June 6, 2005 Getting to Know Your Customer What Motivates the Purchase of Reinsurance Broker Actuary Perspective John Tedeschi Managing Director - Instrat.

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Presentation transcript:

June 6, 2005 Getting to Know Your Customer What Motivates the Purchase of Reinsurance Broker Actuary Perspective John Tedeschi Managing Director - Instrat Seminar on Reinsurance Hamilton, Bermuda

Instrat - Guy Carpenter’s Analytical Team Why does Carpenter have: Over 170 individuals Located globally Necessary disciplines – actuaries, accountants, modelers, scientists, cartographers, software developers etc Because of client demands Reinsurance can be single largest financial spend for a carrier World has gotten more complicated Quantitatively minded individuals now part of the transaction CFO, Chief Actuary, CRO

Getting to Know Your Customer Broker actuary responsibility to client Evaluate risk management alternatives Measure impact of risk management decision Client advocate in the global marketplace Find solutions to current issues whether via a reinsurance solution alternatives Improve client’s business Provide unique vantage point Sounding board for alternative ideas Complement client analytics Educate client on reinsurer’s needs

Responsibility varies by type of client Different types of ceding companies have different needs Size or structure Mutual vs Stock / Regional v Global / Small vs Large Lines of Business Underwritten 1st Party / Long Tail / New Exposures Expertise or existing skill set Extensive analytical staff with full modeling capabilities vs no quantitative support staff Integration of many divisions within one company

Responsibility for Very Large Clients Assumptions Client has a reasonable level of analytical skill Analytical skills not centralized so varies by division Broker actuary supports Consolidation of information that spans various divisions Varying underwriting portfolios in an assortment of formats Intermediary to negotiate friction internal to client Eg: Impact of retention or reinsurance cost allocation Complement analytics 2nd catastrophe model opinion Model development for challenging lines – D&O, Excess WC, Terrorism (A&H, WC, Life)

Responsibility for Smaller Clients Assumptions Client has limited centralized analytical support for reinsurance Broker actuary supports Everything Compiling data Running exposure / experience rating models Catastrophe modeling Measuring impact on BCAR Educating client on market pricing and structures …..

Getting to Know Your Customer Broker actuary responsibility to reinsurers Disseminate information Evaluate structure and price Defend client position Educate reinsurer on client’s needs Expand capabilities for the good of the industry

Broker Actuary as Intermediary Not about placing business but…. Acting as intermediary to bring market and client closer together If price is the issue… Help client see why their opinion is low Help market see why their opinion is too high What is the market clearing price? Information Imbalance Some reinsurers want more than client willing/able to provide Lack of information also tells you something Supplementing information

Broker Actuary Model Development Pricing Methodologies Measuring Capital Need Risk quantification DACH Flood modeling LEAD – D&O modeling Terrorism Excess Workers Compensation Excess Commercial Property CASUS - Unknown accumulation of Life and A&H risks Financial modeling – MetaRisk, CAP