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WELCOME!
Opening RemarksTom Ruggieri,
Co‐Founder, Advisen Ltd.
Keynote PresentationKevin Kelley,
CEO, Ironshore
State of the Casualty Insurance Market/Managing the
Underwriting CycleDave Bradford,
Chief Knowledge Officer, Advisen
State of the Casualty Insurance Market/Managing the Underwriting Cycle
• Dave Bradford, Chief Knowledge Officer, Advisen – Moderator
• Lou Iglesias, Chairman and CEO, Commercial Casualty, Chartis
• Kevin Whitehead, SVP, Excess Casualty, Zurich• Jonathan Zaffino, Managing Director,
US Casualty Practice Leader, Marsh• Todd Germano, President of Property & Casualty, Allied
World US• Jeremy Johnson, President, Cat Excess Liability, Chartis
Summary• Buyers to benefit from continued competitive
market• Slow economic recovery keeps pressure on rates• Property catastrophes have not absorbed enough
capacity to influence soft casualty market• Low interest rates, diminished loss reserves &
future cats may encourage firming• M&A and international expansion offer growth
opportunities
The pricing cycleADVx™ Composite Pricing Index
The pricing cycleADVx™ General Liability
The pricing cycleUmbrella/Excess Rate per Million
The pricing cycleSurplus as % GDP
Legacy of the Great Recession• Fewer exposure units
• Companies downsized & went out of business• Written premium down, but policyholders’ surplus up
• Stock markets recovered much sooner than overall economy
• Low interest rates boosted bond prices• Insurers competing for piece of a shrinking pie• Steady recovery beginning to fuel demand
Other factors• Potential upward pressure
• Catastrophe losses• Very low interest rates• Loss reserve “harvesting”• Bond default risk
• Potential downward pressure• Continued strong stock markets• New capital
Advisen forecast• Largely more of the same• Perhaps some firming by 2012, but sharp
increases unlikely• Increase in insurance company M&A likely
• Mostly “bolt on” opportunities• Non-US business increasingly attractive
State of the Casualty Insurance Market/Managing the Underwriting Cycle
• Dave Bradford, Chief Knowledge Officer, Advisen – Moderator
• Lou Iglesias, Chairman and CEO, Commercial Casualty, Chartis
• Kevin Whitehead, SVP, Excess Casualty, Zurich• Jonathan Zaffino, Managing Director,
US Casualty Practice Leader, Marsh• Todd Germano, President of Property & Casualty, Allied
World US• Jeremy Johnson, President, Cat Excess Liability, Chartis
BREAK
Tales From The Front Lines: Hot Issues In Casualty
Litigation and Claims• Seth Rachlin, Advisen – Moderator• Max Stern, Partner, Duane Morris• Mark Wade, Senior Executive VP, Chief Claims
Officer, Arch• Paul Tuhy, Head of Global Claims, XL
Predominant Industry Breakdown for Select Large Casualty Losses
Based on 3,016 Losses >=$1m, Total $135.8b Source: Advisen Ltd. MSCAd database
Tales From The Front Lines: Hot Issues In Casualty
Litigation and Claims• Seth Rachlin, Advisen – Moderator• Max Stern, Partner, Duane Morris• Mark Wade, Senior Executive VP, Chief Claims
Officer, Arch• Paul Tuhy, Head of Global Claims, XL
LUNCH
Sponsored by FPN
Emerging Risks: How to Identify And Proactively Manage the Next Casualty Disaster
• Jim Blinn, Principal, Advisen – Moderator• Chris Maleno, COO, ACE USA• Bob Reville, Senior Economist, Rand• Tom Tucker, CUO, Chartis
Single Event Case Filings –
Imperial Sugar
Emerging Risk Case Filings – Climate Change
Can We Identify Risks Before the Claims?WE Cooke (1924) published medical journal article on hazards of asbestos dust
Merewether and Price (1930) publish UK report on asbestos dust dangers
Lynch and Smith (1935) hypothesize link between asbestos and cancer
Dodd (1955) demonstrates excess mortality from lung cancer among asbestos workers
Wagner (1960) describes mesothelioma from asbestos exposure
Selikoff (1964) describes mortality of insulation workers in JAMA
1920 1990
1969: Borel v. Fibreboard
Emerging Risks: How to Identify And Proactively Manage the Next Casualty Disaster
• Jim Blinn, Principal, Advisen – Moderator• Chris Maleno, COO, ACE USA• Bob Reville, Senior Economist, Rand• Tom Tucker, CUO, Chartis
Making The Numbers: TranslatingFinancial Targets Into Underwriting Policy• Dave Bradford, Chief Knowledge Officer,
Advisen – Moderator• Lou Iglesias, Chairman and CEO,
Commercial Casualty, Chartis• Susan Rivera, President and CEO,
V3 Insurance Partners• James Lynch, Actuary and Author• Alan Murray, VP and Senior Credit Officer, Moody’s• John Doyle, VP, Philadelphia Insurance
ROE Comparison
Company Peer Group Industry Group Economic SectorCincinnati Financial P&C Insurers Insurance Financials
7.43% 8.90% 10.93% 7.86%
Cincinnati Financial Group
Source: Advisen.com
Company goal: risk‐free + 750bp
Goal by Line of Business
Making The Numbers: TranslatingFinancial Targets Into Underwriting Policy• Dave Bradford, Chief Knowledge Officer,
Advisen – Moderator• Lou Iglesias, Chairman and CEO,
Commercial Casualty, Chartis• Susan Rivera, President and CEO,
V3 Insurance Partners• James Lynch, Actuary and Author• Alan Murray, VP and Senior Credit Officer, Moody’s• John Doyle, VP, Philadelphia Insurance
BREAK
The View From The Top:The Reinsurer’s Perspective on the
Casualty Market• Dave Bradford, Chief Knowledge Officer,
Advisen – Moderator• David Dee, Head of Casualty Underwriting,
National Clients, Munich Re• Emil Metropoulos, SVP, WC and Casualty Specialty
Practice, Guy Carpenter• David Gansberg, EVP, Arch Re
Casualty AggregationsThe Big Dig: $600M+ to date
Source: Advisen MSCAd™
The View From The Top:The Reinsurer’s Perspective on the
Casualty Market• Dave Bradford, Chief Knowledge Officer,
Advisen – Moderator• David Dee, Head of Casualty Underwriting,
National Clients, Munich Re• Emil Metropoulos, SVP, WC and Casualty Specialty
Practice, Guy Carpenter• David Gansberg, EVP, Arch Re
The Broker/Insurer Scorecard
• Tom Ruggieri, CEO, Advisen – Moderator• Len Resto, Director of Risk Management, Global
Crossing• Paul Piazza, Corporate Risk Management, Honeywell• Debbie Gramer, Risk Manager, Arrow Electronics
Services RMs are Interested in Purchasing
Source: Advisen/RIMS Benchmark Survey
The Broker/Insurer Scorecard
• Tom Ruggieri, CEO, Advisen – Moderator• Len Resto, Director of Risk Management, Global
Crossing• Paul Piazza, Corporate Risk Management, Honeywell• Debbie Gramer, Risk Manager, Arrow Electronics
Keynote PresentationMario Vitale,
President, Aspen US
Thank You For Attending Check www.advisen.com for
information on our other upcoming events
Presented by Mario Vitale - President of Aspen US Insurance
Casualty Insights ConferenceJune 2, 2011
U.S. Casualty Opportunities and Challenges
• Current Market Conditions and Results• Market Outlook• Reasons for Optimism and Concern • Impact of Investment Income • Emerging Tort Threat • Summary
U.S. Casualty Opportunities and Challenges
42
Current Rate Environment• Current renewal rates continue to be off slightly (negative 2% to 5%)
on most Casualty lines • Price reductions are less frequent with flat/unchanged pricing
becoming a more common occurrence• Companies with challenging loss experience and/or exposures are
seeing rate increases• Certain individual sectors are experiencing tightening
– Energy– Utilities– NY Contractors– Pharmaceuticals
Current Underwriting Trends
• Carriers are exiting certain segments or lines altogether• Renewal books are being scrutinized to reposition portfolios
(i.e. NY contractors)• Surplus lines submissions are up for the first time in 5 years as
large standard lines carriers pull out of certain specialty classes • Higher attachments are being required by Excess/Umbrella
carriers on both
GL and AL • Creation of “new”
buffer market
• Excess limits are being pulled back in a number of instances as reinsurers and insurers cut back on capacity (56% of gross limits
are reinsured)
Recent Casualty Accident Year Results
Year Loss / LAE Combined2008 71.1% 99.0%2009 73.3% 103.6%2010 73.2% 103.5%
Source: PC Industry SNL Briefing Book
“Other” Liability Loss/LAE and Combined Ratios
Where are Rates Heading?• Consensus view of future casualty rates = firming • Why?
Cumulative Effect Prolonged soft marketDecreased investment incomeInflation concernsDeterioration of development in some lines “Empty Well”
on reservesIncreased regulationImproved economyTort threat
Where are Rates Heading?
“We have finally broken out of the doldrums. Rates are moving. Workers Comp, Property, B.I., General Liability, and
Auto rates adjusted in March…It looks like the soft market of 2005‐2011 will end with Workers Comp and CAT exposed
property leading the way out.”
Market Scout”
(April 14th
2011)
47
Reasons to be Optimistic for the P/C Industry
• Economic recovery in U.S. is strengthening• Consumer confidence and spending are improving• More consumer and business lending occurring• Increased private sector hiring for 14 months • Interest rates remain historically low • More stable stock and bond market• More friendly political environment to business interests• Exposure growth up • Increase in demand for commercial insurance
Robert P. Hartwig, Ph.D., CPCU, President & Economist, Insurance Information Institute. "Overview & Outlook for the P/C Insurance Industry”
48
Reasons to be Concerned for the P/C Industry
• Economic recovery not as strong as past recoveries• Parts of country remain in recession (CA, FL, MI, NV)• Consumers remain cautious in their spending• Businesses are being cautious in their borrowing• Energy and commodity prices remain volatile • P/C industry capacity is at record levels • No catalyst for a robust hard market• Pricing today does not reflect new investment realties • Underwriting results masked by prior‐year reserve releases
Robert P. Hartwig, Ph.D., CPCU, President & Economist, Insurance Information Institute. "Overview & Outlook for the P/C Insurance Industry”
Characteristics of an Underwriting Cycle Impact of Investment Income
Investment Yields at Historically Low LevelsSource: Bloomberg
AHL: NYSE
Characteristics of an Underwriting Cycle Impact of Investment Income
Combined Ratios Must Be Lower Given Current Investment Environment to Generate Risk Appropriate ROEs
Source: Insurance Information Institute, Overview & Outlook for the P&C Industry, April 21, 2011
•2009 & 2010 figures are return on average statutory surplus. 2008, 2009 and 2010 figures exclude mortgage and financial guaranty insurers
AHL: NYSE
Emerging Tort Threat
• No tort reform (or protection of recent reforms) is forthcoming from the current Congress or Administration
• Erosion of recent reforms is already happening• Legislative initiatives will create opportunities to develop new
theories and channels of liability• Torts twice the overall rate of inflation• Historically is extremely costly to P/C insurance industry• Leads to reserve deficiency, rate pressure• A number of emerging claims: Diacetyl, Chinese Drywall,
Benzene, Nano Technology Robert P. Hartwig, Ph.D., CPCU, President & Economist, Insurance Information Institute. "Overview & Outlook for the P/C Insurance Industry”
Number of Years with Underwriting Profits by Decade (1920 ‐
2010)
Robert P. Hartwig, Ph.D., CPCU, President & Economist, Insurance Information Institute. "Overview & Outlook for the P/C Insurance Industry”
Summary• Rate and premium increases are absolutely necessary for the
health of the Casualty industry and the clients it serves• There are signs of underwriting discipline emerging that will
cause rates to rise in the near future• The Casualty market has historically and will continue to face
major challenges that make it very difficult to generate underwriting profits
• Successful companies will have the underwriting experience, claims expertise and financial strength to understand and
confront these challenges and capitalize on the opportunities that will always exist
Q & A
Questions or Cocktails?
