Actuarial & Insurance Services Risk Management Consulting Group Casualty Loss Reserve Seminar Actuary and Risk Manager -- A New Relationship Casualty Loss Reserve Seminar September 18, 2000

2 Casualty Loss Reserve Seminar Introduction Partners Examples Opportunities Evolution

3 Casualty Loss Reserve Seminar Evolution Introduction Partners Examples Opportunities Evolution

4 Casualty Loss Reserve Seminar Evolution of the Risk Manager ãThe Insurance Administrator ãThe Insurance Buyer ãThe Manager of Risk ãThe Enterprise Risk Manager ãThe Chief Risk Officer

5 Casualty Loss Reserve Seminar Evolution of the Risk Manager Insurance Administrator Insura nce Buyer Enterp rise Risk Manag er Insurance Agent purchases insurance Insurance Administrator Pays the Premiums Handles other Administrative Activities ­Certificates ­Auto Cards Management began to notice expense of insurance on income statement Ins. Admin. was put in charge of reducing the price Cost of insurance continued to increase Ins. Buyer began to look for reduction opportunities ­Reduce Losses ­Manage claims ­Alternative risk financing Stepping beyond just property and casualty Risk is risk, whether fortuitous with no opportunity for gain, or other business risk Board becomes aware of the significance of managing risk, and elevates the status of risk managers within the organization Key Activities Today Risk Manag er Chief Risk Officer

6 Casualty Loss Reserve Seminar Partners Introduction Partners Examples Opportunities Evolution

7 Casualty Loss Reserve Seminar Partners Insurer Risk Manager Actuary Insurance Broker

8 Casualty Loss Reserve Seminar Partners A well conducted actuarial analysis can be one of the most valuable decision- making tools available

9 Casualty Loss Reserve Seminar Partners ãActuary’s involvement in renewal process 4Independence working for the risk manager 4Better knowledge of risk portfolio 4Adds credibility to the process 4Supports reasonableness of premiums

10 Casualty Loss Reserve Seminar Examples Introduction Partners Examples Opportunities Evolution

11 Casualty Loss Reserve Seminar Examples ãQuantify retained losses ãAid in program structure ãAllocate cost of risk ãEvaluate mergers & acquisitions ãVerify letters of credit

12 Casualty Loss Reserve Seminar Examples ãCaptive Insurance Subsidiaries ãBalance Sheet Reserves ãLoss Projections ãPremium Reasonableness ãPortfolio Transfer ãFunding of Retentions

13 Casualty Loss Reserve Seminar Opportunities Introduction Partners Examples Opportunities Evolution

14 Casualty Loss Reserve Seminar Opportunities ãANNUALLY?? 4Update previous loss analyses 4Evaluate impact of changes to corporation 4Compare to current market conditions ãMARKETPLACE PRODUCTS 4Asbestos Liabilities 4Other Environmental Liabilities 4Loss Portfolio Transfers