— Dealing With the Differences in Hurricane Models —
When comparing the results of the various models widely used today, many differences can be found in expected catastrophe losses. Regulators and others involved in public policy issues are becoming more and more concerned about the impact these differences can have on consumers. Panelists will discuss the implications of this variability from the perspective of primary insurers and reinsurers.

Moderator:
Ronald T. Kozlowski, Consulting Actuary, Tillinghast-Towers Perrin
Panelists:
Martin M. Simons, ACAS, Public Actuarial Consultant
William Gardner, FIAA, Vice President, AON Re Services

— Understanding the Differences in State Windpools —
A number of states develop windpool plans as a way to provide windstorm coverage for properties along coast lines. These windpool plans can have different structures and different risk apportionment features, for example, assessment periods and targets such as policyholders or insurance companies. These differences could imply various effects, including company strategies, public sentiment, and statutory accounting ramifications.

This session will describe the windpool programs currently in place for several states including Florida, Texas, North Carolina, Mississippi, and Alabama and provide updates on various regulatory issues. Panelists will compare and contrast risk apportionment mechanisms for various states and how they affect the private market.

Moderator:
Rade T. Musulin, ACAS, Vice President/Actuary, Florida Farm Bureau
Panelists:
Christopher J. Burkhalter, FCAS, Vice President, Bickerstaff, Whatley, Ryan & Burkhalter, Inc.
Frederick M. Strauss, ACAS, Shared Markets Director, Allstate Insurance Company

— Clash of Cultures- Latent Financial Exposures —
The bankruptcies of both Enron and Hollywood Funding have thrust the once benign financial credit risk vehicle of surety bond into the limelight. In fact, Enron's demise has sent its financial backer, JP Morgan Chase & Co., to court in an attempt to collect from its surety bond insurers for $1.1 billion. Misunderstanding the differences between a letter of credit and an insurance policy, commercial banking and insurance industry business expectations, a monoline and a multiline insurer and the like, results in what is sometimes called the "clash of cultures."

These misunderstandings have always existed, but are now coming under intense focus as the insurance and banking industries converge. The first decision of the Enron case in this matter, the Mohonia case, will be examined. The panel will discuss what defenses an insurance company has as a matter of law, and which of these defenses can be waived. In short, the panel will explain how to avoid the misunderstandings that arise in this clash of cultures and how to buy an insurance policy that does what you expect it to do.

Panelists:
Bob Aicher, Partner, Sidley Austin Brown & Wood
Ken Wylie, Partner, Sidley Austin Brown & Wood

— Mitigation Programs and Classification Plans —
This session will focus on how mitigation programs are being used to refine the classification and rating process for the hurricane and earthquake perils. The mitigation programs of the Florida Windstorm Underwriting Authority (FWUA) and the California Earthquake Authority (CEA) will be described, along with the new Florida building code refinements. The discussion will cover types of mitigation and retrofitting efforts (hurricane shutters, anchoring) and their associated discounts, and current research into the cost benefit of various mitigation programs. The discussion of changes in classification plans will include the history and current requirements for filing classification plans in Florida for residential insurance by 2003, and the CEA's efforts to change their method of rate distribution from contiguous geographical territories to banding by zip code.

Panelists:
Michael A. Walters, Consulting Actuary, Tillinghast-Towers Perrin
Milo Pearson, Chief Operating Officer, California Earthquake Authority

— Capital Adequacy of the Property/Casualty Insurance Industry-
Post September 11 —
Mainstream researchers generally viewed the property/casualty industry as overcapitalized before September 11. In the same breath, however, mainstream research estimated, among other things, deficient loss reserves and ultimate asbestos claims reaching up to $65 billion, begging the question of how overcapitalized, if at all, the industry truly was before September 11. If truly overcapitalized, why didn't capital leave the industry?

In light of the events of September 11 and other catastrophic events of 2001, the evidence of loss reserve shortfalls, continued estimates of environmental and asbestos claims, the increased exposure due to the subsequent fallout from the Enron crises, and the recent insolvencies, is the property/casualty industry still deemed overcapitalized? Can the industry reasonably sustain another 2001? These and many more questions will be discussed in this session and will incorporate the view of a former senior executive in a major insurance carrier, an industry analyst, and a casualty broker.

Moderator:
Robert F. Wolf, FCAS, Principal, MMC Enterprise Risk Consulting, Inc.
Panelists:
James W. MacGinnitie, FCAS, Actuary & Consultant

— Modeling Worker Compensation Catastrophe Exposures —
Prior to September 11, workers compensation business was written and priced without a true appreciation for the catastrophe 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, a representative from the NCCI will talk about what the issues with regard to the cat load in WC loss costs are and what their requirements for modeling those losses are. We will also hear the reinsurance industry perspective on these same issues. Then one modeling company, EQE will discuss and demonstrate the work they have been doing in this area.

Moderator:
Harry Shuford, Economist, National Council on Compensation Insurance
Panelist:
Richard Clinton, President, EQECAT, Inc.
John L. Tedeschi, ACAS, Senior Vice President, Guy Carpenter & Company, Inc.

— Recent Developments in Earthquake Hazard and Loss Modeling at the USGS —
The United States Geological Survey (USGS) is in the process of updating the National Seismic Hazards Maps. Catastrophe modelers use these maps and their underlying source parameters to assess earthquake faults and recurrence. A representative of the USGS will explain the importance of the changes in assumptions, including putting more emphasis on characteristic recurrence models and less on the Gutenberg-Richter recurrence models, which has increased the occurrence of larger events. In addition, the USGS is due to release a new study on earthquake probabilities for the San Francisco Bay Area. A catastrophe modeling firm panelist will discuss the impact of these changes on their model and implications on the resulting probable maximum losses and loss costs for the California Earthquake Authority.

Panelists:
Robert L. Wesson, Research Geophysicist, United States Geological Survey
Dennis E. Kuzak, Senior Vice President, EQECAT, Inc.

— New Developments in Modeling of Catastrophic Events —
After September 11, companies are paying more attention to exposure concentrations from more than just property risks. A number of catastrophe models are being built for workers compensation losses and terrorism events. Representatives from two modeling firms will discuss the mechanics of these new models, citing the development of terrorism event databases and vulnerability functions. There will also be a discussion on how predictable or reliable the modeling of events such as terrorism can be. A modeling cynic will present an alternative view that terrorism models are pure conjecture.

Moderator:
John Flatley, Employers Reinsurance Corporation
Panelists:
Jack Seaquist, Terrorism Model Project Manager, AIR Worldwide Corporation
Gordon Woo, Catastrophe Risk Consultant, Risk Management Solutions, Ltd.

— Regulatory Proposals for Managing Natural Catastrophe Exposure —
The NAIC has been working since the mid-1990’s on the concept of pre-event tax-deferred catastrophe reserves for natural disasters, with a proposal adopted in October 2001. One speaker will present a summary of her co-authored call paper “Reserving for Catastrophes”, including accounting treatment and instructions on annual calculations for this catastrophe reserve. Another speaker has independently developed an alternative way of accumulating surplus funds for catastrophe payments, similar to a 401 (k) tax-deferred fund, and will present his proposal for discussion.

Panelists:
Kay A. Cleary, FCAS, Actuary, Florida Department of Insurance
Michael A. Walters, FCAS, Consulting Actuary, Tillinghast-Towers Perrin

— Using Catastrophe Models for Pricing —
Catastrophe models were initially designed to measure an insurer's risk of catastrophic loss. More and more, these models are being used in determining insurance rates. The output from catastrophe models is used in setting statewide rate levels and territorial rates and is being used to develop new pricing classifications. Methods that include a provision for catastrophe losses in manual rates are one focus of this session. Issues in the collection of data will also be explored.

This session will also explore how a catastrophe model output may be used in the pricing and design of a reinsurance or retrocessional program, with the FHCF used as an example. Panelists will discuss methods and challenges regarding the use of catastrophe models in pricing reinsurance contracts. Issues to be discussed will include pricing model selection and parameterization.

Moderator:
Jonathan B. Hayes, ACAS, Senior Vice President, Guy Carpenter & Company, Inc.
Panelist:
Paul E. Budde, ACAS, Associate Actuary- Senior Vice President, Benfield Branch
David A. Lalonde, FCAS, Senior Vice President, Applied Insurance Research

— Securitization of Catastrophe Exposure: A Current and Prospective View —
In a CAS 1997 Ratemaking Seminar session, someone boldly predicted that the market for the securitization of catastrophe risk would continue to evolve as participants gain experience through trial and error. At that time, there were more seminars, articles, and research papers on the securitization of catastrophe risks than actual completed deals. Also the soft catastrophe reinsurance market and the absence of recent mega-catastrophes at the time were cited as among the factors slowing market development.

The world has changed in the five years since that prediction. Reinsurance markets have hardened and the world is considered more risky than ever before. This panel will discuss the current developments in the markets since then and discuss the outlook for the future.

Moderator:
Robert F. Wolf, FCAS, Principal, MMC Enterprise Risk Consulting, Inc.
Panelists:
Robert P. Eramo, ACAS, Vice President Corporate Actuary, CNA Insurance Companies
Garrett Shumway, AON Corporation
Geoffrey S. Sweitzer, Vice President, Guy Carpenter & Company, Inc.

— Modeling Business Interruption Losses —
Business interruption losses were one of the most difficult types of losses to estimate after September 11. This session will look at the coverage issues of business interruption claims and losses for recent catastrophes. A claims consultant will describe the basic fundamentals of settling a business interruption claim, including the financial data required. A modeling firm will discuss the methodology for modeling business interruptions losses, including exposure information such as financial data, damage functions and time element restrictions.

Moderator:
David Savage, Director, Hartford Reinsurance Company
Panelist:
Philip LeGrone, Lead Engineer, Risk Management Solutions, Inc.
William Marx, Assistant Vice President, Southern Zone Technical Supervisor, Chubb Group of Insurance Companies

— Global Warming- and Other Disasters the Plaintiffs' Attorneys Can
Create for You —
In the U.S. and abroad, the insurance industry is increasingly concerned about the impact of global warming on weather-related catastrophes and potential catastrophe losses. While the European insurance industry has been much more active in citing dangers posed by global warning, recent legal strategies in the U.S. are causing U.S. insurers to take more notice. In September 2001, a number of top law firms representing Greenpeace, World Wildlife Fund, and other environmental groups began working on a new legal strategy to address the problems of global warming. These strategies are based on such broad class actions as tobacco litigation and the reparations of the Holocaust survivors. In this session, panelists will discuss the view of the European community and possible legal strategies and defenses regarding global warming claims.

Moderator:
Eric F. Lemieux, Principal, The Black Diamond Group, LLC
Panelist:
Richard Murnane, Science Program Manager and Associate Research Scientist, Bermuda Biological Station for Research