Analytics Insights Conference Reflections on Risk Management
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Analytics Insights Conference Reflections on Risk Management Atlanta, Georgia | July 10 – 12, 2012 Agenda Analytics Insights Conference | July 10 - 12, 2012 Tuesday, July 10, 2012 5:30 PM Registration and Cocktail Reception M4 Level / Lobby Area 6:30 PM Dinner with Guest Speaker Grand Ballroom E Hurricane Andrew 20 Years Later: What Have We Learned? Tim Marshall, Haag Engineering Wednesday, July 11, 2012 7:30 – 8:30 AM Continental Breakfast M2 Level / International Ballroom D Registration Lobby Area General Session M2 Level / International Ballroom E & F 8:30 – 9:30 AM Industry Perspectives: Opportunities and Challenges Stephen Mildenhall, Aon Benfield 9:30 – 10:30 AM A.M. Best’s View on Risk Profile vs. Risk Management Capabilities Tom Mount, A.M. Best 10:30 – 10:45 AM Break 10:45 – 11:30 AM Model Blending Paul Budde, Aon Benfield 11:30 – 12:30 PM Lunch M2 Level / International Ballroom D Breakout Sessions Breakouts: M2 Level ReMetrica Training: M3 Level 12:30 – 1:20 PM Breakout Session #1 or ReMetrica Workshop 1:20 – 1:30 PM Break 1:30 – 2:20 PM Breakout Session #2 or ReMetrica Workshop 2:20 – 2:30 PM Break 2:30 – 3:20 PM Breakout Session #3 or ReMetrica Workshop 3:20 PM Adjourn 3:30 – 4:20 PM Optional Professionalism Topics for Actuaries M2 Level / International Ballroom E & F CNN Tour and Dinner 4:00 – 5:30 PM CNN Tour (45-minute tour in pre-assigned groups)* CNN Tower Lobby 4:45 – 6:00 PM Cocktail Reception South Tower / Atrium Terrace “AT” Level 6:00 PM Transportation Departs South Tower / Motor Lobby “M” Level 6:30 PM Dinner at Kevin Rathbun Steak * Please refer to the back packet folder for tour assignments and departure times. Aon Benfield 1 Agenda Analytics Insights Conference | July 10 - 12, 2012 Thursday, July 12, 2012 7:30 – 8:30 AM Continental Breakfast M2 Level / International Ballroom D General Session or ReMetrica Workshop M2 Level / International Ballroom E & F ReMetrica Training: M3 Level 8:30 – 9:15 AM Disastrous Weather Events: 2011-2012 Dr. Greg Forbes, The Weather Channel 9:15 – 10:30 AM AIR and RMS Discussion of Severe Weather Modeling Dan Dick, Aon Benfield Tim Doggett, AIR Matthew Nielsen, RMS 10:30 – 10:45 AM Break 10:45 – 11:30 AM 2011 Lessons Learned Moderator: Mike McClane, Aon Benfield Cat Risk Management: Dan Dick, Aon Benfield Rating Agency: Kelly Superczynski, Aon Benfield Reinsurance Pricing: Gary Landers, Aon Benfield 11:30 – 12:40 PM Lunch M2 Level / International Ballroom D Breakout Sessions Breakouts: M2 Level ReMetrica Training: M3 Level 12:40 – 1:30 PM Breakout Session #1 or ReMetrica Workshop 1:30 – 1:40 PM Break 1:40 – 2:30 PM Breakout Session #2 or ReMetrica Workshop 2:30 – 2:40 PM Break 2:40 – 3:30 PM Breakout Session #3 or ReMetrica Workshop 3:30 PM Adjourn 2 Aon Benfield Breakouts Analytics Insights Conference | July 10 - 12, 2012 Wednesday Breakout Session Descriptions Actuarial Insurance Risk Study Accurate and realistic underwriting risk parameterization is one of the most important steps in developing useful economic capital model results. Unfortunately, most companies do not have sufficient data to develop reliable estimates of volatility and correlations by line of business. This session will review the results from Aon Benfield’s Insurance Risk Study. The focus will be upon the influence of the underwriting cycle upon underwriting risk, the correlation relationships between lines of business, and how those correlations may change as volume grows. Session Leader: Brian Alvers, Aon Benfield Analytics Predictive Modeling With the introduction of credit data in the 1990’s, predictive modeling has become an area of growing interest to the P&C insurance industry. Applications of predictive modeling and statistical methods continue to grow within our industry. In this session we will present some of the applications we have seen and discuss services available at Aon Benfield. Session Leader: Steve Fiete, Aon Benfield Analytics Where is the Profit? Past, Present, and Future Sources of P&C Insurer Profitability Investment yields are plummeting, reserves releases are slowing, and natural catastrophe losses are as high as ever, so where is an insurance company to go for profitability? This presentation will look back at past sources of P&C insurer profitability before looking forward at what the future could bring. Has the attractiveness of long tailed casualty lines changed? What about the increase in catastrophe losses in property lines? How much does underwriting profit need to improve to make up for lost investment income? What impact has loss reserve uncertainty had on insurer valuations in the past and present? Was there a systematic adjustment in investor risk appetite for insurers following the 2008 financial crisis? Session Leader: Adam Troyer and Ben Walker, Aon Benfield Analytics Catastrophe Risk Management AIR Model Calibration and Validation — the Role of Claims Data in Cat Models This session will cover both the value and the challenges of analyzing and using claims data for catastrophe model development and validation. Claims data can vary considerably, ranging from detailed claims folders to aggregated loss information. Expertise in the data cleansing and normalization process is essential to transform raw claims data into usable and defendable information for use in calibrating and validating catastrophe models. Session Leader: Cagdas Kafali, AIR Aon Benfield 17 Breakouts Analytics Insights Conference | July 10 - 12, 2012 Impact Forecasting: Flood and Other Development Activities This session will review the new development efforts for the ELEMENTS model by Impact Forecasting. Various ELEMENTS research includes—planned updates to the Flood model, development work on the Impact Forecasting Industry Exposure data, and new software updates for allowing changes for model miss factors. One interesting development effort underway within the ELEMENTS platform is the ability to allow users to directly adjust frequency and severity values. For example, should actual historical data show that specific construction types (like masonry or wood frame) or age-of-construction classes (such as pre-1995) are either too high or too low; then these model miss factors can entered into a user available screen for adjustment to the ground up losses. Updates to the flood model include better handing of construction types including basements or structures on piles. Updates to the Industry Exposure data for Impact Forecasting will also be discussed (including data source assumptions and limitations). Session Leader: Steve Jakubowski, Impact Forecasting LLC Modeling Severe Convective Storm Severe Convective Storm (SCS) presents a unique challenge for most insurers as they struggle to control aggregations. The models are useful but leave many clients wanting more. How do you know when you have an aggregation problem? Are the models correctly determining AAL based on loss history? Is there a better way to manage exposure outside of a model? This session will present some alternative ways to evaluate and control SCS exposure. Session Leaders: Liz Henderson and Paul Eaton, Aon Benfield Analytics ERM & Capital Modeling Model Risk and Practical Lessons for ERM In a complex and volatile world, the insurance industry is pressing to advance its capabilities in quantifying and managing risk. Furthermore, the Solvency II virus is spreading, as rating agencies are asking more in depth questions regarding risk quantification through their annual questionnaires, the NAIC is developing ORSA guidelines and third parties are expecting further disclosures regarding risk. In the face of this pressure, can an over-reliance upon models become its own risk? What are the limits to risk models and their usefulness? Are there practical lessons in past ERM failures regarding the appropriate balance between the qualitative and quantitative aspects of risk management? These questions and more will be explored in this session. Session Leader: Parr Schoolman, Aon Benfield Analytics Optimizing Business Strategies through Capital Modeling There has been an ongoing debate on the value of capital modeling. Supporters strongly defend the value that it brings to their organizations, while detractors say the benefits have not been measurable or demonstrated. This session will provide examples of how business strategies can be optimized via an economic capital model. Session Leader: Gareth Haslip, Aon Benfield Analytics Overview of ReMetrica This 50 minute session will introduce how P&C companies employ Dynamic Financial Analysis (DFA) models to make strategic decisions. It will include a live demonstration of Aon Benfield’s software for building DFA models, ReMetrica®. The session will show how tools like ReMetrica can be used to model all types of risks of a P&C company (investments, operations, underwriting, credit, etc.). Attendees who plan to participate in the ReMetrica workshops do not need to attend this overview. Session Leader: Mike McClane, Aon Benfield Analytics 18 Aon Benfield Breakouts Analytics Insights Conference | July 10 - 12, 2012 Other Topics Credit Risk of Property Catastrophe Reinsurers 2011 was one of the most active years on record for catastrophe losses, but reinsurance capital remained relatively flat for the year. While a few reinsurers experienced a significant loss of capital, most were able to absorb losses within earnings or a slight loss of capital. This session will highlight industry changes that have occurred over the past several years which have lead to a discernable decrease in the credit risk of property catastrophe reinsurers. Session Leader: Pat Matthews, Aon Benfield Analytics Demystifying Solvency II and the Impact of the Eurozone Debt Crisis This session will explore how the common-risk-based capital measurement processes of the rating agencies and regulators diverge and converge, with a focus on S&P, A.M. Best’s capital models and the standard formula under Pillar 1 of Solvency II. In addition, we’ll discuss how concerned insurers and reinsurers in the Americas should be with the sovereign debt issues plaguing the Eurozone and potential implications for insurance markets.