1. Medical Malpractice Liability Current Reserving Challenges for Captives and Self Insurers Alice Edmondson (CASCO)

2. Current Reserving Challenges Program Structure Client Influences Outside Influences

3. Program Structure - Challenges Expanded retentions from hard markets  Reactivation of captives  Dramatic increases in per claim limits  Disappearance of shared aggregates

4. Program Structure - Challenges Coverage complexities  Varying effective and retro dates  Coverage and limits differences  Occurrence and claims made mixtures

5. Program Structure - Suggestions Create a program structure matrix first!  All coverages (HPL, IPL, GL, PPL,…)  Coverage basis (occ, claims made,…)  Effective and retro dates  Limits and whether LAE is inside  Variations by covered entity  Agreement by client, captive mgr, broker

6. Program Structure – Sample Matrix Covered Entity Line of Coverage Coverage Basis Eff / Retro Dates Per Claim Limit Annual Aggregat e Hospital AHPLClaims Made1/1/98 1/1/92 $ 2 mil ( + LAE) $ 6 mil ( + LAE) Hospital AGLOcc1/1/98 $ 1 mil ( incl. LAE) $ 3 mil ( incl. LAE) Practice Plan B PPLClaims Made1/1/98 Various $ 1 mil ( + LAE) $ 4 mil ( + LAE) Practice Plan B IPLClaims Made1/1/98 1/1/92 $ 1 mil ( + LAE) $ 1 mil ( + LAE)

7. Program Structure - Suggestions Don’t over-simplify projection process!  Do occurrence and report year analysis  Start refined, aggregate later  Emphasize good increased limits analysis

8. Client Influences - Challenges More risk than ever  Nursing and physician staff shortages  Expanded corporate entity exposure  New procedures and ancillary activities  Client unawareness of own exposures

9. Client Influences - Challenges Management needs /expectations  Distorted CFO expectations  Continued cost pressure on providers  Problems created by huge P/L swings

10. Client Influences - Challenges Data problems  Inconsistent / incomplete exposure  Physician specialty “downgrading”  Incomplete loss and LAE reporting  Various claim histories / TPAs

11. Client Influences - Suggestions Communicate early and often  Initiate a “what’s happening” discussion  Be a pest -- don’t accept incomplete or questionable data  Provide early warning of bad news

12. Client Influences - Suggestions Reconcile claims and financial data ASAP  Large claims paid after valuation date  Incomplete recording of LAE  Don’t accept a big discrepancy!

13. Client Influences - Suggestions Consider enhanced risk factors  Explicit exposure values  Percentage loads  Using appropriate conservatism at key judgment points

14. Outside Influences - Challenges Claim severity  Significant upward trends recently  Deteriorating venues  Claim reserving reactions

15. Outside Influences - Challenges Other Factors  Nursing home liability problems  Existing and possible future legislation

16. Outside Influences - Suggestions Amass good information  Comprehensive claims database  Relevant industry data  Read and listen a lot!

17. Outside Influences - Suggestions Don’t ignore trends but Don’t over-react!