The Actuary in Ceded Reinsurance: Operations and Administration

1. The Actuary in Ceded Reinsurance:Operations and Administration CAS Seminar on Reinsurance June 3-4, 2002 Tarrytown, New York Scott Belden Chief Risk & Reinsurance Officer Travelers Property Casualty Corp.

2. Once the deal is done • Ceded Premiums • Contract Details • Claim Identification and Reporting • Ceded Claim Management • Billing and Collections • Reserving • Reporting

3. Ceded Premium • Written Premium • Policy detail vs automatic treaty coverage • Policies attaching vs losses occurring during • Deposit vs fully developed • Ceding Commission • Fixed vs Variable • Profit Commission / No Claims Bonus • Accounts payable

4. Contract Details • Wordings - critical component of effective reinsurance • Contract Data Capture - uses for the data • Claim Identification - Policy number, line of business, retention, date of loss • Financial Reporting - Limits, coverage %, reinsurer detail • Management Information / Actuarial - pricing / exposure, reserving

5. Claim Identification/Initial Reporting • First Notice • quantitative criteria • qualitative criteria • Claim detail provided

6. Ceded Claim Management • Documentation • Routine communication • Privileged materials • Claims Analysis • Primary policy coverage • Reinsurance policy coverage • Risk vs. occurrence • Per claim or aggregate • Allocation of costs by layer or to year for cumulative injury • Reinsurer Audits

7. Billing and Collections • Billing • Timeliness • Consistency with claim analysis • Clarity • Collections • Identify and resolve substantive issues • Follow up, Follow up, Follow up • Refer to Attorneys unresolved outstandings

8. Reserving • Case Reserves • Consistent with claim analysis • Consistent with primary case loss reserve • Catastrophe / Clash ceded case reserves • Incurred But Not Reported • Loss ratios • Developed ultimates

9. Reporting Schedule F • Reinsurer detail – Ceded Premiums – Ceded Reserves – Receivable aging – Collateral held • Allocation / Assignment of IBNR to reinsurer Schedule P • Ceded activity by line for the last 10 years

10. In Summary: Effective administration of the reinsurance process is critical to maximizing the value of a company’s ceded reinsurance.