including actuaries from both broker-market and direct-market reinsurers, as well as a reinsurance buyer, this session will discuss the role of the reinsurance actuary in developing and maintaining client relationships. The panelists will discuss how underwriters and actuaries can work together organizationally and how to optimize the success of an individual transaction through rate monitoring and participating in audits. Differences in the direct and broker markets and what a ceding company looks for from the reinsurance actuary will also be discussed.

Moderator:
Steven B. White, FCAS, Senior Vice President, Guy Carpenter Instrat
Panelists:
Michael A. Coca, FCAS, Senior Vice President, PartnerRe U.S.
Steven A. Kelner, FCAS, Vice President, American Re-Insurance Company
Pierre Guy Laurin, FCAS, Director and Senior Vice President, Zurich North America

Coffeehouses to Catastrophe—Lloyd's Past, Present, and Future
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Coffeehouses became a huge success in London in the late seventeenth century because of their advantages over taverns as good business meeting places. They were soberer, cleaner, and more orderly. Edward Lloyd chose the site of his establishment with care. Near Tower Wharf and the Customs House, Lloyd's coffeehouse captured the thirst of shipowners and captains trading overseas, and, in conjunction, the merchants who dabbled in marine insurance. These underwriters would market the philosophy underlying their product with the phrase "the losse lightethe rather easilie upon many, than heavlilie upon fewe."

Over the past decade, the truth of this philosophy has been tested amongst the society of individuals, who collectively call themselves Lloyd's. Large industry losses accompanied by an antiquated accounting system have led to catastrophic situations for several syndicates. With positive changes in the forefront, can Lloyd's reclaim its past glory and practice its philosophy with pride? In this session you will learn some of the history of Lloyd's. The panel will then discuss the present conditions in Lloyd's, and provide possible predictions for its uncertain future.

Moderator:
Jean A. DeSantis, FCAS, Vice President, Swiss Re Underwriters Agency Inc.
Panelists:
Micheal Falcone, FCAS, Senior Vice President and Chief Actuary, Global Aerospace
Todd Hess, FCAS, Chief Risk Officer and Deputy, Swiss Re Underwriters Agency Inc.

Workers Compensation Emerging Issues
Current trends in workers compensation, including the aftermath of September 11, are the focus of this session. The panel will also discuss conditions in the California market, including an update of the major law change recently enacted there, Assembly Bill 749.

Moderator:
George N. Phillips, FCAS, Vice President and Associate Actuary, Transatlantic Reinsurance Company
Panelists:
Jill Petker, FCAS, Associate Actuary, Liberty Mutual Group
Guy A. Avagliano, FCAS, Consulting Actuary, Milliman USA

Secondary Uncertainty/Parameter Risk in Pricing
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Actuaries do well at building models that reflect the main drivers of the risks assumed under a reinsurance contract. In many of the newer products, secondary uncertainty/parameter risk contributes a significant amount of the risk, particularly in "tail" outcomes. This risk stems from the inability to measure accurately the primary driver of the risk. For example, many actuaries use either the Moody's or S&P default matrices to price a CDO tranche. However, this assumes that the class of assets fits those matrices, the ratings are current, and the pool of assets is "average." Violating any of these assumptions will create significantly more risk. The session will give an example of these risks and suggest ways to include their effect in evaluating the risk when pricing.

Moderator:
Frank D. Pierson, FCAS, Senior Vice President and Chief Technical Officer, Centre Insurance Company
Panelists:
Steven R. Fallon, FCAS, Senior Vice President, Centre Insurance Company
Gary G. Venter, FCAS, Managing Director, Guy Carpenter, Instrat
Steven B. White, FCAS, Senior Vice President, Guy Carpenter Instrat