My Ceding Company's Data is Not Credible, So NOW What Do I Do?

Directors and Officers Liability

My Ceding Company's Data is Not Credible, So NOW What Do I Do?

Directors and Officers Liability

Linda Bjork, FCAS, MAAA

American Re-Insurance Company

Data SourcesData Sources• National Economic Research Associates• Huron Consulting Group• Towers Perrin - Tillinghast• Stanford Law School• Insurance Services Office (ISO)• Reinsurance submission data• Reinsurance claims and reserving data

National Economic Research AssociatesNational Economic Research Associates“Recent Trends in Shareholder Class Action

Litigation: Bear Market Cases Bring Big Settlements” (2005) Information Available

Review of trends in size of settlements Review of federal filings Discussion on relationship of size of settlement to

amount of investor loss Commentary related to current events

Uses: TrendLimitations: High-level information

Huron Consulting GroupHuron Consulting Group“2004 Annual Review of Financial

Reporting Matters” (2005)Information Available

“Huron’s report analyzes the leading causes of and trend in financial restatements filed in amended filings with the U.S. Securities and Exchange Commission (SEC) for the year ending December 31, 2004.”

Uses: TrendLimitations: High-level information

Towers Perrin - TillinghastTowers Perrin - Tillinghast“2004 D&O Liability Survey Executive

Summary: Understanding the Unexpected” Information Available

Results of D&O liability survey of over 2400 U.S. organizations

Premium cost index Coverage limits by asset size Change in deductibles and retentions Claimant distribution by ownership

Uses: TrendLimitations: High-level information

Towers Perrin - TillinghastTowers Perrin - Tillinghast• “2004 D&O Liability Survey U.S. and

Canadian Results”Cost: $700 ($350 for participants)Data Available

Expert Roundtable Section Survey using repeat participants – 1,347 U.S.

organizations that responded to 2003 and 2004 survey

• “Peer Group Report”Cost: $575 ($385 for participants)

Stanford Law SchoolStanford Law SchoolSecurities Class Action Clearinghouse • Data Available

Clearinghouse Research “Securities Class Action Filings 2004: A Year in Review”: Trends

in number of claims and size of settlement “Post-Reform Act Securities Settlements: Updated Through

December 2004”: Contains analysis on settlements filed after the passage of the Private Securities Litigation Reform Act

Indices of securities class action filings Database of federal class action securities fraud litigation

Filings Settlements Decisions

Stanford Law SchoolStanford Law SchoolSecurities Class Action Clearinghouse - continued• Uses

Trend Size of loss distribution

• Limitations Time required to retrieve data Filings limited to filings in the Northern District of California

since the Private Securities Litigation Reform Act of 1995 became effective

©Copyright © 2001 Stanford Law School. Reprinted with permission.

Insurance Services OfficeInsurance Services OfficeDirectors and Officers Database• Data Available

Loss experience of over 9,000 claims Represents approximately 15% of industry Splits profit and non-profit classes Triangles up to 183 months

Paid/incurred loss and allocated loss adjustment expense (ALAE) Occurrence counts

Size of loss distributions Five years of data (accident or report) Limited loss data for the 100k, 250k, 500k, 750k, 1MM, and total limits policy limits

• Cost: $20,000• Uses

Development factors Size of loss distributions

• Limitations New data: unknown issues

Reinsurance Submission DataReinsurance Submission Data• Data Available (many formats)

Primary rate and price changes Historical loss data

Aggregate loss Large loss

• Uses Development factors Historical price and rate changes Size of loss distributions

• Limitations Quality of data Time and resources needed to collect data

Reinsurance Claims and Reserving DataReinsurance Claims and Reserving Data• Data available

Historical individual losses• Uses

Development factorsComparisons to size of loss distributions

Conditional average severity to layer Probability of a loss exhausting the layer limit given

that it has penetrated into the layer

• LimitationsReinsurance reserving systemCost to extract and manipulate data

Questions?Questions?

Data Source - SpecificsData Source - Specifics• National Economic Research Associates

www.nera.com Publications section

• Huron Consulting Group www.huronconsultinggroup.com Resource Library

• Towers Perrin – Tillinghast www.towersperrin.com/tillinghast Publications

• Stanford Law School Securities Class Action Clearinghouse in Cooperation with Cornerstone Research http://securities.stanford.edu

Additional Data SourcesAdditional Data Sources• Institutional Shareholder Services:

www.issproxy.com• U.S. Equal Employment Opportunity

Commission: www.eeoc.gov• U.S Securities and Exchange

Commission: www.sec.gov

Thank you for your Interest.

This material is being provided to you for information only, and is not permitted to be further distributed without the express written permission of American Re. This material is not intended to be legal, underwriting, financial or any other type of professional advice.

© Copyright 2005 American Re-Insurance Company. All rights reserved. The American Re names and logo are registered marks owned by American Re-Insurance Company.