University of Illinois Finance 230 – Intro to Insurance A Career as a Property/Casualty Actuary

1. University of Illinois Finance 230 – Intro to InsuranceA Career as a Property/Casualty Actuary Presentation by Gail M. Ross, FCAS, MAAA September 14, 2007

2. Agenda • Background • The Role of the Actuary • Challenges for the P/C Actuary • Exciting Assignments • Useful Sites • Q&A

3. Insurance / Actuarial Career • Began with Travelers Insurance Co.-1976 • Got into Consulting Upon Becoming an FCAS - 1985 • Became active in the CAS upon becoming an FCAS

4. Actuaries – “Risk is Opportunity” • Actuaries are experts in: • evaluating risk, • designing creative ways to reduce risk potential, • decreasing the impact of undesirable events that do occur. • Actuaries evaluate the financial impact of current economic, legal, and social trends on future events. • We focus on accurate and responsible matching of risk to price.

5. Challenges for the P/C Actuary • Setting the Price to Charge for the Insurance Product

6. Non-Insurance Pricing

7. Insurance Pricing

8. Challenges for the P/C Actuary • Determining the appropriate level of reserves to set – varies by exposure: • Short “Tail”– Property , Physical Damage • Medium “Tail” – Auto Liability • Long “Tail” – Workers Compensation • What Will the Lawyers Dream Up Next “Tail” – Asbestos, Pollution, Tobacco, Firearms, Mold

9. Challenges for the P/C Actuary • Enterprise Risk Management – Helping businesses manage all risks facing the organization: • Hazard Risk • Financial Risk • Operational Risk • Strategic Risk

10. Enterprise Risk Management - Example Coldhard Steel Company (CSC) manufactures steel products. It’s a family owned business operating in the Midwestern US and has a unionized labor force.

11. Enterprise Risk Management - Example • Types of Risk • Hazard Risk • 1st Party – Loss to building & equipment due to fire, tornadoes, etc. • 2nd Party – Injury or illness to employees included work related injuries • 3rd Party – Slip/falls, product recalls, product lawsuits

12. Enterprise Risk Management - Example • Types of Risk • Financial Risk • Foreign exchange risk - CSC has large volumes of sales in Latin America • Commodity risk – changes in prices of raw materials • Credit risk – CSC has a large accounts receivable

13. Enterprise Risk Management - Example • Types of Risk • Operational Risk • Labor relations • Family succession planning • Assessment of the reliability of machinery and processes

14. Enterprise Risk Management - Example • Types of Risk • Strategic Risk • Competition • Regulatory/political issues • Technological advances that could leave CSC obsolete

15. Enterprise Risk Management - Example • The Casualty Actuary will: • Assess the hazard risk • Work with others to assess the financial, operational and strategic risks • Develop models that will integrate all of the potential risk outcomes/probabilities so that an overall impact on CSC’s results can be understood and managed.

16. Actuarial Career Why Consulting ? • Diverse • Challenging • Projects Completed in Short Timeframe • Deal w/ Senior Management • Global Opportunities • Very Good Compensation

17. Actuarial Career Why Not Consulting ? • Long Hours • Often Unpredictable • Actuaries in the “Hot Seat”

18. Exciting Assignments • M&A Due Diligence Assignments • Operational Reviews • Reserve Reviews • Captive Insurance Assignments

19. Web-Sites and Contact Info • Good web-sites to learn more about an actuarial career: • www.BeAnActuary.org • www.casact.org • www.actuarialfoundation.org • Actuarial jokes: • http://users.aol.com/fcas/jokes.html • My contact info: • gail.ross@milliman.com

20. Questions

21. Thank You !