Monthly Archives: May 2011

TweetWeek through May 30, 2011

  • Data challenges for Solvency II group supervision « Solvency II Wire http://ow.ly/54i4s || As always, thoughtful stuff from S-II Wire
  • Sales agents weren’t snorting drugs in photos: Munich Re’s ERGO | Business Insurance http://ow.ly/534uS || Just doing tequila shots.
  • Tropical Storm Risk predicts more active Atlantic hurricane season | Business Insurance http://ow.ly/52tD7 || 14 named, 8 canes, 4 big ones
  • Insured losses in Joplin tornado may hit $3B: EQECAT | Business Insurance http://ow.ly/51RKj || 1/4 of bldg stock may have been destroyed
  • Solvency II news: 23 May 2011 – Covered Bonds, XBRL « Solvency II Wire http://ow.ly/50K5t

The Week in a Minute: May 27

  • Guy Carpenter summarizes the above-average hurricane forecasts in this chart:

CSU is Colorado State University (the most famous forecasters). NOAA is the National Oceanic and Aviation Administration (the feds), and WSI is Weather Services International.

  • S&P and Best agree that rates are likely to rise. As a result, S&P raised its outlook on property-casualty insurers to positive, from neutral. Best is keeping its outlook neutral.
  • U.S. insurers booked $3.32B in underwriting losses in Q1 – WSJ passes along SNL Financial’s number-crunching. Combined ratio is about 103%.

Next week: I will be at the Casualty Actuaries of Greater New York’s meeting June 1 at the New Yorker Hotel, Eighth Avenue and 34th Street. The next day, I will be speaking at Advisen’s Casualty Insight Conference at the McGraw-Hill Conference Center, 1221 Avenue of the Americas, New York.

Stop by and say hello.

Claim of the Week: Every rose . . . etc.

Via Advisen, the tale of a Florida man seeking $15,000 because he pricked his finger on a rose at Winn-Dixie.

The suit states the roses should have been stripped of their thorns and the stems should have been wrapped more carefully. The litigation also claims anti-bacterial solution was not used in the display buckets.

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Revolutions and hard markets

At last week’s Casualty Actuarial Society Spring Meeting, Guy Carpenter’s Don Mango introduced an interesting idea: The dynamic driving the underwriting cycle is similar to the dynamic that drives chaotic revolutions – think France in 1789, Russia in 1917, the fall of communism in 1989 and the Mideast revolts today.

I’m not sure I buy the theory he touted in his presentation at the CAS session on Systemic Risk in the U.S. Insurance Market. But I think it’s interesting to consider. And his conclusions and mine are pretty close.

Continue reading

Triangles in the news

Something old: In this month edition of the Casualty Actuarial Society’s Actuarial Review, Glenn Meyers introduces a database of company-level Schedule P loss triangles for AY 1987 to 1996.

NAIC made the data available for model-testing. There are triangles for personal auto, commercial auto, medical malpractice, other liability and workers comp. And there are triangles for earned premium, ultimate incurred losses, paid losses, and bulk/IBNR.

Each accident year has 10 years of development data – in other words, the triangle has been squared. The idea is to test a model by using the lower half of the triangle to test the projections based on the upper half of the triangle. I can also see the data driving some college classroom assignments.

Some of the data is at a company level; some is at a group level. The data doesn’t represent the entire industry, though, as the data has been screened for accuracy and consistency. Thus, some companies got dropped.

The data can be downloaded from the CAS web site here.

Something new: AIG filed its group level Annual Statement, and included an extra 28 pages of triangles, SNL reports (sub req).

The giant company insists that it’s not possible to determine whether its reserves are adequate by analyzing the net loss triangles in a typical Schedule P. There are just too many acquisitions and sales, reinsurance treaties and commutations and changes in mix of business. And the rate of change accelerated in 2008 as AIG underwent some structural changes you might have read about. Thus, the extra triangles.

AIG says the additional data don’t make analysis any easier, but do show how convoluted an analysis off Schedule P data is.

The extra triangles appear on this pdf (again, sub. req.), right after Schedule P, Part 7B, Section 6. There are triangles for warranty and excess workers comp (among more company-specific information) if you are looking for those.

TweetWeek through May 22, 2011

The Week in a Minute: May 21, 2011

News

  • Allstate, a little late to the on-line game, buys Esurance and Answer Financial.
  • NOAA’s hurricane forecast is a little better than last year, but not great:
    • 12 to 18 named storms
    • Six to 10 hurricanes
    • Three to six Category 3 or higher.
  • A lot of jokes stemming from Munich Re’s company-sponsored orgy in 2007. But the depersonalization of intimate behavior is not, you know, funny. The ribbons the women wore denoting their availability and accessibility reminds my wife of The Handmaid’s Tale. The marks on their forearms indicated how many men they had encountered reminded me of something even darker.

Viral

Rain + baseball = medieval sport

A mere child of 50, I got carded today.

Today I got carded at the West Palm Beach airport pizza joint. (Corporate policy, of course.) They card everyone. I mean EVERYONE – not just 50-year-old me, but anybody who sits down and orders a drink. The woman next to me, maybe 70, she got carded.

I asked the waitress: Who is the oldest person you ever carded?

104.

Dewar’s on the rocks.

Notes on the new fair value accounting rules

Last week the U.S. and international accounting standards boards (FASB and IASB, respectively) agreed on a common standard for fair value measurement and disclosure. These, of course, will affect U.S. actuaries in how they will value liabilities when we begin to discount loss reserves, something that seems increasingly likely.

The agreement is outlined, vaguely, in this press release. I got further information from this IFRS podcast:

  • The key changes/clarifications are:
    • Fair value is the exit price – the price the asset or liability would command if sold today in the market. (The alternative would have been the entry price – but sometimes that doesn’t exist, like a bloc of assets purchased as part of a company.)
    • The standard is explicit in which market the item should be valued in – it should be in the principle market, and that market should be identified. (If there is no principal market, it should be valued in the most advantageous market for the item.)
  • There are also disclosure requirements:
    • The company must provide data on significant inputs in the valuation.
    • Sensitivity and validation analysis are required.
  • Even so, there are some differences between the FASB and IASB. These differences are driven by different approaches in other accounting standards. But the accounting wonks expect to close those gaps over time.
  • IFRS considers this more of a cleanup measure, as their guidance previously was vague or inconsistent.

The standard will be effective Jan. 1, 2013, but early adoption is OK. As far as I can tell, there’s no need for an ‘as if’ restatement for comparative purposes. More at this pdf.

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