Current Issues in NonLife Insurance 2nd YOUNGER MEMBERS CONVENTION Mohammad Khan

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Current Issues in Non-Life Insurance2nd
YOUNGER MEMBERS CONVENTIONMohammad Khan
abcd

• 1-2 December 2003
• Moat House, Glasgow

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What am I talking about?

• Whats General Insurance?
• General Market Situation
• Hurricanes, Storms, Fires Terrorist attacks
• US UK Asbestos
• Investment Bank problems
• Liability or Why Is It Becoming More Expensive To
  Be An Actuary?
• Implications of Regulations

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Whats General Insurance 1?

• Any insurance thats not life insurance
• Uncertainty relating to
• severity and
• frequency of claims.

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Whats General Insurance 2?

• Personal Lines
• Commercial Lines

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General Market Situation

• Great time to be writing General Insurance
  business?
• Excellent underwriting conditions and good loss
  experience

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General Market Situation 2

• But what about after the market turns..?

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General Market Situation 3

• Example Premium rate movements 31 December 2002
  renewal season Marine
• Liability 20
• Hull 25
• Cargo 15
• Specie 15
• Energy Offshore 40
• Energy Onshore 20

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General Market Situation 4

• How long will this market last?
• Where are we in the underwriting cycle?
• Do we understand amplitude of the underwriting
  cycle?
• At what parts of the underwriting cycle do we
  make profits?
• What actions should we take?

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General Market Situation 5

• Personal Lines
• Competition
• Household
• Motor
• Commercial Lines
• Hurricanes, Storms, Fires Terrorist attacks
• US UK Asbestos
• Investment Bank problems
• Liability or Why Is It Becoming More Expensive To
  Be An Actuary?

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Hurricanes, Storms, Fires Terrorist attacks

• Hurricanes, Storms and Fires
• World Trade Center (still..)

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Hurricanes, Storms, Fires Terrorist attacks 2

• Hurricane Isobel
• Colorado Winter Storms
• PO Diamond Princess
• Hurricane Lili
• Prestige
• Why not SARS(?)
• Why not New York blackout(?)

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Hurricanes, Storms, Fires Terrorist attacks 3
World Trade Center
BI
Property
Liability
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US UK Asbestos What is asbestos?

• Known as the miracle mineral
• It is a naturally occurring fibre that is in
  general
• Incombustible
• Flexible
• Durable
• Strong and
• Resistant to heat duration and wear
• An ideal material with many uses

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US UK Asbestos Where was asbestos used?

• Almost everywhere
• Shipbuilding
• Boilers and machinery
• Electricity generation plants
• Oil refineries
• Wallpaper
• Textured paints

• Building insulation
• Pipe coverings
• Wire coatings
• Asbestos cement
• Roofing
• Brake linings
• Wall and ceiling tiles and coatings
• Cement

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US Asbestos Whats the issue?
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US Asbestos Whats the issue 2?

• Nearly one half of all firms that have filed for
  bankruptcies due to asbestos liabilities have
  done so in the past two years
• Market estimates of US asbestos are up to 275bn
• Joseph Stiglitz has estimated that the US
  asbestos problem has cost 60,000 people their
  jobs at an economic cost of up to 3bn
• Utility worker awarded 47m for mesothelioma
• The Economist estimated that 94 of asbestos
  claims filed in 2001 were for unimpaired claims

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US Asbestos Whats the issue 3?

• Headline reserve increases by large US insurers
• Settlements
• Norfolk FELA case
• Tort reform at state level and in Congress?
• Greater awareness regarding unimpaired claims

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UK Asbestos Whats the issue?

• Market estimates of UK asbestos range from 7bn
  to 18bn
• Impact on individual insurers can vary
  significantly from the market experience
• Far less bankruptcies expected compared to the US
  although have been some casualties
• Builders Accident
• Chester Street

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Investment Bank Problems

• Laddering
• Research
• Spinning
• Others

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Liability or Why Is It Becoming More Expensive To
Be An Actuary?

• Global problem
• Poor market experience
• Perceived unavailability for some
• Media/political interest

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Liability or Why Is It Becoming More Expensive To
Be An Actuary 2?
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Liability or Why Is It Becoming More Expensive To
Be An Actuary 3?
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Liability or Why Is It Becoming More Expensive To
Be An Actuary 4?

• Changes in Expectations and Attitudes in the UK
• Compensation Culture
• Establishment of legal trends seen in US
• Political interest in the UK
• DWP
• OFT
• FSA

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Implications of Regulations

• CP190
• IAS 2 phases
• Phase 1 at a minimum implementation of local
  GAAP by 2005.
• Phase 2 implementation currently unknown.
  However, disclosure of fair value amounts by
  2006 in notes to the accounts required
• Market value margins

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• Any Questions?