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The Role of the Actuary in General Insurance

The Role of the Actuary in General Insurance. Roger Bevan FIA. What is an actuary?. An actuary is someone who provides commercial, financial and prudential advice on the management of assets and liabilities – especially where long-term management and planning are critical factors

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The Role of the Actuary in General Insurance

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  1. The Role of the Actuary in General Insurance Roger Bevan FIA

  2. What is an actuary? An actuary is someone who provides commercial, financial and prudential advice on the management of assets and liabilities – especially where long-term management and planning are critical factors Per The Actuarial Profession website

  3. Actuaries in UK General Insurance

  4. Why? Fast Growing • Actuaries identified opportunity to apply skills to a business that is all about risk with plenty of data to be analysed • Every individual or company has to have general insurance

  5. Some History • 1960s Seventeenth International Congress; data • 1970s Vehicle & General collapsed; exam syllabus • 1980s London Market Actuaries Group • 1990s Equitas • 2000s Morris Review; capital assessment

  6. Nature of the General Insurance Product

  7. The General Insurance Product Personal Commercial

  8. Property Damage • House • Contents of House • Office • Car • Marine Property • Aviation Property

  9. Property Damage Claims Variable • Prompt notification • Good estimate of claim amount • Domestic – consistent size and distribution • Commercial – wider distribution • Exposure to catastrophe – storms, floods • … but marine – delays, disputes, large amounts

  10. Liability • Employers • Motor Third Party • Public • Product • Professional Indemnity

  11. Liability claims Complex • Uncertainty re existence of liability • Lengthy settlement process • Long-tailed • Wide distribution of claim amounts • Very large individual claims • … but motor claims less of a problem

  12. Examples of claims • Personal - own experience • hurricane 1987 • motor • flood • Industry – Actuary magazine • asbestos (UK) • British Airways crash landing • Pollution from sunken oil tanker

  13. Product Control Cycle

  14. Who employs general insurance actuaries?

  15. Key aspects of these rolesper individual actuary feedback

  16. Key current issues in these rolesper individual actuary feedback

  17. The actuary’s role in pricing risk premium Rating methodology • Policy and claims data • Burning cost premium = total claims total exposed to risk • Risk premium = total projected claims total projected exposed to risk Adjustments for actual premium …

  18. … adjustments for actual premium gross premium • Investment income • Expenses • Commission • Cost of reinsurance • Cost of capital • Policy conditions • Profit margin

  19. The actuary’s role in reserving £ $ eu £ $ eu • Outstanding reported claims • Incurred but not reported claims • Unearned premium reserves • Reserves for expenses More about outstanding reported claims …

  20. … more about outstanding reported claims $ eu • Statistical methods – run-off triangle • Chain ladder • Average cost per claim • Loss ratio • Blend of above – Bornhuetter-Ferguson • Non-statistical methods £

  21. The actuary’s role regarding capital requirements eu eu • Individual capital assessment • Risk • Stress and scenario testing $$ ££

  22. Risk

  23. Data Risk

  24. Actuarial Techniques Data Risk

  25. Actuarial Techniques Data Risk Financial Soundness

  26. Actuaries have key role Actuarial Techniques Data Risk Financial Soundness

  27. The Role of the Actuary in General Insurance Roger Bevan FIA

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