Category Actuarial / Analytics

Mar
31
2017

Assessing the State of the Casualty Insurance Market

George Zanjani – While property losses from natural disasters such as Hurricane Matthew may grab headlines in the insurance press, casualty losses often drive the more significant cyclical disruptions in the U.S. market. Fortunately, casualty reserving for recent policy periods looks relatively healthy, although pressure from falling interest rates is starting to mount. The opening […]

Feb
17
2016

Beyond the New Normal: Could the Surplus Lines Market Be Heading for a 10% Market Share?

A few years ago, I posed the question of whether the nonadmitted market had reached a “new normal” in terms of market share, or whether it was destined to retreat to its historic norms. To date, there has been little sign of retreat. According to A.M. Best’s annual survey of the market, surplus lines market share edged up to 7.1% in 2014. With the previous hard market peak a decade past, the market’s resilience suggests that maybe, instead of fretting about retreat, we should be considering a different question: Could the surplus lines market be heading even higher? In this post, I’ll cover three ongoing trends that could propel the market beyond a 10% share: 1) declining interest rates, 2) big data, and 3) catastrophe risk.

Jun
2
2015

Predictive Analytics and Surplus Lines: Freedom of Rate but Not Free of Unfair Discrimination

Harold Weston – Similar risks should be priced similarly, and relevant distinctions based on actuarially relevant factors should be captured in the rate. Predictive analytics in insurance will allow ever more precise design of insurance products, selection of insureds and product targeting, and price for the risk exposure. However, the proliferation of “big data” that […]

Nov
11
2014

US Reserve Adequacy: Diminishing Returns

Stephen Mildenhall – With reduced equity in reserves, mistakes in underwriting, rate monitoring, and primary pricing will no longer be covered up by a reserve cushion Reserve releases in the US are now in their eighth consecutive year, heightening concerns insurers are cutting reserves too aggressively. We can form an independent opinion about the adequacy […]

Oct
14
2014

Revolutionary Times in Auto Insurance Pricing

Marty Ellingsworth – For years, auto insurers have used crude miles driven classification schemes in their premium calculations. The logic of crude schemes presumably lay in the difficulties of verification: Carriers didn’t want to spend money on audits and could not fully trust self-reports. This situation is in the process of changing drastically. Technological change […]

Dec
19
2013

Shifting Benchmarks: How Falling Interest Rates Complicate Performance Measurement in Long-Tailed Lines

George Zanjani – Falling interest rates are rendering traditional rule-of-thumb obsolete when evaluating profitability in liability insurance. Performance benchmarks such as the loss ratio need to be adjusted for the fact that fixed income investments return much less than they used to. Appearances can be deceiving. At first glance, liability results seemed quite strong overall […]

Nov
19
2013

The Lingering Effects of a Financial Crisis

George Zanjani – Green shoots. When I’ve talked to brokers and agents in recent years, I’ve often heard about “green shoots.” That’s gone on for several years now. When I dig deeper, I usually get mixed stories: The recovery is there, but it’s uneven. Sluggish insurance market recoveries are common in the aftermath of financial […]

Oct
1
2013

Disappearing … and Reappearing Risk: Part 2 – Expansion of Covered Perils

George Zanjani – In a recent post, I started exploring Steve Mildenhall’s observation that the property-casualty industry is grappling with a problem of “disappearing risk.” More precisely, he observed that losses are declining in relation to the economy. Safer cars, better fire prevention, tort reforms, and other trends have all conspired to drive loss frequency […]

Sep
17
2013

MVP: Most Valuable Project

Marty Ellingsworth – Great news: You got some of that big data stuff, so now you’re a most valuable player in the majors, right? Not exactly and not yet. The issue is what you do with voluminous data. Owning a modern Louisville Slugger is no guarantee of making it to first base. It’s how you […]

Aug
13
2013

Disappearing … and Reappearing Risk: Part 1 – An Overview

But, on the other hand, if risk truly is in secular decline—i.e., if the raison d’etre of the insurance industry really is disappearing—then the long term growth prospects of the industry come into question. It was this latter issue that Steve focused on in the latter part of his piece by indentifying some possible growth areas in property catastrophe and mega-liability risks.

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