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Getting to Know Your Customer What Motivates the Purchase of Reinsurance Broker Actuary Perspective

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. Instrat - Guy Carpenter’s Analytical Team. Why does Carpenter have: Over 170 individuals

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Getting to Know Your Customer What Motivates the Purchase of Reinsurance Broker Actuary Perspective

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  1. June 6, 2005 Getting to Know Your CustomerWhat Motivates the Purchase of ReinsuranceBroker 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

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