WC Cat Reinsurance
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Transcript of WC Cat Reinsurance
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 ZZ
WC Cat ReinsuranceWC Cat Reinsurance
Seth Ruff, FCASSeth Ruff, FCASAssistant Vice President, Treaty Assistant Vice President, Treaty
UnderwritingUnderwritingSwiss Re Underwriters Agency Inc.Swiss Re Underwriters Agency Inc.
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Agenda
Stu
ff w
e ask
for
What we do with it
Issu
es
Modeling
fun
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Here’s what we’d like to see
• Hazard Groups become less interesting
• More concerned with concentrations
• Drill down to individual account level
Exposure
Experience• Typical trend/chop/develop process = thing of the past
• Multi-claimant occurrence detail = thing of the future
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Stochastic Modeling FunSimulatedSimulated
LossesLosses ContractContractStructureStructure
EconomicEconomicProfit/(Loss)Profit/(Loss)
E[Profit]E[Profit]Capital RequiredCapital Required
ROCROC
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Building the Loss Distribution
• Frequency of “Large” occurrences
• Number of claimants per large occurrence
• Severity distribution of each claimant
• Non-modeled perils - the “Armageddon” factor
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Loss Dist - Chart
Simulated Annual Loss
0 2 4 6 8 10 12 14 16 18 20 22 24 26
Loss ($m)
Rel
ativ
e P
rob
abil
ity
Loss Free
Partial Loss
Armageddon
...Twice
Reinstated Limit
…Plus Partial
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Reinsurance Contract Structure
• Retention and Limit
• Maximum Any One Life (MAOL)
• Reinstatements
• Premium
• Loss sensitive features
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Profit - Chart
Simulated Economic Profit
(20) (18) (16) (14) (12) (10) (8) (6) (4) (2) 0 2 4
Profit/(Loss) ($m)
Rel
ativ
e P
rob
abil
ity
Lose!
Win!
Find new job.
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Drivers of Capital Requirements
• Profit/(Loss) distribution
• Correlation with portfolio
• Accounting/regulatory/rating agency impact
• The basis of coverage
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Which do you prefer?
50
50
50
50
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Swiss Re Underwriters Agency Inc. WC Cat Presentation - CAS Spring Meeting 2002 Z
Open Issues
• Terrorism
• “Carve-out” v. Full P&C Coverage
• Standard terms and conditions
• Capacity and Security