General Insurance Convention 1990
Newquay, 1990
Claims run-off patterns update. - Hinton, Peter H; Macnair, Andrew J. 82 pages.
The attached tables update those in Section C of the report of the Working Party on Claims Run-off Patterns presented to the General Insurance Study Group in October 1989, by including data from the 1988 returns in their calculation. The methodology is as described in Section B of that report, to which reference should be made, except that minor changes to the text would be appropriate to accommodate the extra year of run-off. Data discrepancies were again present and were treated in similar fashion to last year.
Commutation Working Party report. - Matthews, Peter N; Tomlinson, David I; White, Martin G. 55 pages.
Commutation could be described as a means outside litigation, arbitration, repudiation, or liquidation, whereby both parties of a potential dispute can arrive at an acceptable financial settlement.
The many reasons why cedant or reinsurer may wish to end a particular contractual relationship are described below. Generalising, it is unlikely that there will be pressure from either party for a commutation in the situation where the financial and administrative integrity of both parties is high. Commutations tend to be associated with weakness on one side or another, to which may be added commutations of treaties with disastrous results or which form part of the settlement of a dispute. Reduction of administration costs is rarely a prime motive.
Commutations are an exciting opportunity for the actuarial profession. More and more are being negotiated and there is reason to believe that this trend will continue. Furthermore, because it is clear to all parties involved that estimation and interpretation of reserves is fundamental to negotiating a commutation, there is scope for a far greater degree of actuarial involvement in the commutations that are already taking place. Where there has been actuarial involvement on behalf of either of the parties involved in a commutation, it has been easy to demonstrate added value.
Employers' liability insurance. - Malde, Shailesh A; Andrews, Timothy E; Brickman, Simon J; Brockman, Michael J; Hitchcox, Andrew N; Larner, Kenneth P W; Lockyer, John. 57 pages.
The paper presented at last year's GISG by Nicholas Michaelides' Working Party on Liability Insurance gave an excellent introduction to the general principles of Liability Insurance - and this report attempts to cover the area of Employers' Liability (EL) insurance in some depth.
It is hoped that the paper will be of educational benefit both to actuaries working in General Insurance and to students of the Institute's examinations. It collects the important aspects of EL insurance into a single document and should prove to be a valuable source of reference. The paper also highlights areas in which the actuary's skills may be applied and it is hoped that this paper will promote a wider use of actuarial techniques in EL business.
Latent claims. - Latent Claims Working Party. 82 pages.
This report is largely a survey of the background to the main types of latent claims currently being faced by UK insurers, reinsurers and syndicates, together with some suggested approaches to reserving for such claims. We also conducted a survey of reserving practices, which is included. Although the report is long, each section is largely self-contained, and it should be possible to read only those sections of interest without loss of understanding. We include a detailed contents section to aid reference. The Working Party members are still learning about many of the issues covered by the paper, and inevitably there will be some factual errors. The report should therefore be seen as part of the process of getting at the truth, rather than as a definitive statement of the current position. We hope that the review of the paper by actuaries and others will identify and correct these errors.
Mortgage-related insurances. Report of the Pecuniary Loss Working Party. - Barlow, Caroline; Brickman, Simon J; Field, Richard J; Hooker, Nigel D; King, Judith; Masters, Graham A; Sanders, David E A. 95 pages.
Mortgage Indemnity Guarantee (MIG) Insurance is a class of business which appears to have received relatively little actuarial attention in the past, although it has been transacted for a considerable number of years. This lack of actuarial investigation may be associated with the fact that MIG was historically perceived as profitable, even after the payment of substantial commissions to the lending institutions, and may even have been regarded as "money for old rope". The apparent profitability was reinforced by the accounting conventions employed, and latterly profits may have been more apparent than real.
Portfolio transfers. - Matthews, Peter N; Tomlinson, David I; White, Martin G. 15 pages.
This note arose out of, and forms an attachment to, a paper on the subject of commutation. Depending upon their needs, it is intended to give readers a background note or a brief introduction to portfolio transfers.
Reinsurance and retentions. - London Market Actuaries Group; Bradshaw, Anthony; Bride, Martin; English, Andrew B; Hindley, David J; Maher, George P M.
Volume I. 38 pages.
Volume II. 33 pages.
Exhibits. 50 pages.
We have defined the retention of a general insurance operation as all business which is not ceded including coinsured layers of excess of loss reinsurance, and any unplaced parts of the operation's reinsurance programme. We stress that we have used the word retention in its literal sense, namely, an amount retained. We consider that a company which has, for example, reinsured itself £90 million excess of £10 million has decided to retain claims excess of £100 million. The remainder of the paper is divided into three sections. Section 2 covers some aspects of the current reinsurance market, Section 3 a discussion of the factors that influence the reinsurance programme and retention philosophy, and Section 4 summarises the practical methods for estimating aggregate claim distributions and retentions that we have reviewed. Detailed documentation of the application of these methods is contained in the appendices.
Reinsurance to close at Lloyd's and related issues. - Rice, Hugh; White, Martin G. 11 pages.
These notes have been prepared in response to the increasing interest in Lloyd's expressed at the 1989 GIRO Conference.
For the purposes of the discussion at 1990 GIRO, Section 3 is not essential. It was felt that some notes on data would be of practical interest, but they are not essential to understanding the structure of Lloyd's. The authors are aware that many readers will have little knowledge of Lloyd's, whilst others will be very familiar with Lloyd's. In order that everyone can gain something from the session, these notes attempt to give a brief outline of Lloyd's structure, concentrating on those aspects of the structure which will be of most interest to actuaries.
Reinsurance to close - stochastic method. 21 pages.
This method is based on a general underlying model of the claims process. Risk theory provides a basis for both the random and systematic components of the run off. The method is free from dependence on any particular form of error structure (for example Log Normal). The model is fitted by Fishers scoring method (this is the method used in the GLIM package) which has the advantage that it is fitted directly to the original data without transformation (for example taking logs). Thus negative incremental data do not present a problem. The variation in development pattern across years of origin is estimated from the data and modelled by use of the Kalman filter.
The method is able to project the run off beyond the observed range of the data and, where available, may be fitted to data whose development period is less than annual (for example quarterly). The model is also able to model the non-uniform build up of exposure during early development periods.
Reinsurance to close - traditional methods [Exhibits]. - Larner, Kenneth P W. 24 pages.
Report of Reinsurers' Security Working Party. - Hart, David M; Carroll, Patrick S; Dean, James; Downing, Peter N; Green, Peter A G; Leigh, Julian C T; MacAulay, Glyn; Miranthis, Constantinos; Tomlinson, David I. 41 pages.
The Working Party adopted the following as its terms of reference:-
1) To provide material which may be of assistance to reinsurance security committees;
2) To provide guidance to those responsible for the making of provisions against current and potential future bad debts within the past and current reinsurance programme;
3) To research and document what additional data would be of assistance in an improved analysis.
It became apparent at a fairly late stage that the ideas which were being formulated on reinsurers also had considerable applicability to direct insurers. Accordingly, the questionnaire used was drafted in terms of (re)insurers and, in other parts of the paper, the use of the term reinsurer or reinsurance should be taken to include insurer or insurance where appropriate.
Report of the Working Party on Europe. - Abbott, William M; Akhurst, Ron B; Larner, Kenneth P W; Michaelides, Nicholas; Moliver, Michael R; Moyle, Keith M; Tripp, Michael H. 53 pages.
Much has been happening recently, including publications of the third 'framework' draft directive to complete freedom of non-life insurance services in Europe. Progress continues on directives on strict liability, accounting for insurance and the diplomas directive, which will affect the rights of actuaries to practice in other European countries and/or join other associations.
The Working Party is aiming to produce as up-to-the-minute as possible digests of these directives for the conference, with particular emphasis on their actuarial implications.
In addition, we have undertaken a major European research project, aimed at summarising the state of play for non-life actuaries in many European countries. We have now received a substantial amount of material from our various contacts, although one or two replies are still outstanding. This will form a valuable source of reference for the future and we will be summarising what is at present available for the GISG meeting.