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Casualty Actuaries in Reinsurance

Casualty Actuaries in Reinsurance. Observations on Medical Malpractice. James D. Hurley, ACAS, MAAA May 20, 2008. This document is incomplete without the accompanying discussion; it is confidential and intended solely for the information and benefit of the immediate recipient hereof.

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Casualty Actuaries in Reinsurance

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  1. Casualty Actuaries in Reinsurance Observations on Medical Malpractice James D. Hurley, ACAS, MAAA May 20, 2008 This document is incomplete without the accompanying discussion; it is confidential and intended solely for the information and benefit of the immediate recipient hereof.

  2. Observations on Medical Malpractice • Financial results • Reinsurance issues • What’s different . . . or not?

  3. Observations on Medical Malpractice • Financial results impacted by . . . • 1990’s • modest loss trends • favorable reserve development • relatively high investment returns • expansion • slippage in pricing • 2000’s • loss trends pick up • unfavorable reserve development • investment returns turn • rates adjusted Continued . . .

  4. Observations on Medical Malpractice (cont.) • 2003  2006 • rates/prices tight • tort reform • loss trends • investment returns stabilize • 2007  20?? • rates reduced • tort reforms “+“ • loss trends • investment returns “return” (some)

  5. Observations on Medical Malpractice Source: A.M. Best’s Aggregates and Averages

  6. Observations on Medical Malpractice Source: Compilation of Best Data

  7. Observations on Medical Malpractice Source: Compilation of Best Data

  8. Observations on Medical Malpractice Source: Compilation of Best Data

  9. Observations on Medical Malpractice Source: Compilation of Best Data

  10. Observations on Medical Malpractice Source: Compilation of Best Data

  11. Observations on Medical Malpractice Source: Compilation of Best Data

  12. Observations on Medical Malpractice Source: Compilation of Best Data

  13. Observations on Medical Malpractice Source: Compilation of Best Data

  14. Observations on Medical Malpractice Source: Compilation of Best Data

  15. Observations on Medical Malpractice Source: Compilation of Best Data

  16. Observations on Medical Malpractice Source: Compilation of Best Data

  17. Observations on Medical Malpractice Source: Compilation of Best Data

  18. Observations on Medical Malpractice • Reinsurance Issues • Reinsurance attestation • risk transfer • NAIC survey • Proposed rule – New Jersey • reporting requirements

  19. Observations on Medical Malpractice • Market needs  some divergence • start-ups • capacity • avoid early “knock-out” • mature companies • clash • ECO/EPL

  20. Observations on Medical Malpractice • What’s different . . . or not? • rules • rates • results • capacity • other?

  21. What’s different . . . or not?  “Rules” • Florida  proposed SB 1660 • consumer protection laws apply to insurance • more rigorous requirements on experience rating individual physicians and schedule rating generally • ALAE/DCC shall be part of insurer’s “rate base” only to extent they do not exceed “. . . the national average for such expenses, as determined by the office, for the prior calendar year . . .” • Requires (apparently) a Florida income statement • policies effective on/after October 1, 2007, rates shall be 25% less than rates at October 1, 2004

  22. What’s different . . . or not?  “Rules” • Florida  proposed SB 1660 (cont.) • insurer/self-insurer or RRG filing a proposed rate change • must give notice to public • any insured can request a hearing within 30 days (any consumer may participate) • public counsel has standing to request hearing • med mal rates cannot be based on experience for 2003 and prior

  23. What’s different . . . or not?  “Rules” • Colorado  SB 164 (proposed 2008) • “guts” the non-economic cap • “. . . no rate shall be held to be inadequate unless surplus falls below . . .” company action level RBC • Similar RBC related proposals in Rhode Island, D.C. • Other states debating/changing “rules” • California (all lines) • Ohio – file annually • Missouri – recent legislation requires new “rules” • Illinois – fully documented filings

  24. What’s different . . . or not?  “Rates” Percentage of Rate Changes in Survey by Range* *October 2007 Medical Liability Monitor

  25. What’s different . . . or not?  “Rates” • Comments on the survey • “repositioning” changes? • number of rate increases down by 50% • 50% show “no change”; 30% reflect decreases • opportunity to get class/territory right • manual changes; not collected • tracking and balanced?

  26. What’s different . . . or not?  “Results” 26

  27. What’s different . . . or not?  “Capacity” 27

  28. What’s different . . . or not?  “Capacity” 28

  29. What’s different . . . or not?  “Capacity” 29

  30. What’s different . . . or not?  “Other” • Market composition • reduced “commercial” presence • specialty companies • non-physician directed • physician directed • Investment income • volatile stock market • interest rates • impact of leverage • Start-ups • how do they play?

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