Advanced Topics Panel and Small Group Project

Moderator:Alice Underwood, FCAS, Executive Vice President, Willis Re Inc.

Panelists:Charles Goldie, FCAS, Senior Vice President, Manager of Specialty Lines, Partner Re U.S.Jeff Dollinger, FCAS, Senior Vice President & Chief Actuary, Endurance Reinsurance Corporation of AmericaDaniel R. Kamen, FCAS, Vice President, Folksamerica Reinsurance Company

Paul Ingrey’s “Reinsurance Clock”

Pricing starts to drop

Companies compete to increase market share

Prices fall dramatically

Profits slide

Results horrible

Pricing CANNOT go lower

EUPHORIA!

All companies flourish

Capacity gets expensive

Prices up sharply

Crunch

AM Best writes this decade’s “letter of concern”

Source: David Skurnick, “The Underwriting Cycle”http://www.casact.org/pubs/forum/93sforum/93sf377.pdf

What Triggers Underwriting Cycles?

• Catastrophic events• New legal theories• Interest rates• Wall Street• The demands of growth• Naïve capital

What Fuels Underwriting Cycles?

• You get the money FIRST…

…and you pay claims LATER• Incentive plans• “Feeding the Beast”• Herd mentality• Actuaries?

What Dampens Underwriting Cycles?

• Regulation

• Nimble capital

• Actuaries?

What’s the Actuary’s Role?