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
– 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
Guy Carpenter Presentation - Seminar on Reinsurance
June 6, 2005 Hamilton Bermuda
2
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
Guy Carpenter Presentation - Seminar on Reinsurance
June 6, 2005 Hamilton Bermuda
3
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
Guy Carpenter Presentation - Seminar on Reinsurance
June 6, 2005 Hamilton Bermuda
4
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)
Guy Carpenter Presentation - Seminar on Reinsurance
June 6, 2005 Hamilton Bermuda
5
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

…..
Guy Carpenter Presentation - Seminar on Reinsurance
June 6, 2005 Hamilton Bermuda
6
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
Guy Carpenter Presentation - Seminar on Reinsurance
June 6, 2005 Hamilton Bermuda
7
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
Guy Carpenter Presentation - Seminar on Reinsurance
June 6, 2005 Hamilton Bermuda
8
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
Guy Carpenter Presentation - Seminar on Reinsurance
June 6, 2005 Hamilton Bermuda
9