Casualty Actuarial Society Reinsuring Small Regional Companies November 12, 2007 Tim Madden Business Leader – Swiss Reinsurance.
Download ReportTranscript Casualty Actuarial Society Reinsuring Small Regional Companies November 12, 2007 Tim Madden Business Leader – Swiss Reinsurance.
Casualty Actuarial Society Reinsuring Small Regional Companies November 12, 2007 Tim Madden Business Leader – Swiss Reinsurance Agenda Definition of Regional Company Profile of Regional Company Marketplace Segment Appeal to Reinsurers Underwriting Challenges Expert Services Summary Regional Company Definition Limited Geographic Focus Traditional Product Offerings Independent Agency or Exclusive Sales Force Mutual or Stock Company Profile Outwards Reinsurance Consistency Regional Company Marketplace 2005 Data DWP - $107 Billion Ceded Premium - $12.9 Billion Number of Ceding Companies - 506 Ceded Premium < $10 Million - 308 Companies - Aggregate Ceded Premium - $900 Million Ceded Premium > $10 Million - $25 Million - 88 Companies - Aggregate Ceded Premium - $1.5 Billion Segment Appeal to Reinsurers Consistent Buying Philosophy Traditional Lines in Well-Defined Market Consistent Business Plan Execution Stable Operating Results Business Partnership Underwriting Challenges Data Limitations Concentration - Product Offerings - Geographic Attitude Towards Change Constraints - Rating Agency - Regulatory - Capital Expert Services Strong Reinsurer Ratings are Critical Commitment to Provide Technical Support - Underwriting, Claims, Actuarial, Regulatory, Legal, IT, Risk Management, etc. Value-Added Intellectual Property - Publications, Webinars, Client Forums, Education Platform, Market Research Risk Management Solutions - Customized for Regional Segment Needs High Touch Point, Expensive to Service Conclusion “Small” Companies Represent - Approximately 80% of Company Count - Approximately 20% of Ceded Premium Stable Segment of Industry Relationship Oriented Reinsurance Needs - Need to Differentiate Data Quality Issues Commitment to Expert Service Delivery Reputation as a Market for Regional Business – Consistency is Key! REINSURING SMALL REGIONAL COMPANIES November 12, 2007 The Ceding Company's Perspective Larry Seymour, FCAS SO YOU WANT TO BUY SOME REINSURANCE… How, What, Where, When, Why… Multiline, CAT’s, Terrorism, Clash, Baskets, Reinstatements… Uggghhhh! FINDING A BROKER OR OTHER REINSURANCE INTERMEDIARY A broker … Has been there, done that Knows the current market conditions Know your book and which reinsurers like it Knows the contract wording BROKER CLIENT DISCUSSIONS Why buy reinsurance? What is your risk tolerance? Is capacity an issue? What limit, what retention? Probability of ruin? Structure: Quota Share,Excess? Combined lines treaty? Carve out LOB's (WC, umbrella, etc)? TRANSPARENCY Consider the potential bias of a product based on "commissions" Am I paying too much or buying too much? Go broker shopping every X years The broker universe is smaller than you think Be fair and never burn a bridge DATA IS KING There is no such thing as too much data There is no such thing as too much data There is no such thing as too much data DATA DATA DATA Provide all data requested by Broker Premiums, losses, rates changes, LCM's Loss ratios, frequency, severity Large losses, CAT’s Proforma's, terrorism take up rates Loss development triangles THE DATA MUST HAVE’S… WC --> Class code, hazard group, zip code, location Property --> Exposures by location address Liability --> Limits profiles Umbrella --> Excess, monoline, auto exposed Auto --> Type of use, weight, limits OTHER ITEMS TO SHARE WITH YOUR BROKER… Exposure rate or experience rate? The "but for" exclusions, runoff business New endeavors, new lines, new states, new agents 1 in 100; 1 in 250; 1 in 500? LAKE WOBEGON SYNDROME (GARRISON KEILLOR) The place where every kid is above average Every insurance company is also above average Convince your broker why you are above, above average DEAL WITH THE FACTS But don’t be afraid to be an optimist Above the hurricane I'm sure the sun is shining UNDERWRITING AUDITS Develop relationships with reinsurers Confirm your u/w standards Confirm consistency Resolve unanswered questions Eye to eye contact with the price setter LET THE NEGOTIATIONS BEGIN… Explore various retentions, layers, exclusions, etc. Contract wording has value as well ROL (Rate On Line) A simple way to compare quotes 11/6/2015 21 WHICH QUOTE IS BETTER? Ex: $100M DWP: 5.0M xs 1.0M @ 6% DWP 5.0M xs 1.5M @ 5% DWP Should you pay an extra $1.0M to drop down to a $1.0M attachment? Do you expect 2 losses > $1.5M per year? WHAT ABOUT REINSTATEMENTS? is always better, right? Just like lunch, there is no such thing as a free reinstatement Get quotes with and without to determine the value WHAT ABOUT CONTRACT LANGAUGE? Reinsurers exclude areas they have seen problems Nuclear, Pollution, Pharmaceuticals, War Special acceptances Incidental exposures Time per occurrence: 72 hours,144 hours? Terrorism: NBC, Federal backstop Commutation agreements A TISKET, A TASKET WHAT IS A BASKET? Basket Retention If a covered loss on a multi-line treaty spans over Property AND Casualty then it will be subject to only one retention. Ex: Fire caused by employee with customer losses Find out the cost of this coverage and then decide. CARVE IT OUT? Work Comp or Umbrella can be carved out of a treaty and handled by a specialty reinsurer Occasionally the sum of two treaties can be less than the whole Contrary to diversification strategies, but can work FIRM ORDER PRICING Tells the reinsurers the price to play or go home. If 100% subscribed in a day then price too high. If 10% subscribed in a week then price too low. If 90% subscribed in a week, then just about perfect. FINALLY… Settle on price, settle on wording Sign some contracts settle on terms, C25: Reinsuring Small/Regional Insurers Eric Arnst Vice President and General Manager Hannover Re Services USA, Inc. Email to: [email protected] Casualty Actuarial Society Chicago, 12th November, 2007, 1.30-3.00 PM INTRODUCTION About Hannover Re Regional Companies – a meaningful part of an overall portfolio Appeals of regional companies Various Challenges with regional companies Hannover Re specific concerns with regional companies The Hannover Re appreciation for regional companies 1 About Hannover Re WE ARE AMONG THE TOP REINSURERS IN THE WORLD and are consistently among the most profitable reinsurers 4th largest Reinsurer worldwide with Gross Premiums written of $ 12.265 bn (behind Swiss Re, Munich Re and Berkshire Hathaway). • Policyholder Surplus as of June, 2007 $ 6.823 bn • Return on equity 19.9 % (target > 15% p.a.) US is the largest market for Hannover Re (ca. 40% of overall writings) • We transact all lines of non-life and life and health reinsurance We are a Broker Market Reinsurer in the US Very strong Ratings by the agencies most relevant to the insurance industry: • AM Best's: "A" (stable Outlook) / Standard & Poor's: "AA-" (stable Outlook) Hannover Re is a Trusteed Reinsurer in 50 U.S. jurisdictions (except for Louisiana) • 2 US P&C Treaty Reinsurance of $1.257bn (expected in 2007) / US Non life Reinsurance in total of $2.4bn (2006) Master U.S. Reinsurance Trust domiciled in New York. As of Dec 31, 2006, invested assets in the Trust were almost $3 billion. Local Presence by Hannover Re Services USA, Inc. located in Illinois Regional Companies as a potential growth segment A MEANINGFUL PART OF AN OVERALL PORTFOLIO U/W Year 3 Written Premium Change 1995 32,107 1996 29,198 -9.1% 1997 36,209 24.0% 1998 35,092 -3.1% 1999 32,903 -6.2% 2000 42,213 28.3% 2001 76,600 81.5% 2002 95,998 25.3% 2003 153,132 59.5 2004 152,977 -0.1 2005 164,096 7.3 2006 147,363 -10.2 METHODS TO DIVERSIFY (in million USD) Category 4 Premium distribution Groups/Cedents Sum of Prem Percentage National 29 791 63% Super-regional 40 138 11% Regional 236 147 12% Monoline 107 177 14% 412 1253 100% Monoline 14% Regional 12% Superregional 11% National 63% Appeals of Regional Companies REGIONAL COMPANIES IN PARTICULAR CAN ENLARGE their capacity by buying reinsurance Regional companies need their reinsurers Loyal buying behaviour/partnership with reinsurers Predictable casualty results (property could be different due to natural catastrophes) Mostly standard lines Very conservative underwriting approach, few changes You always deal with the same people 5 VARIOUS CHALLENGES WITH REGIONAL COMPANIES Data quality often insufficient to do exposure or experience analysis • therefore Brokers are important to support company Vulnerable to natural catastrophes, since focused on one region • therefore we need to participate in all program parts to be able to balance our results Challenges from: 6 • Rating Agencies • Regulatory • Legal + capital issues HANNOVER RE SPECIFIC CONCERNS / REQUESTS In umbrella business we need a certain balance (liability vs. premium) to be able to pay total losses Lack of umbrella balance can be overcome by writing other parts of the program Essential information must be available otherwise our pricing models do not work We have to be very creative with regional companies 7 THE HANNOVER RE APPRECIATION FOR REGIONAL COMPANIES long standing relationships going back to the 70's 8 We regard them to be our core group of clients We value regional companies as reliable and stable partners and provide consistent pricing through the cycles We make every effort to visit existing regional clients regularly even if located in remote areas We provide special services to regional cedants upon request: • Underwriting- and claims audits • Peer analysis • Have a great understanding of their needs • Provide long term commitments We are member of the NAMIC We generally write larger lines on regional companies than on national companies We like regional exposures to balance/ diversify our book of business We have lower data standards for smaller regional companies than for large national companies Hannover Re's Peer Study about regional companies STRONG LONG TERM RELATIONSHIPS ARE THE RULE not the exception Group figures Cedent 1 Cedent 2 Cedent 3 Cedent 4 A+ A+ A A 30/70 30/70 35/65 10/90 since '94 since '87 since '91 since '86 Premium with Hannover Re $8.0m $8.0m $1.6m 6.7m Company Ceded Re Premium '06 $185m $105m $114m $105m 4.3% 7.7% 1.4% 6.4% 56.1% 50.0% 37.5% 23.0%** Do we participate in all Program Parts? yes yes no* yes Loyal Buying behaviour? yes yes yes yes HR internal categorization A A/B A A Frequency of contacts in 2006 3 1 1 3 yes no no yes AM Best Rating Split Personal/ Commercial Relationship with Hannover Re % ceded Premium to HR Overall Result (before IBNR) Ever visited Hannover *only Property per Risk and Casualty Clash **large Katrina losses 9 Thank you for your attention! DISCLAIMER The information provided in this presentation does in no way whatsoever constitute legal, accounting, tax or other professional advice. While Hannover Rückversicherung AG has endeavoured to include in this presentation information it believes to be reliable, complete and up-to-date, the company does not make any representation or warranty, express or implied, as to the accuracy, completeness or updated status of such information. Therefore, in no case whatsoever will Hannover Rückversicherung AG and its affiliate companies be liable to anyone for any decision made or action taken in conjunction with the information in this presentation or for any related damages. © Hannover Rückversicherung AG. All rights reserved. Hannover Re is the registered service mark of Hannover Rückversicherung AG. 10 2007 CAS MEETING C25: Reinsurance For Regional Companies November 12, 2007 Linda C. Johnson Executive Vice President Benfield [email protected] 952.886.8093 Table of Contents Page 1 What Should Be Considered Before Purchasing Reinsurance? 3 2 What Factors Influence the Price of a Specific Reinsurance Program? 14 3 What Should Be Expected of a Reinsurance Broker? 19 4 What is the Role of the Insurance Actuary in the Reinsurance Placement Process? 22 What Should Be Considered Before Purchasing Reinsurance? What Should Be Considered Before Purchasing Reinsurance? 1. Why is the Reinsurance Being Purchased? 2. What Risk is Intended to Be Transferred? 3. What Type of Reinsurance Protection is Being Considered? 4. What is the Best Premium Mechanism? 5. What is Covered? 6. Is It Cost Effective? 7. Is It Appropriately Transferring Risk? Reasons For Purchasing Reinsurance Regulatory Requirements Rating Agency Concerns Reduce Risk of Ruin Earnings Stabilization Protect Policyholders’ Surplus Per Policy Limits Capacity Expertise Underwriting, Claims Major Types of Reinsurance Treaty Facultative Pro Rata Excess of Loss Aggregate Excess Per Policy or Per Occurrence Protection Premium Mechanisms & Features Flat Rated Cessions Rated Ceding Commission Experience Adjusted Features Sliding Scale, Losses Loaded, Profit Sharing Annual Aggregate Deductibles Exposure Adjusted Features Premium Based on Agreed PML What Factors Should Be Considered in Establishing a Retention? Impact on Policyholder Surplus Written Premium Impact of Loss on Net Income Claims Frequency and Severity Capital Implications / Parent Company Support Cash Flow Implications Cost of Reinsurance / Market Conditions Rating Agency Impact Volatility of Underwriting Results Net Benefit of Reinsurance Return of Risk Adjusted Capital Understanding Contract Language is Critical in Evaluating Protection Business Covered Coverage Basis Definitions Exclusions Treatment of Loss Adjustment Expenses, ECO, XPL Termination Provisions Reinsurer Funding Provisions “Standard” Articles What Factors Should Be Considered When Determining How Much Limit is Purchased? Per Occurrence and Aggregate Limits Per Policy Limits Exposure Workers Compensation Catastrophe Limit Contingency / Clash Limit Earthquake, Terrorism, and Industrial Accident Models Exposure to Extra Contractual Obligations Exposure to Multiple Policy Accumulations Cost of Reinsurance / Market Conditions What Should a Company Consider When Buying Clash Reinsurance? Exposure to Private Passenger Type Losses Exposure to Industry Group Accumulations Significant Market Share in a State Claims Adjusting Culture Contract Language: Which Losses are Intended to Be Covered? Treatment of Loss Adjustment Expense Cost of Reinsurance Volatility of Underwriting Result XYZ Insurance Company Retention Analysis Net Underwriting Gain/Loss by Retention Adverse Outcomes 10 Year Return Time 20 Year Return Time 50 Year Return Time 100 Year Return Time 250 Year Return Time 500 Year Return Time Expected Result: Mean Volatility Measure: Standard Deviation Alternatives Analyzed Gross $20M Retention $10M Retention $5M Retention 467,234 -4,904,190 -13,414,539 -19,445,761 -26,578,342 -31,532,067 85,116 -4,720,358 -10,701,669 -14,566,778 -19,269,431 -22,819,573 554,302 -3,174,240 -7,487,612 -10,501,776 -14,076,248 -17,246,461 1,431,123 -1,591,111 -5,175,326 -7,777,288 -11,245,907 -13,557,211 $1M Retention $500K Retention 2,781,540 710,487 -1,646,508 -3,308,927 -5,776,695 -7,312,408 3,263,090 1,627,414 -360,289 -1,685,690 -3,451,141 -4,961,078 10,552,696 8,325,396 10,301,013 7,742,087 9,941,706 6,980,686 9,763,422 6,243,981 8,715,775 4,494,133 8,118,311 3,677,032 99% Range of Outcomes 30,000,000 20,000,000 10,000,000 0 -10,000,000 Differences in Expected Outcomes Help Evaluate Cost vs. Benefit -20,000,000 -30,000,000 99% Range of Outcomes High Mean Low 23,629,826 10,552,696 -24,628,633 23,205,026 10,301,013 -18,144,686 22,480,076 9,941,706 -13,378,908 21,738,026 9,763,422 -10,458,760 Dynamic Financial Analysis is a Valuable Tool in Analyzing Continuum of Cost / Benefit Trade Offs of Alternative Structures and Retentions 18,100,979 8,715,775 -5,152,661 15,979,600 8,118,311 -3,019,978 Net Benefit of Reinsurance Cash Flows Associated With Reinsurance Transactions XYZ Insurance Company Retention Analysis Net Benefit of Reinsurance Statistical Summary by Retention (Recoveries - Ceded Premium) 10 Year Return Time 20 Year Return Time 50 Year Return Time 100 Year Return Time 250 Year Return Time 500 Year Return Time Mean Standard Deviation $20M Retention -467,280 -467,280 799,533 8,728,178 13,565,362 16,069,442 $10M Retention -1,264,725 1,021,174 10,405,112 18,314,100 23,279,519 25,730,508 $5M Retention 843,122 5,282,831 15,071,815 22,579,710 27,906,022 31,143,128 -276,851 1,516,055 -672,089 3,071,531 -868,201 4,170,479 Evaluating Multiple Metrics Helps Identify the Optimal Structure $1M Retention $500K Retention 4,527,232 4,864,801 9,837,265 10,276,168 19,730,496 19,941,514 26,603,908 26,848,030 32,874,549 33,519,559 37,283,576 38,063,273 -2,020,614 6,293,231 -2,677,824 6,864,855 31,359,336 -2,222,675 -6,293,925 31,859,265 -2,945,606 -9,307,018 99% Range of Outcomes 40,000,000 30,000,000 20,000,000 10,000,000 0 -10,000,000 -20,000,000 99% Range of Outcomes High Mean Low 12,690,076 -304,536 -467,280 22,360,961 -739,298 -1,264,725 26,882,752 -955,022 -2,080,980 What Factors Influence the Price of a Specific Reinsurance Program? What Factors Influence the Price of a Specific Reinsurance Program? Derivation of a Reinsurance Rate $500K xs $500K Flat Rate Risk Load 2.19% Expenses 1.88% Expenses 1.88% Expected Layer Loss 10.66% Expected Layer Loss 10.66% Expected Layer Loss 10.66% Step 1 Step 2 Step 3 Reinsurance Ratemaking Parallels Primary Ratemaking Discounted Rate 12.15% Step 4 What Factors Influence the Price of a Specific Reinsurance Program? CASUALTY LINES COMBINED Accident/Report Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1997 82.03% 86.78% 86.34% 81.40% 78.15% 77.20% 79.30% 79.73% 80.35% 81.19% 1998 86.71% 86.10% 81.16% 77.86% 76.77% 78.83% 79.20% 80.92% 82.04% 83.99% Direct & Assumed Loss & LAE Ratio Schedule P Year 1999 2000 2001 2002 2003 85.82% 80.64% 77.02% 75.68% 77.74% 78.18% 80.11% 82.50% 84.97% 85.51% 80.27% 76.87% 75.32% 77.47% 77.90% 79.98% 83.07% 86.83% 88.80% 87.01% 76.69% 75.13% 77.29% 77.67% 79.54% 83.51% 88.19% 92.96% 90.51% 87.78% 75.16% 77.15% 77.54% 79.59% 83.85% 89.81% 95.56% 94.74% 89.41% 79.48% Adverse Development Creates Parameter Uncertainty Average Standard Deviation CoV 81.25% 81.36% 80.82% 81.35% 3.16% 3.39% 3.73% 4.80% 3.89% 4.16% 4.61% 5.89% Overall Average Standard Deviation CoV 82.19% 10.24% 12.46% 82.93% 6.50% 7.84% 84.23% 7.59% 9.01% 2004 2005 77.44% 77.87% 77.91% 79.72% 79.85% 80.37% 84.05% 84.15% 84.79% 84.82% 90.64% 91.51% 92.58% 92.58% 97.72% 97.94% 99.40% 99.88% 98.55% 100.22% 102.19% 102.89% 92.30% 94.10% 96.86% 97.55% 79.76% 80.35% 81.97% 82.51% 74.64% 71.66% 71.09% 70.74% 72.78% 68.68% 66.75% 72.74% 69.39% 72.11% 85.27% 8.83% 10.35% 85.05% 10.28% 12.09% 85.07% 12.21% 14.35% The Gross Loss Ratio Assumption is a Key Determinant in Establishing the Reinsurance Price SOURCE: Highline Data and Federal Reserve Economic Database 2006 83.92% 13.73% 16.36% Adverse/Favorable Development 0.00% -0.08% -0.60% -1.38% -1.87% -2.64% -2.35% -2.29% 0.02% 4.48% 10.24% 16.81% 18.25% 11.13% 3.81% -5.22% -8.28% -4.61% 0.00% What Factors Influence the Price of a Specific Reinsurance Program? After Expenses & Investment Income, Reinsurer is Still Making Money Company Specific Results 80% 70% Net Ceded Loss & LAE Ratio % 60% 50% 40% 30% The Reinsurer Results Relative to the Cedent Results Signal Whether Decreases or Increases are Warranted 20% 10% 0% 1997 1998 1999 2000 2001 2002 Accident Year SOURCE: Sample Insurance Company Data 2003 2004 2005 2006 What Factors Influence the Price of a Specific Reinsurance Program? Impact of Severity Trend 2.0% 1.74% Trended Loss Cost (to Hist SEP) 1.62% 1.6% The Cumulative Impact of Individual Assumptions Materially Impacts the Ultimate Rate 1.45% 1.21% 1.2% 0.8% 0.99% 0.69% 0.53% 0.4% 0.0% 0% Trend 2% Trend 4% Trend 5% Trend 6% Trend Selected 3.5-9.0% Trend* 7% Trend Key Drivers' Impact on Loss Costs Trend Sensitivities 2.40% Rate Change Impact on Loss Costs 1.62% 1.62% 1.2% Loss Cost 1.6% Loss Cost 1.97% 2.00% 2.0% 0.91% 1.60% 0.91% 1.20% 0.8% 0.80% 0.4% 0.40% 0.53% 0.00% 0.0% Historic Premium On-Level Premium Reported Losses Severity Trend Rate Change Key Driver Loss Development Impact on Loss Costs 2.4% 2.0% 1.81% 1.89% 1.97% Loss Cost 1.64% 1.6% 1.2% 0.91% 0.8% 0.4% 0.0% Undeveloped Developed 0% Developed 10% Developed 15% Developed 20% Tail Tail Tail Tail SOURCE: Sample Insurance Company Data Loss Development What Should Be Expected From a Reinsurance Broker? What Should Be Expected From a Reinsurance Broker? Advocacy Program Structure, Negotiations, Terms & Conditions Transparency Market Knowledge Ease of Administration Role in Original Business Broker Services Market Knowledge: Peer Information Modeled Perils Company A B C D E F G H I J K L M Region Southeast Nationwide Nationwide Northeast Southeast Nationwide Nationwide Nationwide Northeast Nationwide Nationwide Nationwide Nationwide Nationwide Average RMS v6.0 Data Attach RT Exhaust RT 11.4 1.8 4.5 16.0 40.1 3.4 5.6 5.6 92.6 10.5 5.2 3.7 5.7 117.4 706.6 183.6 66.8 188.9 327.0 111.4 126.3 486.8 95.7 64.0 84.4 26.3 5.1 191.7 Tor/Hail EQ Hurr x x x x x x x x x x x x x x x x x x x x x x x x Retention % of PHS 5.5% 2.3% 5.6% 6.8% 3.8% 4.3% 1.0% 1.0% 9.3% 4.8% 7.8% 0.3% 4.5% 3.5% Market Knowledge: Pricing ROL VS. LOL ( THREE APRIL 1 RENEWALS ) 35% 30% 25% ROL 20% 15% 2006 Bound Pricing 2007 Quotes 10% 2007 FOT 5% 0% 0% 2% 4% 6% 8% LOL RMS v6.0 Data for 2006 & 2007 Renewals 10% 12% 14% 16% Broker Services ALFA Group Consolidated Total Risk - 99% TVaR ($000) Assessment of Risk and Developing Risk Distributions Catastrophe Modeling Large Loss Distributions Non-Cat Loss Volatility Asset Risks Other Risks Correlations and Dependencies Identified Comprehensive Stochastic Financial Model (1) (2) Total Risk Asset Risk (3) (4) (5) (6) Non CAT UW Risk Trial 44151 12530 27949 41102 24196 26371 2843 28716 33041 30507 4699 Operating Result (1,528,502) (568,699) (350,959) (285,747) (252,516) (230,310) (213,245) (200,740) (189,382) (180,348) (171,343) Investment Income 255,319 178,594 (286,989) (46,955) (276,677) (281,585) (203,114) (10,299) (50,170) (142,525) (177,085) Reserves Yr End 245,788 196,041 232,592 209,892 215,763 220,127 214,404 215,759 232,146 243,941 241,357 Paid Current AY 419,507 319,068 419,186 372,182 363,110 369,187 387,422 386,710 408,031 430,833 426,498 Paid On Prior AY's 192,501 150,715 133,993 135,822 176,838 187,585 131,297 156,691 165,412 177,044 152,351 CAT Loss Gross 2,432,675 1,878,809 165,862 1,027,544 67,831 19,526 224,131 774,363 240,051 33,707 21,753 CAT Loss Net 1,725,175 880,619 119,163 320,044 67,831 19,526 112,099 245,384 172,734 33,707 21,753 97.50 95.00 18720 33162 (104,458) (53,623) (179,973) (112,354) 218,907 243,268 403,315 374,751 119,474 153,873 30,490 17,078 30,490 17,078 214,380 (347,408) 184,994 (22,097) 223,582 227,710 392,017 401,089 158,708 163,947 55,673 716,670 42,769 356,224 12,904 360,446 4,128 9,072 5,239 660,998 313,455 347,542 Mean 99% TVaR Risk 561,787 207,091 Net Risk $ Net Risk % 207,091 18,439 336,257 561,787 36.86% 3.28% 59.85% 100.00% Gross Risk Gross Risk % 207,091 18,439 660,998 886,528 23.36% 2.08% 74.56% 100.00% (A) Asset Risk (B) Non CAT UW Risk (C) Cat Risk (D) Total Risk Net Risk Non CAT UW Risk 3% Asset Risk 37% Notes: (A)=(2) (B)=(3)+(4)+(5) (C) Net =(7)+(8)-(9), Gross = (6) (D)=(A)+(B)+(C) Cat Risk 60% $1,500M $1,300M Step 4 $1,100M Step 3 Starting Point $900M Step 1 Step 2 $700M $500M Capital Allocations CAT Loss Recoveries 707,500 998,190 46,699 707,500 112,032 528,980 67,317 - (TVaR Less Mean - Sign adjusted) (A) Asset Risk (B) Non CAT UW Risk (C) Cat Risk (D) Total Risk Expected Return By Source of Risk (UW, Cat, Asset) By Region By Line of Business By Company or Business Unit (9) Percentile 99.99 99.90 99.80 99.70 99.60 99.50 99.40 99.30 99.20 99.10 99.00 Risk Measures in Total and By Desired Sub-Categories (8) CAT Risk Return v Standard Deviation in Dollars (7) $300M $100M $200M $300M $400M Standard Deviation $500M $600M - CAT Reins Benefit 610,397 901,087 (8,589) 610,397 (48,552) (48,552) 50,871 446,829 10,175 (48,552) (48,552) (48,552) (48,552) (36,887) 287,854 324,740 What is the Role of the Insurance Actuary in the Reinsurance Placement? (a.k.a. How Can a Primary Insurance Actuary Position Him or Herself to Get a Trip to London or Bermuda as Part of the Reinsurance Placement Process?) How Can a Primary Insurance Actuary Position Him or Herself to Get a Trip to London or Bermuda as Part of the R/I Placement Process? Primary Company Actuaries Impact Reinsurance Terms and Conditions Rate Change Information Interpreting Loss Development Triangles Rating Implication of Underwriting and / or Claims Reserving Practices Trends: Their View and Supporting Work of Such (Sev & Freq) Policy Limit Shifts Cost Effect of Expansion / Contraction Perspective on the Environment: Tort Reform, etc.