1. 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

2. 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

3. 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

4. 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

5. 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)

6. 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
…..

7. 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

8. 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

9. 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