1. Loss Portfolio Transfers
Casualty Loss Reserve Seminar
September 10, 2001
New Orleans, LA
André Lefebvre, FCAS, MAAA

2. Definition
Transfer of a risk portfolio of an organization, insurer or self-insured, to a third-party, insurer or reinsurer, of equal or greater security for the least amount of assets.
Seller
Buyer
Risk
Insurer/
Self-Insured
Insurer/
Reinsurer
Assets

3. Reasons for Transfer Economic Risk Transfer Financial Management
Discontinued Lines of Business/Self-Insured Program
Mergers & Acquisition

4. Economic Risk Transfer
Adverse Loss Development
Accelerated Loss Payments
Insufficient Yield on Assets Supporting the Reserves

5. Financial Management
Income Recognition
Statutory
GAAP
“Soft Market”

6. Discontinued Operations
Discontinued Line of Business/Self-Insured Program
Loss Reserve Liabilities
Claims Maintenance

7. Mergers & Acquisitions
Adverse Loss Development Protection

8. Types of Products Guaranteed Cost vs. Finite (Funded)
Aggregate Limit vs. Unlimited
Deductible/Attachment Point
Additional Features (e.g., Profit Sharing)

9. General Process Claims Review Risk Management Information Systems
Reinsurance Agreements
Financial / Actuarial Analysis
Claims Administration

10. Claims Review Claims Audit Access to Claim Files
Location of Claim Files
Number of Open Claims
Adequacy of Carried Reserves

11. RMIS Format of Claim Data (i.e., Electronic or Hard Copies)
Complete Transactional History
Number of Years of History
Transferring Data from Buyer to Seller

12. Reinsurance Agreements
Terms of Existing Reinsurance Agreements
Flexible
Cut-through Agreements

13. Financial / Actuarial Analysis
Traditional Reserve Review
Cash-Flow Analysis
Sensitivity Analysis

14. Claims Administration (Buyer)
Staffing Requirement
Intellectual Capital
Additional TPA Costs (Self-Insured)