1 / 14

Industry Reserve Adequacy 1998 CLRS, Philadelphia

Industry Reserve Adequacy 1998 CLRS, Philadelphia. Todd Hess, FCAS, MAAA Underwriters Reinsurance Company. Using Price Monitoring in Reserving. LR method: Use indicated loss ratio or relativity from earlier years Bornhuetter Ferguson method: Use as initial loss ratios

talitha
Download Presentation

Industry Reserve Adequacy 1998 CLRS, Philadelphia

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Industry Reserve Adequacy1998 CLRS, Philadelphia Todd Hess, FCAS, MAAA Underwriters Reinsurance Company

  2. Using Price Monitoring in Reserving • LR method: Use indicated loss ratio or relativity from earlier years • Bornhuetter Ferguson method: Use as initial loss ratios • Cape Cod (Stanard-Bühlman): Adjust premium via relativities • All methods: Reasonableness check

  3. Bornhuetter-Ferguson IBNR = EP x ILR x % Unreported Cape Cod IBNRi = AEPi x ILR x % Unreportedi ILR = Known Incurred ¸ Avg. % Reported Avg. % Rpt’d = (SAEPi x % Rpt’di)/(SAEPi) AEP = EP adjusted for rate relativities, ie. through price monitoring

  4. A Few Price Monitoring Approaches • Reinsurance • LR estimate on each piece of business written (Treaty reinsurance) • Average Att Point/Retention changes vs. average premium (Fac Certificate Reinsurance - many weaknesses) • Benchmark pricing relativity changes • Rate changes through underwriting audits

  5. A Few Price Monitoring Approaches • Insurance • Percentage of proposed rate changes approved (admitted insurance) • Change in average rate derivations (schedule rating) • Change in average Basic Charges and insurance charges (experience rating)

  6. Two More Topics • On-level factors vs. price monitoring • Reinsurance Effects • Traditional • Stop Loss

  7. Loss Ratios Net of Reinsurance • Can look too low if buying cheap reinsurance/too high with expensive reinsurance • Premium Adjustment features can magnify net loss ratio swings • Look at retention changes/history of reinsurance rates • Net, Ceded, and Gross reserves can be affected in different ways to various pressures

  8. Stop-Loss Reinsurance • Reserves difficult to evaluate when protected by Stop Loss Reinsurance • Reinsurers big purchasers • Structure can have wide ranging accounting treatments for both reinsurer and cedent • in the money lowers LR -- not inadequate, still protection • ceded reserve often offshore where discounting allowed • AP features can distort LRs

More Related