CAS 2005 Spring Meeting Handouts

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Ron Pressman is president and CEO of GE Insurance, and chairman, president and CEO of GE Insurance Solutions, one of the world's largest reinsurance and insurance organizations.

In addition, Pressman serves as a member of the GE Corporate Executive Council reporting to GE CEO Jeff Immelt and as a director of GE Capital Services. He was elected an officer of the General Electric Company in 1993 and senior vice president in July 2000.

Pressman has held an array of roles in GE, leading GE Capital Real Estate as president and CEO from 1997 to 2000. Prior to that, he was CEO of GE Power Systems Europe and led several business units for GE Power Systems. In 1990 he assumed his first business leadership position as general manager of GE's Central and Eastern Europe operations based in London. Pressman began his career with GE in 1980. He currently chairs the Union Station Strategy Task Force in Kansas City and is vice chairman of the Kansas City Civic Council and a member of the boards of the Greater Kansas City Community Foundation, Pathways to College and ABC (A Better Chance). He has served on the executive board of the National Realty Committee and Wharton Real Estate Business School, as a member of the Hamilton College Board of Trustees from 1994 to 1998, and as chairman of Roots and Wings, a U.K. mentoring program. Pressman graduated from Hamilton College in Clinton, New York, in 1980.

Actuarial Accountability - In a Changing World
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Hardly a day goes by without corporate misconduct and unethical practices being alleged in lawsuits and in the press. The insurance industry has not been an exception. Insurance company failures due to reserve inadequacy have not been uncommon in recent years even with the increased prominence of the role of the actuaries in protecting the public interest.

This issue is not only in the United States. In response to a recent United Kingdom life insurance company insolvency, a study (i.e. the Morris Review) has been commissioned to address some interesting questions. What does it mean for actuaries or the actuarial profession to serve in the public's interest? Are actuaries sufficiently accountable for their actions? Is the self-regulatory nature of the actuarial profession sufficient to protect the public? Should actuarial standards represent minimum standards, best practices or some other criteria?

The panel will review the possible implications of questions raised by the Morris Review of the Actuarial Profession on Actuaries in the United States and the role and implication of the Actuarial Standards Board standards. Following the presentation, the panelist will have a question and answer period and give the audience members an opportunity to express their opinion on the subject.

Moderator/Panelist:
Mary Frances Miller, Past President, Casualty Actuarial Society
Panelists:
Lauren Bloom, General Counsel, American Academy of Actuaries
Karen Terry, Member, Actuarial Standards Board

The Industry's Ability to Attract Capital Given Historically Low ROE
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The historical insurance industry ROE has been low relative to other financial industries such as banking. Nevertheless, there have been capital infusions in this industry over the last several years. This raises some interesting questions. Is ROE the right measure for the insurance industry's performance? If it is not what is? And what are the motivations of the investors? The panel will discuss this and other related questions as to why the insurance industry continues to attract investment capital.

Moderator:
Gail M. Ross, Manager & Senior Consultant, Milliman USA
Panelists:
Jeffrey Cohen, Principal, MMC Capital, Inc.
Rajat Duggal, Managing Director, Friedman, Fleischer & Lowe, LLC
Joan Lamm-Tennant, Senior Vice President, General Reinsurance Corporation

The Actuarial Role in Mergers and Acquisitions
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Actuaries contribute in many different ways throughout a mergers and acquisitions process. Some actuaries are asked to evaluate potential targets and perform valuation of insurance companies. Actuaries are also frequently involved in other areas such as due diligence and deal structuring. After the acquisition, actuaries can also help integrate the acquired business into the current operations, which could include restructuring reinsurance programs and carving out and disposing of books of business that were not the target of the acquisition.

In 2004, the CAS and SOA formed a working group to author a textbook on Insurance Industry Mergers and Acquisitions, which will be released May 2005. In addition to members from the CAS and SOA, the working group included an investment banker, CPA, lawyer and tax expert. The panel will take you through the journey of an M&A process from the investment banking perspective, and discuss the various roles and responsibilities that actuaries play during a merger, acquisition or restructuring. The insight gleaned from other disciplines will allow actuaries to work more effectively with other experts working on the deal.

Moderator/Panelist:
Alan Hines, Principal Consultant, PricewaterhouseCoopers
Panelists:
John Butler, Senior Vice President, Houlihan, Lokey, Howard & Zukin
James Toole, Managing Director, Life and Health, MBA Actuaries

The Future of Finite Insurance
Recently Eliot Spitzer, the New York Attorney General, the SEC and other insurance regulators have been gathering evidence on the use of finite insurance contracts to smooth earnings or otherwise cloud the true picture of accounting statements. In high profile bankruptcies, plaintiffs allege that these contracts have deepened the insolvency by delaying the inevitable. While finite insurance seems to have become a dirty word in the mainstream press, actuaries have discussed and commented on the value of this product in the past. The panel will review some basics of finite insurance and will discuss the varying viewpoints of auditors, rating agencies, insurers, and reinsurers. It will discuss the possibility of using finite insurance to mask true results and legitimate uses of finite insurance as well as how to distinguish between the two. Panelists will also discuss how rating agencies view the use of finite insurance and the difficulties of defining finite contracts.

Moderator:
Marc F. Oberholtzer, Director, PricewaterhouseCooper LLP
Panelists:
Christopher E. Hall, Vice President, Senior Accounting Analyst, Moody's Investors Service
Kenneth Kruger, Senior Vice President, Willis Re., Inc.
Daniel Malloy, Executive Vice President, Benfield

Actuaries Embrace Operational Risk
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Operational Risk has been defined as "the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events." This has long been acknowledged as a risk that should be included in any enterprise risk management model; however, it has not always been embraced as a measurable, quantifiable risk by actuaries. This is ironic, since commercial multi-peril could arguably be renamed "insured operational risk" coverage.

Because of the Basel II Accord, banks are very interested in operational risk management. Best practice in this area has evolved (with limited actuarial involvement) to resemble actuarial science in general, and casualty actuarial practices more specifically. Leading banks are establishing what amounts to internal insurance programs, developing exposure bases, compiling claim databases, and estimating frequency and severity. They are also struggling with exposure scaling, ongoing monitoring, aggregation, and collation of industry data.

This session will (i) provide an overview of operational risk, (ii) discuss state-of-the-art in banking operational risk management, and (iii) chart a course for actuarial thought leadership in the broader operational risk world

Moderator/Panelist:
Donald F. Mango, Director of Research and Development, GE Insurance Solutions
Panelist:
Dr. Ali Samad-Khan, President, OpRisk Advisory
Mark Verheyen, Vice President, Carvill America

Are D&O Rates Really Softening?
Between 2000 and 2003, Directors and Officers insurance underwent a substantial hardening. The D&O market experienced rate level increases of 100%+ in some sectors, the elimination of multi-year contracts and tightening of policy terms. D&O rate increases were driven by many of the same forces impacting the overall market cycle, including deeply inadequate rates due to overcapacity and excessive competition during the 1990s, and the sudden end of the prolonged bull investment market. But D&O pricing also was strongly influenced by unique factors such as the string of corporate governance scandals inaugurated by the collapse of Enron, skyrocketing average securities class action settlement values and the passage of the Sarbanes-Oxley Act.

As of late 2004, D&O market observers suggest that the hardening might be at an end and perhaps reversing. The panelists will discuss their views on this assertion. Presentations will cover both public D&O and non-public D&O markets.

Moderator:
Elissa M. Sirovatka, Consultant and Principal, Tillinghast-Towers Perrin
Panelists:
David K. Bradford, Executive Vice President, Advisen Ltd.
Kraig P. Peterson, AVP & Actuary, Chubb Group of Insurance Companies

Auto Injury Claims: The What, Why and How of it All
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Many consider personal auto to be a very straightforward type of insurance, requiring little expertise to manage, price, underwrite, and reserve. This session will decidedly convince you otherwise. The average severity of auto injury claims has escalated in recent years, fueled by surging reported medical expenses. Auto injury claimants reported significantly higher medical care expenditures, despite the fact that injuries from auto accidents appear to be less serious than in the past. For PIP and Med Pay claims, recent growth in medical expenses has surpassed the rate of medical care inflation.

Fraud and buildup have also played a role in some of the deteriorating trends seen in auto injury claims in recent years. The insurance industry has developed sophisticated techniques to fight fraud. These efforts are causing changes in the auto loss development pattern and, ultimately, in the severity of losses.

The panel will share with you the results of a recent national study by the Insurance Research Council on closed auto injury claims. By examining trends in many aspects of auto injury claims, the study reveals sharp increases in charges for the treatment of auto injuries combined with increased use of certain medical professionals and diagnostic procedures as the basis for the rising medical expenses. The IRC will also share findings from a follow-up report on the appearance of fraud and buildup in auto injury claims closed with payment.

In addition, recent research in Massachusetts on the composition of bodily injury liability payments, the effectiveness of claims handling using independent medical examinations, and the negotiation process to reach settlement payments will be covered to help explain how and why the IRC data evolved as it did.

Moderator/Panelist:
Richard A. Derrig, President, OPAL Consulting LLC
Panelist:
Adam Carmichael, Senior Research Associate, Insurance Research Council

Aviation Pricing and Modeling
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Traditionally Aviation exposures have been evaluated and priced only by brokers and underwriters. Is there enough information to utilize traditional actuarial techniques for pricing? There have been many models developed for "exposure rating" of major airline exposure. These models reside with insurers and with major aviation brokers.

This panel will discuss the Aviation product and techniques for modeling exposures for insurance and reinsurance companies. They will also talk about the current state of the Aviation marketplace and how things may be different post-9/11.

Moderator:
Michael A. Falcone, Chief Actuary, Global Aerospace
Panelists:
Matthew Maddocks, Underwriter, ACE Tempest Re, London
Kurt Maureder, Actuary, GE Insurance Solutions

Beyond Indications
Traditionally personal lines pricing actuaries have focused a lot on indicated rates and structures and left marketing analysis to other areas. More recently, actuaries have begun to focus more heavily on marketing considerations as well. This panel will discuss things like obtaining competitive data, performing competitive and impact analysis, modeling retention/conversion, and determining optimal prices.

Moderator:
Jonathan White, Assistant Vice President & Actuary, The Hartford
Panelists:
Peter Orlay, Director, Optimal Decisions Group
Geoffrey Werner, Senior Consultant, EMB America LLC

California Workers Compensation Update
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The initial returns are coming in following the passage of SB 899, and (believe it or not) the results look like this highly touted legislation is getting some traction. Three panelists will provide a perspective of what they are seeing in California workers compensation claims experience since this law was put on the books.

The panelists will share some industry trends that they are seeing in their most recent rate and reserve analyses. Taking a closer look to where the rubber meets the road, a claims manager for a large self-insurer will provide some background on how the legislative changes are being implemented in case reserving and settlements. Finally, some data and methodology adjustments will be presented, so that you can be better prepared to conduct ratemaking and reserving analyses on historical California workers compensation claims experience.

The end result will be a general better understanding of how this legislation is playing out and what you should be looking for in your own claims data.

Moderator/Panelist:
Roberta J. Garland, President, Garland Actuarial LLC
Panelists:
Joanne M. Ottone, Consulting Actuary, Towers Perrin
Katrina Zitnik, Director, Workers Compensation, Costco Wholesale

Caribbean Catastrophes and the Caribbean Market
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The 2004 hurricane season has opened eyes on the impact of catastrophes on the Caribbean. The predictability and accuracy of catastrophe modelling is in the forefront in the Caribbean today. Insurance and reinsurance companies are now re-visiting the level with which to rely on cat models. Cat modeling companies are now evaluating future enhancements to better capture the impact of catastrophes in the market.

The panel will discuss the predictability of the models with respect to the 2004 hurricanes, as well as recent and upcoming revisions to the catastrophe models to improve their overall reliability. The panel will also explore the Caribbean market, in general, including discussions on methodologies for setting rates and underwriting standards, reinsurance structuring, and the impact of catastrophes and catastrophe modeling on each of these items.

Moderator:
Stephanie Gould, Vice President, Guy Carpenter & Company, Inc.
Panelists:
Timothy Aman, Managing Director, Guy Carpenter & Company, Inc.
Laurie Johnson, Vice President, Technical Marketing and Catastrophe Response, RMS Inc.
Bryan Murphy, CEO, Island Heritage Insurance Company Ltd

COTOR's Loss Reserving from the Viewpoint of Modeling
This session will introduce a new class for practicing actuaries that is being sponsored by the Committee on the Theory of Risk. The committee plans to work with Regional Affiliates to present the class. The session will present an abbreviated version of the subject matter covered by the class.

Based on Gary G. Venter's paper "Testing The Assumptions Of Age-To-Age Factors", the class will explore the relationship of the chain-ladder method to mathematical models of the loss development process, including comparing and contrasting the assumptions in each. Following Venter's suggestions, the class will cover ways to test the reasonableness of a mathematical model of the loss development experience, and, implicitly, the reasonableness of the chain-ladder approach. Several lines of business will illustrate both reasonable and unreasonable models and methods. Participants will be able to keep the Excel workbooks they will use in the class, which include useful charts.

Moderator:
Louise A. Francis, Consulting Principal, Francis Analytics & Actuarial Data Mining, Inc.
Panelist:
Oakley E. Van Slyke, President, Capital Management Technology
Christopher J. Monsour, Consulting Actuary, Tillinghast

Discussion Draft on Reserving Principles
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A Discussion Draft of the proposed revision to the 1988 Statement of Principles Regarding Property and Casualty Loss and Loss Adjustment Expense Reserves was released to the CAS membership in March 2005. The Discussion Draft is the result of more than two years of work by the Task Force on Reserving Principles and its predecessor, the Committee on Reserves Task Force on Principles. The Task Force welcomes all feedback, comments, and suggestions on the Discussion Draft.

The panelists will provide an overview of the development of the Draft, summarize substantive changes between the 1988 Principles and the Draft, and invite your comments and discussion on the Draft.

Moderator/Panelist:
Bertram A. Horowitz, Chairperson, Task Force on Reserving Principles, President, Bertram Horowitz, Inc.
Panelists:
Aaron M. Halpert, Principal, KPMG LLP
Jon Michelson, Owner, Expert Actuarial Services, LLC
Thomas A. Ryan, Consulting Actuary, Milliman, Inc.
Deborah M. Rosenberg, Deputy Chief Casualty Actuary, New York State Insurance Department

Discussion of Loss Reserve Standard
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The Subcommittee on Reserving of the Casualty Committee of the Actuarial Standards Board has been working on a standard for reserve estimates. Members of the subcommittee will present the key components of the standard including a discussion on scope, analysis of issues and recommended practices. One of the goals of this session is to receive input from a broad group of actuaries to incorporate into the proposed standard. The standard is expected to be subject to the normal exposure process in the summer of 2005.

Moderator:
Raji Bhagavatula, Principal, Milliman USA
Panelists:
Ralph S. Blanchard III, 2nd Vice President and Actuary, Travelers Property Casualty Insurance Company
Mary Francis Miller, Select Actuarial Services

Enterprise Risk Management --the Present and the Future CAS
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Our centennial goal states that "CAS members will be recognized as the leading experts in the evaluation of hazard risk and the integration of hazard risk with strategic, financial, and operational risk." Said another way, casualty actuaries will be recognized as experts in enterprise risk management (ERM) quantification. But actuaries are not alone in their interest in ERM. There are many professional organizations around making moves in this dynamic, emerging space.

The CAS is taking steps to position ourselves. During its March 2005 meeting, the CAS Board approved joint sponsorship of a Risk Management Section with the SOA. The Joint Risk Management Section is similar to the existing CAS special interest sections Casualty Actuaries in Reinsurance (CARe) and Actuaries in Regulation (AIR) in that it brings together a group of interested members to study and discuss common professional interests and to contribute information on those interests to the profession through seminars and research projects. The Risk Management Section will focus on developing solutions to unsolved problems, communicating the value of actuaries in providing solutions, and educating actuaries to meet market demands.

This session will (i) provide an update on many ERM-related activities and organizations, including the COSO framework, PRMIA, GARP, ERMII, IAA and AAA task forces; (ii) explain the Joint Section in more detail: mission, scope, plans; and (iii) challenge the audience for their feedback, opinions and interest in volunteering for Joint Section committees.

Moderator:
Donald F. Mango, Director Research & Development, GE Insurance Solutions
Panelists:
James E. Rech, Vice President, GPW and Associates, Inc.
John Kollar, Vice President, Insurance Services Office, Inc.
CAS representative, Joint Risk Management Section Council

Estimating the Effect of Tort Reform on Medical Malpractice Costs
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Republican, Democrat, Libertarian, Green Party: medical malpractice tort reform is on everyone's agenda in 2005. Whether you are pricing, reserving, or preparing your financial plan, you need to be able to respond to the impending changes that federal and state legislation may be bringing.

The panel will provide an overview of the more common types of tort reform being proposed for medical malpractice, including:

• Award reductions (caps on non-economic damages and changes to joint & several statutes)
• Coverage restrictions (changes to contributory negligence, statutes of limitations, and punitive award limitations)
• Other changes (arbitration mandates, attorney fee limitations, collateral source offsets)

Moderator/Panelist:
Robert J. Walling, III, Principal and Consulting Actuary, Pinnacle Actuarial Resources, Inc.
Panelists:
Kevin M. Bingham, Senior Manager, Deloitte Consulting LLP
Richard B. Lord, Principal and Consulting Actuary, Milliman

From the Actuary's "Best Estimate Range" to "Management's Best Estimate." Which "X" Marks the Spot?
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Here is the situation. You've completed a reserve analysis. You've provided a point estimate. Management has indicated their desire to book the number "x", which is consistent with its business plan, but falls below your original point estimate. Management is asking for your "best estimate" range around your point estimate in the interest of assessing the reasonableness of "x".

This session is intended to offer practical approaches and considerations in determining "best estimate" ranges using actual examples of best practices in determining reasonableness. Discussions will center on defining "reasonableness" in light of our written standards of practice and attempt to answer:

• Given your estimation of the range, what standards do you now apply to "x"?
• Does every number within your range constitute a reasonable estimate to carry as "x"? How can you differentiate between reasonable range and total range?
• Are they the same?

As next year's requirements of a Company's Appointed Actuary call for disclosure of both reserve point estimates and reserve ranges in an actuarial opinion summary (AOS) report, these discussions are timely. We welcome audience participation, and views/opinions.

Moderator/Panelist:
Robert F. Wolf, Principal, Mercer Oliver Wyman
Panelists:
Roger M. Hayne, Consulting Actuary, Milliman USA
CK Stan Khury, Principal, Bass & Khury

Future of TRIA 2004
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The Terrorism Risk Insurance Act (TRIA) expires on December 31, 2005. With the deadline approaching, what should be and what will be the future of terrorism cover?

Is terrorism risk privately insurable? Should it be covered by the government only? Will TRIA remain in its current form?

The panelists will discuss the pros & cons of the current TRIA and discuss the likely scenarios after December 31, 2005 with their implications.

Moderator:
Benoit Carrier, Second Vice President, GE Insurance Solutions
Panelists:
Lloyd Dixon, Senior Economist, RAND Corporation
Glenn Pomeroy, Associate General Counsel : Government Relations, GE Insurance Solutions

2004 Hurricanes and 2005 Reinsurance Market
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Because of the "Big 4" in Florida, 2004 was another interesting year for hurricanes. Now that 2004 is over, we can look back at and evaluate some of the data from those hurricanes. The panel will examine the actual results and compare them to the hurricane model predictions. The panel will discuss the impact of the 2004 hurricane season on the 2005 reinsurance market and highlight techniques for companies to evaluate various alternatives.

Moderator/Panelist:
Thomas E. Hettinger, Managing Director, EMB America LLC
Panelists:
Randall E. Brubaker, Senior Vice President, Aon Corporation

Insurance Accounting for Actuaries
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This session addresses a major gap in the actuarial profession's continuing education. Instead of just going over the rules, this session will review the rationale behind the guidelines. For example, what is an accrual? What does it do and not do? Do larger reserves provide more financial protection?

Actuaries express strong opinions regarding how they view accounting guidance (which) does not allow the booking of margins) without full understanding of the financial protection, or lack thereof, of booking margins. Many of the arguments were raised 30 years ago and considered and rejected as misguided back when FAS 5 was promulgated.

Moderator:
Michael C.Dubin, Director, Pricewaterhouse Coopers LLP
Panelists:
Roger M. Hayne, Consulting Actuary, Milliman USA
Kevin L. Wick, Principal Consultant, PricewaterhouseCoopers LLP

Interaction With Underwriters
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In most companies, Actuaries and Underwriters have constant and considerable interaction on a day-to-day basis. In some companies, Actuaries are part of the Underwriting Department; in other companies, they are separate. Actuaries work with Underwriters in setting large vision strategies, help them with product filings, pricing and structure of large accounts (and occasionally customer visits), and even some teaching and presentations - to name a few.

This session provides a glimpse of some of the work interactions that occur between Actuaries and Underwriters. The panelists will give some insight into their successes and failures in working with the Underwriting process.

Moderator:
Christopher M. Norman, Actuary, United Services Automobile Association
Panelists: Brian Evans, Chief Underwriter, Individual Risk E & S, GE Insurance Solutions
John Herder, Senior Actuary, GE Insurance Solutions

Investment Principles - Session with the CAS Investment Committee
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Many actuaries are knowledgeable about modern portfolio theory and investment principles that are used daily by investment professionals. Yet, very few of us get a chance to apply these principles in real life, except maybe for our own investments.

This session will cover basic investment principles and how they can be used in an investment strategy. From there, members of the CAS Investment Committee will present a history of their Committee, some of the recommendations they have presented to the CAS Board over the last few years and some of their current activities.

All members are invited to come hear more about how the Committee operates, and how it manages CAS investable funds in excess of $4 million. The session will also discuss basic strategies that can be used to manage personal investment portfolios.

Moderator/Panelist:
François Morin, Principal, Towers Perrin
Panelists:
Curtis Gary Dean, Distinguished Professor, Ball State University
Todd Rogers, Director - Finance and Operations, Casualty Actuarial Society

Managing the Insurance Cycle
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What are the causes of insurance cycles?

Is it possible for insurance and reinsurance companies to make money through the cycles? Are cycles inevitable?

The panel will discuss these points, sharing their own experience and perspectives.

Moderator:
Benoit Carrier, Second Vice President, GE Insurance Solutions
Panelists:
Joseph A. Boor, Reserving Actuary, Florida Department of Financial Services
Harry Shuford, Chief Economist, NCCI

Predictive Modeling - Panacea or Placebo?
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The term "Predictive Modeling" has gotten a lot of visibility in CAS circles of late. It even got its own (very well attended) special interest seminar. Given that much of what actuaries do could be called predictive modeling, one could ask "What is different?" This session will describe the difference between the "New Predictive Modeling" and the "Old Predictive Modeling." Panelists will: (1) discuss what predictive modeling can and cannot do; (2) give examples of applications where the "New Predictive Modeling" gives superior results.

Moderator:
Glenn G. Meyers, Chief Actuary, ISO Innovative Analytics
Panelists:
Daniel Finnegan, President, ISO Innovative Analytics
Cheng-Sheng Peter Wu, Director, Deloitte & Touche LLP

Presenting Dynamic Financial Analysis Results to Decision Makers
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This session will summarize the work to date of the CAS Research Working Party on Executive Level Decision Making Using DFA. The panel of working party members will begin by reviewing their survey of past DFA presentations and will highlight slides or presentation techniques that work well when presenting DFA studies. A PowerPoint template for DFA presentations will be introduced followed by sample presentations that illustrate how the template can be applied. The panel will share their insights gained from their survey of DFA presentations and their own experiences.

Moderator:
Mark R. Shapland, Actuary, Milliman USA
Panelists:
Raju Bohra, Vice President - Client Modeling, American Re-Insurance Company
Michael R. Larsen, Working Party Chair, Property Consultant, The Hartford
Aleksey Popelyukhin, Vice President, Information Systems, 2 Wings Risk Services

Privacy of Information
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Increased access to computing and modeling technology has made the widespread use of data for analysis of risk and exposure more common and more likely. Often these models have made use of data that individuals felt was private information. Individuals have reacted to this use and perceived abuse of personal information by demanding greater restrictions on the uses and users of this data. This Panel will discuss whether the restriction on the use of data on the grounds of privacy protection could have profound effects on the ability of insurers to:

• Underwrite risks
• Build underwriting or scoring models
• Adjust claims or detect fraudulent activity in claims
• Correctly and adequately rate risks

In addition, under various information privacy and security laws insurance companies face a risk of potential liability for any breach of information privacy that may occur in their handling of data.

The panel will discuss the possible doomsday and real scenarios embodied in the current laws and proposed legislation.

Moderator:
Patrick B. Woods, Assistant Vice President & Actuary, Insurance Services Office, Inc.
Panelists:
Jon Neiditz, Of Counsel, Lord, Bissell & Brook LLP
John B. Storey, CISSP, Director and Chief Information Security Official, Insurance Services Offices, Inc.

Reinsurance: Recycled or Reinvented?
Is there anything new under the sun for Reinsurers? Are we just taking another lap around a circular racetrack and repeating the underwriting cycle yet again? Is it possible to get off the treadmill? What skills, tools, techniques and disciplines will it take to reinvent Reinsurance?

To answer these and other questions important to Reinsurers and others, a panel of seasoned reinsurance executives will share their own unique perspectives on these topics.

Moderator:
Nolan Asch, Principal, Insurance Services Office, Inc.
Panelists:
Craig Johnson, President, Signet Star Reinsurance Company
Michael G. Wacek, President, Odyssey America Reinsurance Corporation

The State of Construction Defects
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It's been almost 9 years since the Montrose case and 8 years since the Stonewall case which opened the flood gates for construction defect claims. The insurance industry reacted by revising CGL policies, tightening underwriting guidelines and restricting coverage. Despite the passage of years and the hindsight changes in coverage, construction defect claims continue to emerge, including a notable surge in 2003. Like other mass tort issues, construction defect remains a current topic relevant to the many companies who wrote general liability coverage for construction risks throughout the 1990's.

Key states have statutes of limitations ranging from 6 years to 10 years after construction is finished. At almost 9 years out, with some statutes starting to run, we can get a better handle on how to estimate the ultimate losses and what effect the remediation measures have had on the losses.

The panel will discuss claim characteristics, settlements and awards, evolving reserving and adjusting practices, the frequency and severity of claims, data segmentation, actuarial techniques for estimating ultimate losses and potential future issues.

Moderator/Panelist:
Ronald T. Kozlowski, Principal, Towers Perrin
Panelist:
Paul Swank, Senior Claims Consultant, Towers Perrin

Terrorism Modeling
Terrorism modeling has been through different stages since 9/11.

The two panelists will discuss their company's approach to terror modeling, taking account of the latest events.

Moderator:
Rhonda K. Aikens, Second Vice President, GE Insurance Solutions
Panelists:
Francois Dagneau, SVP, AON Re Canada Inc
Timothy Tetlow, Senior Vice President Global Reinsurance, Axis Specialty Limited, Bermuda

Update on a Global Risk Based Capital Standard
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Acting in support of the International Association of Insurance Supervisors (IAIS) in its initiative on developing a global framework for risk-based capital for insurers, the Insurance Regulation Committee of the International Actuarial Association (IAA) formed the Insurer Solvency Assessment Working Party in early 2002 to prepare a report on insurer solvency standards. The Report of the Working Party was completed in late 2003 and represents the culmination of that mandate. (Note- the report can be downloaded from the IAA website). In the course of its mandate, the Working Party presented its work to various insurance supervisory and actuarial meetings. Feedback from these presentations has been both positive and constructive.

In the course of its mandate, the Working Party presented its work to various insurance supervisory and actuarial meetings. Feedback from these presentations has been both positive and constructive. This session will discuss the critical components of the Working Party's recommendations while balancing its focus between practical and sophisticated methodologies, with greater weight on those methodologies with the greatest likelihood of practical implementation. Audience participation and discussion is strongly encouraged.

Moderator:
Robert F. Wolf, Principal, Mercer Oliver Wyman, Inc.
Panelists:
Glenn G. Meyers, Chief Actuary, ISO Innovative Analytics
Nino Savelli, Associate Professor, Catholic University of the Sacred Heart

What Is The Next Asbestos?
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Is there another mega exposure like asbestos lurking in the dark for the Insurance Industry? Each year the estimate of the ultimate cost of asbestos claims continues to grow. Given that asbestos was not considered a significant exposure initially, what other exposures loom over the industry.

Will the next mega exposure be pharmaceutical drugs that may cause heart problems? How about silica or mold? Is cyber crime a significant exposure?

How do insurers forecast and deal with these changing exposures? What are actuaries and underwriters doing to analyze and mitigate these exposures? The panel will discuss emerging exposures and offer their opinion as to their likely impact on the P&C Industry.

Moderator:
James Larkin, Chief Actuary, Broker Market, American Re-Insurance Company
Panelist:
Bonnie L. Boccitto, Senior Vice President, American Re-Insurance Company
John P. Yonkunas, Principal, Towers Perrin

Why do Specialty/Niche Companies Outperform Their Peers?
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This session studies the issues around whether Specialty Companies do actually outperform their larger multi-line competitors, and if so, how do they do it? What advantages do these companies have that their larger competitors don't have?

What are the drivers behind their performance? Better data, more concentrated customer focus, and more specific underwriting knowledge of their customers are all possible explanations. Or instead of any knowledge based explanations, do some companies simply have a "reputation as experts" and can charge however much they want?

Moderator:
David C. Snow, Managing Actuary, GE Insurance Solutions
Panelists:
Gary R. Josephson, Consulting Actuary, Milliman, Inc.
Michael F. McManus, Senior Vice President & Chief Actuary, Chubb Group of Insurance Companies
Kenneth Quintilian, Vice President and Chief Actuary, Medical Liability Mutual Insurance Company

Discussion Paper Program
Risk Measurement in Insurance
A guide to risk measurement, capital allocation and related decision support issues
by Paul Kaye, Benfield ReMetrics - Risk Consultancy
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Risk measurement provides fundamental support to decision making within the insurance industry. In spite of this, the limitations of the common measures are not well appreciated and there is little non-specialist awareness of the more powerful techniques. The published material on risk measurement is strong and has developed significantly in recent years. However, it is fragmented and is not always in a form that is accessible to many industry practitioners. Also, notwithstanding the theoretical merits or otherwise of different techniques, many practical attempts to measure risk can be compromised by inappropriate use and interpretation. This paper aims to give an accessible overview of the full range of risk measurement and allocation techniques, critiquing both technical properties and practical considerations. A simple example is used throughout the paper to help illustrate the various measures and methods, with values being calculated using stochastic simulation.

Modeling the Solvency Impact of TRIA on the Workers Compensation Insurance Industry
by Harry Shuford, National Council on Compensation Insurance
Jonathan Evans, National Council on Compensation Insurance
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The enterprise in a rating bureau risk model is the insurance industry. This paper describes how statewide or national loss exceedance curve output from a catastrophe model for workers compensation losses from terrorist attacks can be combined with insurance industry financial data in a basic model to estimate the financial impact on the United States workers compensation insurance industry. Many different metrics of impact on the industry are calculated for different percentile levels for the loss size of a single terrorist attack. The model is run with and without consideration of recoveries to insurers from the Terrorism Risk Insurance Act (TRIA) in order to assess the impact of this law on industry solvency. Qualitative results that indicate that TRIA does provide a very high level of protection to the industry are discussed.

Proceedings Paper Presentations
"Riskiness Leverage Models"
by Rodney E. Kreps
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"A general formulation of risk load for total cash flows is presented. It allows completely additive co-measures at any level of detail for any dependency structure between random variables constituting the total. It is founded on the intuition that some total outcomes are more risky per dollar than others, and the measure of that is a "riskiness leverage ratio." This riskiness leverage function is an essentially arbitrary choice, enabling an infinite variety of management attitudes toward risk to be expressed.

The complete additivity makes these models useful. What makes them interesting is that attention can be turned toward asking "what is a plausible risk measure for the whole, while being prepared to use the indicated allocation technique for the pieces?" The usual measures are special cases of this form, as shown in some examples.

While the author does not particularly advocate allocating capital to do pricing, this class of models does allow pricing at the individual policy clause level, if so desired.

Further, the desirability of reinsurance or other hedges can be quantitatively evaluated from the cedant's point of view by comparing the increase in the mean cost with the decrease in capital cost from reduction of capital required."

"An Examination of the Influence of Leading Actuarial Journals"
by L. Lee Colquitt

The relative significance of research published in eight actuarial journals is evaluated by examining the frequency of citations in sixteen risk, insurance, and actuarial journals during the years 1996 through 2000. First, the frequency with which each sample risk, insurance, and actuarial journal cites itself and the other sample journals is provided so as to communicate the degree to which each journal=s published research has had an influence on the other sample journals. Then the sixteen risk, insurance, and actuarial journals are divided into two groups; 1.) the actuarial journal group and 2.) the risk and insurance journal group. The actuarial journals are then ranked based on their total number of citations including and excluding self-citations. Also, a ranking of journals within the actuarial journal group is provided based on the journals influence on a per article published basis. Finally, the most frequently cited articles from the actuarial journals are observed and reported.