2006 Seminar on Reinsurance Handouts

These handouts are available in their original Power Point Presentation format. If you do not have Power Point on your computer, you will need to download the free Power Point Viewer, which is a 2.8 MB file.

Some of the handouts are Portable Document Format (PDF) files. The files were created using Adobe Acrobat. To view the documents, you need the Acrobat Reader. For more information, read the Adobe Frequently Asked Questions. To download the free Acrobat Reader, click the icon below.

If a session handout is not online, unfortunately it was not submitted by the speaker and is not available.

---

I. 2005-A Year in Review
This panel will review the tumultuous past year in the industry. They will begin with a review of the pre-Katrina underwriting and competitive environment. They will then review the devastating impact of the three hurricanes, the lessons learned from these events, and the subsequent flow of capital into the industry. Finally, they will discuss their views of the underwriting environment in 2006 and how they see the market evolving over the next year.

Moderator:
Michael E. Angelina, Chief Actuary, Endurance Specialty Holdings Ltd.
Panelists:
Kenneth J. LeStrange, Chairman, President and Chief Executive Officer, Endurance Specialty Holdings Ltd.
Rod Thaler, Executive Vice President and National Director, Willis Re

II. 2005-A Year in Review-The External Focus
This panel will review the events of 2005 and their impact from an outside perspective, including the rating agencies, capital markets, and modelling vendors. An analyst from one of the rating agencies and an investment firm will discuss how their view of capital requirements and other rating criteria has changed for existing companies as well as the new start-ups.

We will also hear from one of the modelling vendors and how their view of hurricane frequency, severity, and other loss modelling has changed with the new models released in late May.

Moderator:
Michael E. Angelina, Chief Actuary & Chief Risk Officer, Endurance Specialty Holdings, Ltd.
Panelists:
Damien Magarelli, Director, Standard & Poors
Peter Nakada, Managing Director, RMS Consulting
TBD

Beyond Capital Allocation
Actuaries spend a lot of time discussing the many ways of allocating capital. Modern finance theory makes clear that capital allocation is sufficient but not necessary for pricing. In fact, many financial pricing approaches do not even use capital allocation.

This session will present two alternative approaches. Don Mango will discuss his November 2005 ASTIN paper "Insurance Capital as a Shared Asset." This paper uses the theory (from property rights) of common pool resources to develop a more realistic understanding of the two distinct ways capital is used by an insurer. Richard Goldfarb will then present ideas from his working paper "The Evolution of Insurance Pricing." Richard unifies insurance pricing techniques and many well known financial techniques in a single comprehensive framework known by many names: stochastic discount factors, state price densities, deflators, or pricing kernels.

Moderator:
Ira Robbin, Senior Pricing Actuary, PartnerRe
Panelists:
Donald F. Mango, Senior Vice President, Guy Carpenter & Company Inc.
Richard S. Goldfarb, Senior Manager, Ernst & Young LLP

Capital Markets Focus: The Reinsurance Capital Cycle
The past 20 years have seen four notable periods of the entrance of new capital into reinsurance markets. The panelists will compare and contrast the cycles, including the state of the reinsurance market immediately prior to the capital infusions, notable events, market participants and their expectations at investment. The events of 2005 and the subsequent capital raising will be discussed and will include discussion on sidecar vehicles and securitizations.

Moderator:
Anne Petrides, Haverford Capital Partners/Meetinghouse LLC
Panelists:
Jeffrey Cohen, Principal, Stone Point Capital
Michael Millette, Managing Director, Goldman Sachs

Catastrophe Modeling
Catastrophe models have developed tremendously in the last ten years. How far have we gotten? What mistakes have we made? What are we doing about them? What did we learn in 2004 and 2005? The panel will discuss elements of the models as viewed from a variety of positions. We will have speakers from regulation, reinsurance, and (we hope) the primary side. We all should be aware, and some of us are probably actively involved in, catastrophe modeling. Let's all try to learn more and provide some direction for the future.

Moderator:
TBD
Panelist:
Harvey A. Sherman, Actuary, Swiss Reinsurance America Corporation

Ceding Company Considerations
Download Handout 1
Download Handout 2
Download Handout 3
Besides the ceded premium and ceded loss, there are many other issues that ceding companies consider when purchasing a treaty. For example, judging broker and reinsurer service quality, reinsurance and risk management expertise, structuring advice, data work and technology, catastrophe modeling, security criteria and valuation, ratings agency assistance, loss payment and collection, market access, and so on. The panelists will discuss approaches to evaluating these considerations in the reinsurance purchase decision.

Moderator:
Timothy Paul Aman, Managing Director, Guy Carpenter & Company Inc.
Panelists:
William J. Blatcher, Financial Actuary, AEGIS Insurance Services
Wanchin W. Chou, Assistant Vice President and International Actuary, Liberty International
David M. Flitman, Chief Actuary, Flagstone Re

Environmental Liability
Download Handout 1
Download Handout 2
Download Handout 3
This session will present an overview of Environmental Liability from both underwriting and actuarial perspectives. The session will cover the origins and development of the market, common coverages, data issues, and current actuarial approaches to pricing and reserving.

Moderator:
Gerard J. Palisi, Vice President and Actuary, Swiss Reinsurance America Corporation
Panelists:
Peter J. Schultheiss, Vice President, Zurich North America
Robert Weireter, Associate Product Line Manager, Swiss Reinsurance America Corporation

ERM: Rating Agency & Asset/Investment Issues
Download Handout 1
Download Handout 2
Download Handout 3
This session will discuss several important issues in effective Enterprise Risk Management (ERM):

• S&P and other rating agencies have recently announced new initiatives to assess companies' ERM practices as part of the ratings process. David Ingram will give an overview of S&P's new initiative and how companies will be assessed in five key areas: risk-management culture, risk controls, extreme-event management, risk and capital models, and strategic risk management. Asset and investment issues will also be discussed.
• Asset allocation and other investment issues in ERM will be discussed by Jim Bachman of New England Asset Management and Richard Goldfarb of Ernst & Young.

Moderator:
James M. Maher, Chief Research Officer, Platinum Underwriters Reinsurance, Inc.
Panelists:
James Bachman, Vice President, General Re-New England Asset Management
Richard Goldfarb, Senior Manager, Ernst & Young LLP
David Ingram, Director, Enterprise Risk Management, Standard & Poor's

Experience Rating
This session is aimed at actuaries who are new to reinsurance or other nonactuarial insurance professionals. It will cover the basic steps involved in experience rating treaties as well as procedures for credibility weighting the experience and exposure rating methods. It will also address some complications that often arise such as a shift over the years in the mix of business or the policy limit distribution.

Panelist:
James C. Sandor, Vice President and Actuary, American Re-Insurance Company

Exposure Rating: Unique Applications
Download Handout 1
Download Handout 2
Download Handout 3
This session will review some nonstandard applications of exposure rating. The first speaker will discuss how she used the ISO ILF curves to build a model that reviews the adequacy of client umbrella pricing on an individual account basis. Our next speaker will discuss the workers compensation excess of loss model that he has constructed. One of the model's key features is that it varies indicated excess factors in a more refined manner than the standard four hazard groups approach. The final speaker will discuss how he used the statistics provided in the recent Surety Association of America contract loss severity study to build an exposure rating model for that business.

Panelists:
Jose R. Couret, Senior Vice President, Guy Carpenter & Company Inc.
David J. Curtis, Endurance Reinsurance Corporation of America
Halina H. Smosna, Vice President and Senior Pricing Actuary, Endurance Reinsurance Corporation of America

Marine/Aviation
Download Handout 1
Download Handout 2
Download Handout 3
This session will present an overview of marine and aviation business from an underwriting and actuarial perspective. The session will cover data issues and current actuarial approaches to pricing, including applications of experience rating, exposure rating, and catastrophe modeling.

Moderator:
Timothy Paul Aman, Managing Director, Guy Carpenter & Company Inc.
Panelists:
Lee Tookey, Marine & Aviation Underwriter, Aspen Re.
Michael W. Mahoney, Senior Underwriter, GE Insurance Solutions,
Steven Searle, Senior Vice President, Guy Carpenter & Company Inc.

Miscellaneous E&O
This session will address some of the recent developments in miscellaneous errors and omissions insurance. The panelists represent a diverse set of views: primary company, reinsurer, and broker. They will discuss emerging issues for the more traditional lines as well as explore newer coverages. The session will also address pricing considerations for this line: severity and frequency trends (past, present, and future), uncertainty in trend estimates, benchmarks, loss development patterns, and more.

Moderator:
Giuseppe Russo, Senior Vice President and Chief Actuary, ACE Tempest Re USA
Panelists:
David Schoenrock, Managing Director, Errors & Omissions Liability, Guy Carpenter & Company Inc.
Michael Smith, President Professional Liability, National Union Fire Insurance Company of Pittsburgh
Thomas M. Smith, Vice President and Managing Actuary, PartnerRe U.S.

Parameter Risk—Where Does It Come From and Why Do We Care?
Download Handout 1
Download Handout 2

Is parameter risk simply the variance of the hypothetical means or is it all the risk we cannot model? Maybe it's something in between. Maybe it's something we can model; at least to the extent quantification is needed. Maybe not. In any case, there's probably a lot more of it than you realize.

The panel will discuss these and related issues. Find out more or tell us more at this session.

Moderator:
TBD
Panelist:
Spencer M. Gluck, Sr. Vice President, Guy Carpenter Instrat

Prediction of Hurricane Frequency and Intensity
Download Handout 1
Download Handout 2
Prediction of Hurricane Frequency and Intensity The last two Atlantic hurricane seasons have been much more active than average. In addition, a large number of land falling intense hurricanes in 2004 and 2005, resulted in substantial insured losses.

The first panelist will explore the driving factors for the track, intensity and frequency of the last two years. In addition, he will give insight to their methodology and predictive skill of their forecasts, as well as how the insurance industry can incorporate this in the modeling of expected losses.

The second panelist will explain the long term changing of the climate, such as global warming. He will also explain how these changes impact hurricane activity.

Moderator:
Sean R. Devlin, Chief Actuary - Direct Reinsurance, GE Insurance Solutions
Panelist:
Thomas R. Knutson, Research Meteorologist, National Oceanic and Atmospheric Administration
Dail Rowe, Ph.D., Senior Research Scientist and Scientific Operations Manager, Accurate Environmental Forecasting, Inc.

Pricing/Quoting Differences Among Reinsurers
For many treaties, the difference in the quoted rates offered by the reinsurance marketplace is often fairly extreme. What is the driver behind this? Is there a significant variation in loss picks amongst reinsurers? Are their pricing targets radically different? Is the strict pricing analysis similar across companies, but there is greater management override at some reinsurers? Is it a combination of these reasons or perhaps something else? How are some reinsurers, which often quote rates of only half of what others offer, able to survive over the long term? This session will be a roundtable discussion of three actuaries who will share their insights and observations based on their careers at numerous companies.

Moderator:
Daniel Kamen, Vice President, Folksamerica Reinsurance Company
Panelists:
David M. Flitman, Chief Actuary, Flagstone Re
Elizabeth E. L. Hansen, Managing Director, Guy Carpenter & Company Inc.
Bryan C. Ware, Chief Pricing Actuary, American Re-Insurance Company

Reinsurance Research Corner
Download Handout 1
Download Handout 2
Hosted by the CAS Reinsurance Research Committee, the Research Corner is a forum to present preliminary reports on works in progress or recently completed. Research Corner participants can pose new problems and demonstrate innovative practical approaches. Individual investigators as well as representatives of research working parties and other groups are encouraged to participate. There is no need to preregister-"walk in" speakers are most welcome, though advance notice is appreciated whenever possible. Speakers should plan on having ten to fifteen minutes to make their presentation. Attendees who would like to present their work during this session are invited to contact the moderator at robingillam@earthlink.net

Moderator:
Robin Gillam, Consultant, Quality Casualty Consulting

Riskiness Leverage Models
Download Handout 1
Download Handout 2
Rodney Kreps won the 2005 CAS Dorweiler prize for his paper "Riskiness Leverage Models." These models are a general formulation of risk load for total cash flows, allowing completely additive co-measures at any level of detail for any dependency structure between random variables constituting the total. They are 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 essentially an arbitrary choice, enabling an infinite variety of management attitudes toward risk to be expressed. Because of this flexibility, these models are of particular interest to reinsurers.

In this session, Dr. Kreps will present his paper, and Robert Bear will present his discussions of this paper and a related paper by Donald Mango on "Insurance Capital as a Shared Asset." An approach to integrate desirable properties of the two methods will also be presented.

Moderator:
Paul J. Brehm, Senior Vice President, Guy Carpenter & Company Inc.
Panelists:
Rodney E. Kreps, Managing Director, Guy Carpenter & Company Inc.
Robert A. Bear, Consulting Actuary, RAB Actuarial Solutions LLC

Risk Transfer Issues
Risk transfer has been a headline topic over the last year. This session will discuss some ideas regarding how to define and test for risk transfer in short duration reinsurance contracts as required by FAS 113 and SSAP 62. A summary of the report prepared by the CAS Research Working Party on Risk Transfer Testing will be presented along with a discussion by accounting professionals.

Moderator:
Brian Z. Brown, Consulting Actuary, Milliman Inc.
Panelist:
John G. Aquino, Executive Vice President, Benfield Group
Peter M. Licht, Managing Director, PricewaterhouseCoopers, LLP

Treaty Pricing-Other Issues
Besides the mechanical exercise of running a cedant's data through pricing models, actuaries must consider many other issues when pricing a treaty. For example, are the cedant's goals in sync with those of the reinsurer? Where does binding authority lie? Booking authority? How does this affect the analysis and the decision to write the deal? Does the actuary participate in the underwriting audits, and how might this influence the process? Given the attributes of the ceding company, does the treaty structure make sense? Is the cedant an opportunistic buyer? This roundtable discussion will focus on these and other issues that pricing actuaries contemplate as they navigate through the process of analyzing potential treaties.

Moderator:
Daniel Kamen, Vice President, Folksamerica Reinsurance Company
Panelists:
Jeffrey Dollinger, Senior Vice President, Endurance Reinsurance Corporation of America
Alice Underwood, Senior Vice President, Willis Re
Barry C. Zurbuchen, Senior Vice President and Chief Pricing Actuary, Allied World Assurance Company

Umbrella and Excess Liability
Download Handout 1
Download Handout 2
Download Handout 3
This year's session will focus on understanding and quantifying price movement in umbrella and excess liability. Panelists will discuss the issues that make price monitoring particularly difficult for these lines, reasonable benchmarks for new business, actuaries' responses to these challenges. The session will include perspectives of reinsurance actuaries, as well as actuaries from umbrella/excess insurers.

Moderator:
Gerard J. Palisi, Vice President and Actuary, Swiss Reinsurance America Corporation
Panelists:
Anup Seth, Chief Actuary, ACE Bermuda Insurance Ltd.
Jason A. Kundrot, Senior Actuary, GE Insurance Solutions

Workers Compensation
Download Handout 1
Download Handout 2
Covering two topics related to workers compensation insurance, this session panel will first discuss new methodologies and other changes recently implemented by the NCCI and their potential impacts on the analysis of workers compensation excess of loss treaties. Second, the session panel will explore a new approach to reserving for workers compensation excess of loss treaties.

Moderator:
David Na, Consulting Actuary, Towers Perrin
Panelists:
Daniel R. Corro, Senior Research Consultant, National Council on Compensation Insurance
Gregory J. Engl, Actuary, National Council on Compensation Insurance
Michael B. McKnight, Chief Actuary Reinsurance, Max Re, Ltd.