1. CAS 2004 Fall Meeting | November 17, 2004 Actuaries in Non-Traditional Roles John Ferrara – President Specialty Products Division Jferrara@ArrowheadGrp.com | 212.918.4603

2. John Ferrara – Background July 2003- Present Arrowhead NYC Founded New York City Operation General Agency/Wholesaler Consultant Binding Authority Business Ski Program

3. Background – cont. QBE 1/99 – 7/03 Board Member in the United States QBE Insurance Corporation QBE Reinsurance Corporation Chief Actuary In Charge of the Regulatory Compliance Department In Charge of the Corporate Risk Management Ceded Reinsurance Administration, Reinsurance Underwriting Audits Team Leader for Formation of QBE Reinsurance Bermuda (utilized as a segregated cell captive for agency partners) Helped to Re-underwrite Reinsurance Portfolio Help to Develop Insurance Company Business QBE grew profitability 7 fold during my tenure

4. Experience- cont. CNA 10/96 – 1/99 pricing and reserving actuarial support for E&S books of business Ernst & Young 11/93-10/96 Consulting Actuary pricing, reserving work, statements of actuarial opinion, self insurance studies, commutation litigation, mergers and acquisition support work Crum & Forster 3/90-11/93 reserving studies, risk based capital work, mergers and acquisition work New York Compensation Insurance Rating Board 2/89 – 3/90 workers compensation rate filings in New York FCAS 1996 ACAS 1993 Bachelor of Engineering in Mechanical Engineering 1998 SUNY at Stony Brook Bachelor of Science in Applied Math and Statistics 1988

5. Practical Approach to Problem Solving A lot of problems an actuary is asked to solve are not worth the time involved to solve them down to an exact science. A lot of problems an actuary is asked to solve can be solved by an algorithmic approach.

6. Problem Solving Need to Prioritize to Maximize Production While Maintaining the Highest Level of Quality. If you can solve a problem simply it is often better in the business world than the more complex solution that no one understands. It may make sense to perform the calculation on a complex basis but make the presentation for the simple solution especially in terms of pricing and reserving analyses (be practical). Certain times call out for a complex solution with all the supporting details. Different problems require different levels of accuracy, and the ability to tell the difference separates many Actuaries.

7. Example A red flag in determining the feasibility of particular opportunity can be as simple as whether the individual can explain to you what business they are covering. If you don’t get it, how can one make financial projections associated with the coverage? If someone consistently under performs in the market and loses money, what is going to change from year-to-year? As if analyses Big Company Supports the Account Disproportionate Risk More Sophisticated Clients Client Makes Money, Risk Partners Do Not

8. Keys to My Business Model Be Aggressive & don’t be afraid to make decisions Calculate your downside Meet deadlines Have people skills (client and inter-office) Make statements as to what you know and be silent as to what you don’t know Learn from others - Learn about the other disciplines you do business with Use different approaches for different problems Answer the telephone Look professional Bring bad news in a non-confrontational manner Stick to your guns and don’t cave in to popular demands Know your adversary, trading partners and competition

9. Keys to Success In the Insurance Industry Know Your Strengths and Weaknesses. Strive to Improve. Be Honest. Build your resources and contacts (Don’t let an adversarial deal ruin all your relationships). Handle the rate increase or commission request in a professional, high level manner. Don’t get drawn into a personal battle when you are attacked. Admit the imprecision, basic assumptions associated with your calculations (admit flaws but stand pat on your projections). Try to get involved in situations that are mutually beneficial. Be prepared when you have the proper capabilities to step outside the traditional actuarial roles.

10. Insurance Industry Cycles The insurance industry is an easy entry-easy exit marketplace. Historically the insurance industry has had periods of unprofitable underwriting results. How can you position yourself in the insurance industry to make money regardless of the market cycle? Personally and on a corporate level? The answer to the previous should consider the following facts: –Insurance people tend to be followers –Insurance Companies do not return capital to investors in times of underwriting loss –Insurers do not make market rates of return on their investments The answer as I see it would be diversification away from purely cyclical lines of insurance, or sticking to underwriting and rating disciplines regardless of market cycles.

11. Thank You! John Ferrara – President Specialty Products Division Jferrara@ArrowheadGrp.com | 212.918.4603