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

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

Insurance / Actuarial Career Began with Travelers Insurance Co Got into Consulting Upon Becoming an FCAS Became active in the CAS upon becoming an FCAS

Actuaries – “Risk is Opportunity” Actuaries are experts in: evaluating risk, evaluating risk, designing creative ways to reduce risk potential, designing creative ways to reduce risk potential, decreasing the impact of undesirable events that do occur. 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.

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

Non-Insurance Pricing

Insurance Pricing

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

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

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.

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

Enterprise Risk Management - Example Types of Risk Financial 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

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

Enterprise Risk Management - Example Types of Risk Strategic Risk Strategic RiskCompetition Regulatory/political issues Technological advances that could leave CSC obsolete

Enterprise Risk Management - Example The Casualty Actuary will: Assess the hazard risk Assess the hazard risk Work with others to assess the financial, operational and strategic risks 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. 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.

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

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

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

Web-Sites and Contact Info Good web-sites to learn more about an actuarial career: Actuarial jokes: My contact info:

Questions

Thank You !