University of IllinoisUniversity of Illinois Finance 230 – Intro to InsuranceFinance 230 – Intro to Insurance

Presentation by Presentation by

Gail M. Ross, FCAS, MAAAGail M. Ross, FCAS, MAAA

October 13, 2006October 13, 2006

AgendaAgenda

BackgroundBackground

Insurance / Actuarial CareerInsurance / Actuarial Career

CAS ActivitiesCAS Activities

Challenges for the P/C ActuaryChallenges for the P/C Actuary

Exciting AssignmentsExciting Assignments

Contact InfoContact Info

Q&AQ&A

BackgroundBackground

Chicago NativeChicago Native Grew up in SkokieGrew up in Skokie Graduated Niles EastGraduated Niles East

CollegeCollege B.S. Math – University of IllinoisB.S. Math – University of Illinois M.A. Math – University of MiamiM.A. Math – University of Miami

Insurance / Actuarial CareerInsurance / Actuarial CareerBegan with Travelers Insurance Co.-1976Began with Travelers Insurance Co.-1976 Underwriter in Miami Field Office – 2 Yrs.Underwriter in Miami Field Office – 2 Yrs. Transferred to Hartford Home Office – 8 Yrs.Transferred to Hartford Home Office – 8 Yrs.

Product Management DepartmentProduct Management Department

Actuarial DepartmentActuarial Department

Got into Consulting Upon Becoming an Got into Consulting Upon Becoming an FCASFCAS Tillinghast – 1985Tillinghast – 1985 Am-Re Consultants – 1995Am-Re Consultants – 1995 Milliman - 2003Milliman - 2003

Casualty Actuarial SocietyCasualty Actuarial Society

Became active in CAS in 1985Became active in CAS in 1985 Volunteered on CommitteesVolunteered on Committees Appointed Chair of Syllabus CommitteeAppointed Chair of Syllabus Committee Asked to Chair Task ForcesAsked to Chair Task Forces Elected to the Board of DirectorsElected to the Board of Directors Elected as President-Elect (2001/2002)Elected as President-Elect (2001/2002) Served as President (2002/2003)Served as President (2002/2003) Served as Board of Directors Chair (2003/2004)Served as Board of Directors Chair (2003/2004) Current Chair of CAS Centennial Committee (2014)Current Chair of CAS Centennial Committee (2014)

Challenges for the P/C ActuaryChallenges for the P/C Actuary

Setting the Price to Charge for the Setting the Price to Charge for the Insurance ProductInsurance Product

Non-Insurance PricingNon-Insurance Pricing

Insurance PricingInsurance Pricing

Challenges for the P/C ActuaryChallenges for the P/C Actuary

Determining the appropriate level of Determining the appropriate level of reserves to set – varies by exposure:reserves to set – varies by exposure: Short “Tail”– Property , Physical DamageShort “Tail”– Property , Physical Damage Medium “Tail” – Auto LiabilityMedium “Tail” – Auto Liability Long “Tail” – Workers CompensationLong “Tail” – Workers Compensation What Will the Lawyers Dream Up Next “Tail” – What Will the Lawyers Dream Up Next “Tail” –

Asbestos, Pollution, Tobacco, Firearms, MoldAsbestos, Pollution, Tobacco, Firearms, Mold

Challenges for the P/C ActuaryChallenges for the P/C Actuary

Enterprise Risk Management – Helping Enterprise Risk Management – Helping businesses manage businesses manage allall risks facing the risks facing the organization:organization: Hazard RiskHazard Risk Financial RiskFinancial Risk Operational RiskOperational Risk Strategic RiskStrategic Risk

Enterprise Risk Management - Enterprise Risk Management - ExampleExample

Coldhard Steel Company (CSC) Coldhard Steel Company (CSC) manufactures steel products. It’s a family manufactures steel products. It’s a family owned business operating in the owned business operating in the Midwestern US and has a unionized labor Midwestern US and has a unionized labor force.force.

Enterprise Risk Management - Enterprise Risk Management - ExampleExample

Types of RiskTypes of Risk Hazard RiskHazard Risk

11stst Party – Loss to building & equipment due to fire, Party – Loss to building & equipment due to fire, tornadoes, etc.tornadoes, etc.

22ndnd Party – Injury or illness to employees included Party – Injury or illness to employees included work related injurieswork related injuries

33rdrd Party – Slip/falls, product recalls, product Party – Slip/falls, product recalls, product lawsuitslawsuits

Enterprise Risk Management - Enterprise Risk Management - ExampleExample

Types of RiskTypes of Risk Financial RiskFinancial Risk

Foreign exchange risk - CSC has large volumes of Foreign exchange risk - CSC has large volumes of sales in Latin Americasales in Latin America

Commodity risk – changes in prices of raw Commodity risk – changes in prices of raw materialsmaterials

Credit risk – CSC has a large accounts receivableCredit risk – CSC has a large accounts receivable

Enterprise Risk Management - Enterprise Risk Management - ExampleExample

Types of RiskTypes of Risk Operational RiskOperational Risk

Labor relationsLabor relations

Family succession planningFamily succession planning

Assessment of the reliability of machinery and Assessment of the reliability of machinery and processesprocesses

Enterprise Risk Management - Enterprise Risk Management - ExampleExample

Types of RiskTypes of Risk Strategic RiskStrategic Risk

CompetitionCompetition

Regulatory/political issuesRegulatory/political issues

Technological advances that could leave CSC Technological advances that could leave CSC obsoleteobsolete

Enterprise Risk Management - Enterprise Risk Management - ExampleExample

The Casualty Actuary will:The Casualty Actuary will: Assess the hazard riskAssess the hazard risk Work with others to assess the financial, Work with others to assess the financial,

operational and strategic risksoperational and strategic risks Develop models that will integrate all of the Develop models that will integrate all of the

potential risk outcomes/probabilities so that potential risk outcomes/probabilities so that an overall impact on CSC’s results can be an overall impact on CSC’s results can be understood and managed.understood and managed.

Actuarial CareerActuarial Career

Why Consulting ?Why Consulting ? DiverseDiverse ChallengingChallenging Projects Completed in Short TimeframeProjects Completed in Short Timeframe Deal w/ Senior ManagementDeal w/ Senior Management Global OpportunitiesGlobal Opportunities Very Good CompensationVery Good Compensation

Actuarial CareerActuarial Career

Why Why NotNot Consulting ? Consulting ? Long HoursLong Hours Often UnpredictableOften Unpredictable Actuaries in the “Hot Seat”Actuaries in the “Hot Seat”

Exciting AssignmentsExciting Assignments

M&A Due Diligence AssignmentsM&A Due Diligence Assignments

Operational ReviewsOperational Reviews

Reserve ReviewsReserve Reviews

Captive Insurance AssignmentsCaptive Insurance Assignments

Closing ThoughtClosing Thought

““It’s not your father’s old insurance It’s not your father’s old insurance world anymore!”world anymore!”

Web-Sites and Contact InfoWeb-Sites and Contact Info

Good web-sites to learn more about an Good web-sites to learn more about an actuarial career:actuarial career: www.BeAnActuary.orgwww.BeAnActuary.org www.casact.orgwww.casact.org www.actuarialfoundation.orgwww.actuarialfoundation.org

My contact info:My contact info: gail.ross@milliman.comgail.ross@milliman.com

Actuarial jokes:Actuarial jokes: http://users.aol.com/fcas/jokes.htmlhttp://users.aol.com/fcas/jokes.html

QuestionsQuestions

Thank You !Thank You !