1 / 14

Maximizing Shareholder Value in Catastrophe Management

This session, led by John Tedeschi from Guy Carpenter, delves into the intricacies of measuring catastrophe losses, understanding loss models, and exploring how these factors impact capital and shareholder value. Participants will learn about dynamic financial modeling, popular loss estimation models like AIR, EQECAT, and RMS, and gain insights into metrics such as the Cat Recovery Ratio and exposure ratios. The discussion emphasizes multifaceted perspectives on shareholder value over time and examines the benefits of innovative financial strategies, including finite risk and catastrophe bonds.

kagami
Télécharger la présentation

Maximizing Shareholder Value in Catastrophe Management

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Maximizing Shareholder Value in Catastrophe Management Session 10 Casualty Actuarial SocietyCatastrophe Issues Special Interest Seminar John Tedeschi ACAS, MAAA Senior Vice President Guy Carpenter & Co. 212-323-1629 JTEDESCHI@GUYCARP.E-MAIL.COM

  2. Agenda • Review of how to measure catastrophe losses • What is included in a loss model • What’s not included in a loss model • How are companies measuring catastrophe losses as an impact to capital 2

  3. Loss Modeling • Dynamic Financial Modeling requires • Catastrophe Per Occurrence Loss Distribution • Annual Frequency Assumptions • Time Horizon • Natural Disasters • Hurricane, Earthquake, Tornado, Winter Storm, Hail, Flood, Straight-line Wind, Volcano, Subsidence, Freeze, Flood, Brush Fire... 3

  4. Loss Estimation Modeling • The most popular • AIR, EQECAT and RMS • Others • TOPCAT, REI, ARA • Definition of Loss Exceedance Curves can vary by modeler • example 4

  5. Guy Carpenter & Company, Inc. CAS Catastrophe Issues Special Interest Seminar Loss Exceedance Curve 5

  6. Guy Carpenter & Company, Inc. CAS Catastrophe Issues Special Interest Seminar Per Occurrence Exceedance Curve Example Event #1Event #2 Event #3 F1=0.04 F2=0.03 F3=0.01 PMF PMF PMF 0.6 0.55 0.7 0.2 0.15 0.1 0.2 0.3 0.2 10 30 70 20 40 90 30 60 130 Loss Loss Loss 6

  7. Guy Carpenter & Company, Inc. CAS Catastrophe Issues Special Interest Seminar Per Occurrence Exceedance Curve Approach I Loss Freq. Prob. of Non-Exce 90 0.01 1.00 40 0.03 0.99 20 0.04 0.96 7

  8. Guy Carpenter & Company, Inc. CAS Catastrophe Issues Special Interest Seminar Per Occurrence Exceedance Curve Approach II Loss Freq. Prob. of Non-Exce 130 0.001 1.00 90 0.007 0.999 70 0.002 0.992 600.00450.99 40 0.0165 0.9855 30 0.017 .969 20 0.024 0.952 10 0.008 0.928 8

  9. What is included in loss model? • Class of Business • Auto Physical Damage • Inland Marine / Ocean Marine • Workers Compensation / General Liability • Unknown Locations • etc • Portions of Loss • Loss Adjustment Expense (ULAE and ALAE) • Business Interruption • Demand Surge/Debris Removal 9

  10. What is included in loss model? • Loss Assessments • Involuntary Pools • Guaranty Funds • State Pools - eg FHCF, JUA • Other Losses that destroy equity • Reinsurance Reinstatement Premiums • Un-collectable Reinsurance (eg FHCF) • State Imposed Coverage 10

  11. Metrics on Capital • Multiple Metrics are preferred • monitor single large catastrophe • monitor accumulation of many smaller cats • monitor varying time horizons • Total PML measured gross or net basis to: • Surplus • Earnings • Income 11

  12. Example: S&P’s Catastrophe Methodology • Cat Recovery Ratio: • Net Expected Cat Exposure (NECE) to 3yr avg Pre-tax Income • Cat Exposure Ratio: • NECE to Surplus • Cat Liquidity Ratio: • NECE to Liquid Assets 12

  13. S&P Benchmarks AAAAAABBB Cat Recovery Ratio: 0-1.0 0.5-2.5 2.0-5.0 4-6 Cat Exposure Ratio: 0-15% 10-35% 15-40% 30-60% Cat Liquidity Ratio: 0-10% 7.5-25% 20-50% 40-100% 13

  14. Conclusion • Shareholder value should be measured from many perspectives and over multiple years. • DFA and other analysis can be used to measure the benefit of alternative financial strategies: • finite risk • equity options • cat bonds 14

More Related