General Insurance Convention 2000

The copyright in the content of the conference and seminar papers on this site may rest either with the authors or with the profession. Single copies may be downloaded for private study or research but more extensive copying requires the permission of the copyright owner. Should you wish to make multiple copies of any material please contact the Conference Department. Where an author has not provided written copyright permission for a paper to be granted public access we have not been able to include it with the other conference papers on this part of the site.

We regret that we have been unable to obtain electronic copies of all papers presented at the 2000 Convention. A list is given at the bottom of this page. If you presented one of these papers to the Convention we'd be grateful if you could please forward a copy of it Webservices for posting on the website. Many thanks.

GIRO Working Party Papers

Assessing the financial strength of insurers. - Angell, Kate A; Archer-Lock, Philip; Harris, Simon D; Moss, Gaynore E; Patfield, Stephen M; Sayers, Jeffery E. 29 pages.
The financial strength of an insurer is of interest to many different parties: policyholders, regulators, investors and lenders. The paper discusses the parameters and methodologies used by three of the major parties in assessing financial strength (rating agencies, brokers’ security panels and investment analysts), and discusses the role that actuaries can play in improving and extending these analyses.

The aviation and space insurance market. - Harding, R Justyn; Hart, David M; Tippin, Philip J; Widdows, James I. 50 pages.  (1,192 kb)

Capital Allocation Working Party [summary only]. 2 pages.  (120 kb)

Distribution channels of the 21st century. - Akinlaja, Ade; Biswas, Shamit; Cheesman, L Dick; Eves, Michael J; Patfield, Stephen M; Tripp, Michael H; Westcott, David. 63 pages.
The aim of this report is to stimulate discussion and thought. It is seen not so much as a learned paper, but a series of thoughts to help actuaries (and others) improve their awareness of the fundamental changes taking place in what we currently call the insurance market.
Perhaps the biggest conclusion is that no one knows what our industry will look like in 5 years (let alone 20). The speed at which customers adopt the new technologies, the speed with which current insurance providers adapt and experiment, the imagination that they and other (new) players employ in designing products that truly meet customers’ needs and creatively use customer information are imponderable. Likely scenarios include greater automation, lower expense bases, greater competition brought about by price transparency, further changes to the role of ‘middlemen', globalisation, virtualisation and mobilisation.
All of this will impact on the way that actuaries work in general insurance. Let us open-mindedly seize the opportunities that are being created by this electronic revolution.

Employers' liability insurance. - Gibbs, Jefferson R; Williams, Nathan P; Barton, Catherine E; Callan, Gary L; Slater, David A; Smith, Mike; Whelan, Owen F. 60 pages.  (102 kb)
The paper summarises the background to UK employers’ liability insurance. The paper provides an update to a similar paper presented to the Institute of Actuaries’ 1990 General Insurance Convention. Some, but not all, of the issues considered in that earlier paper are m-addressed within this paper.
It is hoped that the paper will serve as a useful reference point for this area of insurance, providing detail of the legal and contractual framework, the market’s size and current major players, key features of claims and claims reserving and a discussion of current issues affecting this market.
While it was hoped to cover underwriting and rating this was not done. These topics were touched upon in a 1997 General Insurance Convention paper: 'The Premium Rating of Commercial Risks'.

Financial Condition Working Party report.

General insurance and the public interest. - Newton, Derek F B; Byrne, Kathy J; Carmona, Katie; Clark, Ian; Cross, Martin; Hinton, Peter H; Leigh, Julian C T; Silverman, Anthony H; Taylor, Keith M; Tripp, Michael H. 57 pages. (1,527 kb)
The actuarial profession has a duty to serve the public interest, a duty that it intends to fulfil. What it does in pursuit of that duty could affect all actuaries, including those working in general insurance.
This report starts by considering and challenging how the profession attempts to fulfil its public interest role. It looks in particular at the establishment of position statements. The report calls for greater acknowledgement in the formation of the profession’s stance on public interest matters of the views of rank and file members.
The rest of the report looks at various - but far from all - public interest issues in general insurance. It considers these from a variety of viewpoints, highlights some that warrant further research and makes various suggestions regarding others. Some of these suggestions will be eminently acceptable to most readers and others will cause near apoplexy. That is fine, most are suggestions not recommendations, and they are intended primarily to stimulate active thinking.
Providing that those who have extreme reactions to this paper are consequently prepared to air their views in open and coherent debate then the report will have served a useful purpose.
In order to whet readers’ appetites the following sets out what we have done. We have crawled all over compulsory insurance, commission disclosure, the mis-selling/misbuying of insurance products, and access to insurance. We have looked at ways of making private motor cover more affordable for youngsters, at the desirability or otherwise of there being restrictions imposed on premium rating, and at how the rules regarding claims are set. We have investigated whether the existence of captives and of the reinsurance market is in the public interest. Finally, we have considered whether actuaries need to be more intuitive in their communications with the public.

Insurance, games and psychology. - Carpenter, Nigel J; Dolan, Conor B; Lowe, Julian A; Ross, Nick A G; Wilson, John. 23 pages.
This paper describes Game Theory and the psychological aspects of decisionmaking. Both these areas of work have some useful and interesting insights into where traditional/logical financial models may fall down.
The paper considers how aspects of Game Theory and psychology may apply to general insurance, both for actuaries who work in this area, as well as the buyers and sellers of insurance.
The plan is to construct a 'game' to be played before and during GIRO to illustrate some of the points referred to in this paper.

Reinsurance to close. - Bradley, Helen L; Couper, Andrew J; Finlay, Nigel J; Graham, Mark C; Harding, R Justyn; Shah, Shreyas R; Sheaf, Simon H; Vazquez, Jose R. 68 pages.
This paper follows on from the work presented in the Institute of Actuaries’ sessional paper entitled “The Lloyd’s Reinsurance to Close Process”. In particular, after discussing the way in which reinsurance to close (RITC) premiums are currently set, it considers the implications of the introduction of an actuarial sign-off of the RITC.
Any actuarial sign-off on RITC reserves would need to be on the basis that the reserves were reasonable rather than on the basis that they were adequate. The paper discusses the implications of this for the various stakeholders at Lloyd's. Using the results from a reserving questionnaire, it also considers the consistency between different actuaries in assessing a reasonable provision.
The paper then discusses the appropriate risk margin that should be included in the RITC premium. It considers a number of methods for measuring the variability of claim reserves and includes results to demonstrate the level of consistency between them. It also discusses the issues that need to be considered when setting the risk margin. An assumption that is currently often made by syndicates is that the need for a risk margin is offset by a decision not to discount the reserves. The paper investigates the extent to which such an assumption is appropriate.
The paper discusses the variability seen both between different actuaries’ reserve estimates and between the different methods for measuring the variability of claim reserves. It concludes with some comments on the implications of this variability. Since many of the issues considered in this paper are of equal relevance outside the area of Lloyd’s RITC, it is hoped that it will also be of value to general insurance practitioners working outside the Lloyd’s market.

Shareholder value measures in general insurance. - Rodriguez, Richard A; Shaw, Richard A; Laird, G Sean; Bland, Richard H; Fulcher, Graham; Kelsey, Richard. 40 pages.
Investors’ primary interest in a company is its ability to produce value to them in the future. Therefore, investors want information about a company’s potential for creating shareholder value. Value is created by enhancing a company’s prospects and this, to a large degree, stems from a company’s competitive advantage together with the ability of management to choose and implement a strategy that exploits that advantage.
Many managers believe that a gap exists between the internal perception of a company’s value and that of the stock market. The Shareholder Value framework seeks to provide an environment where management can effectively bridge this gap by linking internal and external perspectives by making key aspects of a company’s capabilities and performance more transparent to investors.
This paper provides a brief introduction to Shareholder value and illustrates current practice in a number of industries, in particular the measures and commentaries given in Report and Accounts. Overall, it was found that there was no market agreement as to the most appropriate Shareholder Value measures to use, however, organisations continue to report traditional ones such as Dividend per share, Earnings per sham, Book Value or Net Asset Value per share, Return on Equity or Capital etc.

Stochastic reserving [summary only]. - Brix, Anders; Fagnoni, Herve J B; Monk, Joe C; Skinner, Justin M E. 2 pages.

Structured settlements. - Charles, John M; Ellis, Philip; Boit, Francois C; Maher, Jim M; Cresswell, Catherine; Philps, Richard. 45 pages.  (38 kb)
This paper considers the possible application of structured settlements in personal injury compensation. We consider the advantages and disadvantages of alternative methods of compensation. We outline a prospective view of potential future developments both from the perspective of individual claimants and defendants (usually an insurer).

Guest Speaker

General insurance, the public interest and the Ombudsman. - Walter Merrick, Chief Ombudsman, Financial Ombudsman Service

GIRO Workshops

ART [Alternative risk transfer]. - Jones, Tony; Bain, Derek; Allen, Peter.

Bayesian networks and data mining [summary only]. - Orr, James B; England, Peter D; Cowell, Robert G; Smith, Duncan. 3 pages.

Emerging oportunities in the credit derivative market [summary only]. - Walker, Stephen R. 3 pages.  (64 kb)

The GISC. - Nicholl, Catherine.

How the FSA is going to affect YOU! (or how to avoid going to prison). - Sharma, Paul; Hinton, Peter H. 9 pages.

Lloyd's actuaries - sinners or saints? - McConnell, Bill; McPherson, James.

Lloyd's - battered heavyweight champion of the insurance world. - J J Park & Co Ltd

Making mergers and acquisitions work. - Copeman, Peter.

Parameter uncertainty for extreme value distributions. - Mata, Ana J. 22 pages.

RBC (risk based capital) at Lloyd's [slides]. - Rodriguez, Richard A. 14 pages.

Reserving - best estimates and ranges [slides]. - Gibson, Lis R. 2 pages.  (17 kb)

Reserving standards. - Charles, John.

Shareholder value measures in non-life insurance. - Rodriguez, Richard; Fulcher, Graham; Shaw, Richard; Bland, Richard; Kelsey, Richard; Laird, Sean

Papers submitted for the Brian Hey prize

1st Prize paper
Underwriting cycles and business transfer. - Feldblum, Sholom. 52 pages.
Underwriting cycles, with their wide and puzzling swings in premiums and profitability, challenge the pricing actuary to adapt rates to market realities. Understanding the forces behind insurance price fluctuations is a prerequisite to analyzing market prices.
Underwriting cycles have been ascribed to actuarial rate making procedures, to under-writing philosophy, and to interest fate volatility. These interpretations underestimate the dynamics of the insurance marketplace, and they ignore the competitive pressures that drive insurance pricing.
Underwriting cycles, like profit fluctuations in other industries, reflect the interdependence of rival firms. Strong policyholder loyalty and demand inelasticity hold the allure of large returns for incumbent firms, but the apparent ease of entry into insurance, the lack of market concentration, and the difficulty of monitoring competitors’ prices preclude excessive profits. The interaction of these forces keeps the market in disequilibrium, with continuing price oscillations.
With the decline of rating bureaus and the growing competitiveness of the insurance marketplace, the proficient actuary may no longer set rates based solely on indicated costs. Insurers seek actuaries who understand the competitive forces that drive market prices and who can set future rates that are most advantageous for the firm. They seek actuaries who can ride the underwriting cycle.

2nd prize paper
Great (and not so great) expectations: an endogenous economic explication of insurance cycles and liability crises. - Lai, Gene C; Witt, Robert C; Fung, Hung-Gay; MacMinn, Richard; Brockett, Patrick L. 60 pages.

Presentations for which no paper is available:

If anyone can supply a copy of these papers we will add them to the site.

• Actuaries and the public interest, position statements and the work of the profession. Lowe, Julian A; Newton, Derek F B.
• Affinity group marketing. Tripp, Michael H.
• Around the European motor market in 60 minutes (without speeding). Salvatori, Laura.
• Assessing Causes of Insurer Failure Working Party report.
• Asset liability modelling and management. Shaw, Richard A; Britt, Stephen P.
• Chatset's view of Lloyd's.
• Customer value techniques across Europe. Brossart, Fabrice; Judice, Margarida.
• Developments in Motor Rating Working Party report.
• The e-commerce revolution in the personal lines market. Murphy, Karl P.
• Enhancing underwriting capability using Lloyd's - a new opportunity? Bulmer, J Richard.
• Equitas - managing long tail risk.
• IASC accounting proposals. Clark, Peter.
• Improving interaction with auditors. Creedon, Seamus; Mackie, Fergus J; McLaren, Melanie.
• The life cycle of a personal lines product. Winter, Richard D.
• Making mergers and acquisitions work. Copeman, Peter J.
• Managing change. Gibbs, Jefferson R.
• Managing the capital base. Ryan, John P.
• MBAs for general insurance actuaries. Jones, Mike.
• Mortgage indemnity - an update. Slater, David A.
• Motor competitive market analysis. Ryan, Jim.
• Motor rating - current techniques and a personal injury claims analysis. Anderson, Duncan.
• New developments in catastrophe modelling. Mitchell, Andrew J.
• Perspectives from the past. Ryan, John P.
• Question time. Richmond, Clare M; Felisky-Watson, Kendra; Seago, Wendy A; Hindley, David J; Morgan, Kathryn A.
• Reinsurance commutations. Joseph, Bryan R P; Collins, Jonathan A.
• Risk measures in DFA (dynamic financial analysis). Czernuszewicz, Andrzej J; England, Peter D.
• The role of the actuary in the EU.
• Stochastic claims reserving: demystifying Mack's model. Verrall, Richard J; England, Peter D.
• An update on developments in risk securitisation. Gibson, Nicholas.
• Utility pricing - an imposition? Brockman, Michael J.
• What can we learn from life actuaries? Sher, Martin.

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