16th July 2007London Underwriting Centre

James Orr

© 2007 Towers Perrin

Casualty Pricing

Lessons from America

© 2007 Towers Perrin 2

Order of Play

Moderator’s Opening Remarks James Orr, Tillinghast

Culture Clash Doug LaCoss, Converium

Solving the Actuarial Puzzle John Buchanan, Platinum Re

Questions & Answers

Luncheon 12:30 to 13:30

© 2007 Towers Perrin 3

Let’s remind ourselves…

Why this is so difficult no direct measure of exposure long lead times and slow development inflationary effects

—economic

—judicial

Why this matters APH “laddering”, Enron, WorldCom

© 2007 Towers Perrin 4

The value of benchmarking

Insurance cover is unique/bespoke rarely traded in a

secondary market

So no common currency not hedgeable

© 2007 Towers Perrin 5

Examples of benchmarking

floated in late 90s not presently live, but

much needed

CLIPS – Commercial Lines Insurance Pricing Survey

GLD – Global Loss Distributions

US since 2003 UK variant launching in

2006

© 2007 Towers Perrin 6

Global Loss Distributions

Data-sharing benchmarking Motor and General Liability Computing various size of loss distributions 4 scenarios for each country Assess impact of assumptions by scenario

Benchmarking Process

Adjust data for loss development and claim inflation

All-industry application of results

Filter claims, fit curve & calculate excess factors

© 2007 Towers Perrin 7

Global Loss Distribution – Example Exhibit

Comparison of Actual and Fitted Data

© 2007 Towers Perrin 8

Global Loss Distribution – Example Exhibit

Comparison of Expected Excess Loss Cost

© 2007 Towers Perrin 9

Global Loss Distribution – Example Exhibit

Incurred Loss DevelopmentUnited Kingdom

Development Years

© 2007 Towers Perrin 10

Our speakers

Doug LaCoss, FCAS Head of Actuarial Pricing – UK/Ireland Converium

John Buchanan, FCAS Senior Vice President Platinum Underwriters Reinsurance Inc