Discussion Points – Part I - Schedschd.ws/hosted_files/2016agripspring/08/Pooling Basics -...
34
Building blocks of an actuarial report How actuarial conclusions are derived Es8mated outstanding losses Funding levels Discussion Points – Part I 1
Transcript of Discussion Points – Part I - Schedschd.ws/hosted_files/2016agripspring/08/Pooling Basics -...
Buildingblocksofanactuarialreport
Howactuarial
conclusionsarederived
Es8matedoutstanding
losses
Fundinglevels
DiscussionPoints–PartI
1
PaygenerallyfixedpremiumupfrontforapromisetopayclaimslaterClaimswillnotbeknownforawhileandaresubjecttovaria8onRisk:thedevia8onorvariabilityaroundanexpectedoutcome
PoolingandSelf-Insuranceare…InsuranceMechanisms
2
premium+invincome=losses+expenses
fixed fixed minimal variable
BalancingFormula
3
2015201420132012Prior
Outstandinglosses
…2019201820172016
Projectedfunding
December2015
ActuarialReport2TimePerspec8ves
4
(Source: GASB Statement No. 10, Paragraph 22)
1. Liability for unpaid claim costs, including Incurred But Not Reported (IBNR) claims
2. Liability should be based on: • The estimated ultimate cost
(including effects of inflation and other societal and economic factors);
• Past experience adjusted for current trends; and • Other factors that would modify past experience.
GASB10:Determina8onofLiability
5
• Collectdata• Organizeandsummarizeclaimsandexposuredata– Checkforreasonabilityandconsistency
• Performanalysis– Es8mateul8matelossesusingactuarialmethods
• Drawconclusions– Outstandingliabili8es– Projectedfunding
ActuarialProcess
6
Claim Period Self-Insured Retention
1997 to 2000 $200,000
2001 to 2008 $250,000
2009 to 2010 300,000
2011 to 2013 350,000
2014 to 2015 500,000
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
1997 2000 2003 2006 2009 2012 2015
HistoryofSelf-InsuredReten8ons
7
• GIGO– …garbagein,garbageout…
• Reviewthelosses– Lookforanomalies,largeclaims– Keepaneyefortrends–typesofnewlosses,recurringclaims,etc.
• Reconcilelossrunstodatainactuarialreport– Reasonabilitytests– Adjustments–deduc8bles,SIRlimits,etc.
8
DataisKing!
• Details– Claimnumber– Loca8on– Department– Claimtype
• Lossamounts– Paidlosses– Casereserves
• Dates– Valua8on– Accident– Report– Close
• Addi8onalinfo– Expenses– Recoveries– Deduc8bles
9
ClaimData
• Paidlosses– Cumula8vetotalpayments
• Casereserves– Valueassignedbyaclaimsadjusterofamountyettobepaid
• Incurredlosses– =Paidlosses+casereserves
10
ComponentsofIncurredLosses
$0
$5
$10
$15
$20
$25
$30
$35
$40
to 1
999/
00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
15 17 14 17 15
22 20 22 24 26 20 20 18
14
6
1 1
0
2 1
1 2
3 3
5
2 3 4
6
13 Mill
ions
Paid Case Reserves 11
IncurredLossesbyAccidentYear
Lossdevelopment
Bornhuecer-Fergusonanalysis
Frequency/severity
Lossrateanalysis
Selectul8matelossesbasedonappropriatemethodsandactuarialjudgment
12
ActuarialMethods
Claim Period
Paid at 6/30/15
Age at 6/30/15
Paid Factor to Ultimate
Estimated % Paid
Estimated Ultimate
2009/10 $26,296,803 72 1.346 74% $35,408,541
2010/11 19,823,128 60 1.434 70% 28,426,728
2011/12 20,083,311 48 1.549 65% 31,103,822
2012/13 17,564,656 36 1.758 57% 30,875,497
2013/14 14,184,753 24 2.417 41% 34,284,576
2014/15 6,347,584 12 6.284 16% 39,889,520
13
PaidLossDevelopment
Claim MonthsofDevelopmentPeriod 12 24 36 48 60 72 … UlJmate
2000/012001/022002/032003/042004/052005/062006/072007/082008/092009/10 26,2972010/11 19,823
2011/12 20,0832012/13 17,5652013/14 14,1852014/15 6,348
DiagonalrepresentsthelatestvaluaJon
14
LossTriangle,ExcerptofPaidLossDevelopment
Claim MonthsofDevelopmentPeriod 12 24 36 48 60 72 … UlJmate
2000/01 2,637 6,735 9,264 10,632 11,456 12,1392001/02 2,977 7,763 10,749 12,077 12,962 13,8592002/03 2,456 6,435 8,978 10,086 10,897 11,6242003/04 3,139 8,217 11,252 12,686 13,759 14,5722004/05 2,757 7,332 10,086 11,351 12,349 13,1222005/06 4,195 10,709 15,111 16,949 18,362 19,6032006/07 3,897 10,142 13,626 15,411 16,600 17,6792007/08 4,418 11,446 15,687 17,922 19,305 20,5732008/09 4,972 12,659 17,149 19,620 21,158 22,8712009/10 5,840 15,115 20,454 23,166 24,914 26,2972010/11 4,442 11,796 16,582 18,631 19,823
2011/12 5,074 13,329 18,051 20,0832012/13 4,872 13,325 17,5652013/14 6,063 14,1852014/15 6,348
15
LossTriangle,ExcerptofPaidLossDevelopment
Claim MonthsofDevelopment
Period 12 24 36 48 60 72 … UlJmate
2000/01 2,637 6,735 9,264 10,632 11,456 12,139
2001/02 2,977 7,763 10,749 12,077 12,962 13,859
2002/03 2,456 6,435 8,978 10,086 10,897 11,624
2003/04 3,139 8,217 11,252 12,686 13,759 14,572
2004/05 2,757 7,332 10,086 11,351 12,349 13,122
2005/06 4,195 10,709 15,111 16,949 18,362 19,603
2006/07 3,897 10,142 13,626 15,411 16,600 17,679
2007/08 4,418 11,446 15,687 17,922 19,305 20,573
2008/09 4,972 12,659 17,149 19,620 21,158 22,871
2009/10 5,840 15,115 20,454 23,166 24,914 26,297
2010/11 4,442 11,796 16,582 18,631 19,823
2011/12 5,074 13,329 18,051 20,083
2012/13 4,872 13,325 17,565
2013/14 6,063 14,185
2014/15 6,34814,185 / 6,063 = 2.339
16
LossTriangle,ExcerptofPaidLossDevelopment
Claim MonthsofDevelopmentPeriod 12-24 24-36 36-48 48-60 60-72 72-84 … UlJmate
2000/01 2.554 1.375 1.148 1.078 1.060 1.0492001/02 2.607 1.385 1.124 1.073 1.069 1.0512002/03 2.620 1.395 1.123 1.080 1.067 1.0532003/04 2.617 1.369 1.127 1.085 1.059 1.0532004/05 2.659 1.376 1.125 1.088 1.063 1.0542005/06 2.553 1.411 1.122 1.083 1.068 1.0512006/07 2.602 1.344 1.131 1.077 1.065 1.0532007/08 2.591 1.371 1.142 1.077 1.066 1.0412008/09 2.546 1.355 1.144 1.078 1.081 1.0542009/10 2.588 1.353 1.133 1.075 1.0562010/11 2.656 1.406 1.124 1.0642011/12 2.627 1.354 1.1132012/13 2.735 1.3182013/14 2.3392014/15
Avg.All 2.593 1.370 1.130 1.078 1.065 1.051Avg.Last3 2.567 1.359 1.123 1.073 1.067 1.049Avg.Wtd3 2.551 1.358 1.123 1.073 1.067 1.049
Selected 2.600 1.375 1.135 1.080 1.065 1.052Cumula8ve 6.284 2.417 1.758 1.549 1.434 1.346Percent 16% 41% 57% 65% 70% 74% 100%
17
LossTriangle,PaidLossDevelopmentFactors
16%
25%
16% 8% 5% 5% 4% 3% 2% 2% 2%
41%
57% 65%
70% 74%
78% 81% 83% 85% 86%
52%
69% 76%
79% 83%
86% 89%
0%
20%
40%
60%
80%
100%
0 12 24 36 48 60 72 84 96 108 120 132
Months of Development
Incremental Paid Paid Reported 18
DevelopmentMethods
9 12 13 14 14 17 25 16 29 26 35 42 58 75 93 89 117 189 366
1025
3179 3165 3211 3350 3176
3474 3542 3470 3514 3475 3496 3636 3705 3584 3570 3366 3388 3335
3625 3579
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Prio
r
1995
/96
1996
/97
1997
/98
1998
/99
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
Num
ber o
f Cla
ims
# of Open Claims # of Claims Average 19
NumberofClaimsAbout3,460claimslast5years
$7,037 $6,410
$7,576 $8,229
$10,217
$7,322
$8,595 $8,335 $8,432
$9,791 1.8 1.8
1.6 1.6
1.5 1.5
1.5 1.4
1.5 1.5
0.8
1.0
1.2
1.4
1.6
1.8
2.0
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
# of
Cla
ims
per $
1 M
illio
n P
ayro
ll
Aver
age
Cos
t per
Cla
im
20
Frequency:at1.5claimsper$1MofpayrollSeverity:recentaveragesabout$10,000
$0
$5
$10
$15
$20
$25
$30
$35
$40
to 1
999/
00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
15 17 14 17 15
22 20 22 24 26 20 20 18
14
6
1 1
0
2 1
1 2
3 3
5
2 3 4
6
13 1
1 0
1 1
1 2
3 3
5
3 6
7 10 17
Mill
ions
Paid Case Reserves IBNR 21
Es8matedUl8mateLossesbyPolicyYear
• Knownlosseventsexpectedtobecomeclaims• Unknownlosseventsexpectedtobecomeclaims– Morecommoninliabilityinsurance– Workercompensa8on(e.g.cumula8veinjury)
• FuturedevelopmentonclaimsalreadyreportedPaidlosses
22
IncurredbutNotReported(IBNR)
$0
$5
$10
$15
$20
$25
$30
$35
$40
to 1
999/
00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
1 1
0
2 1
1 2
3 3
5
2 3 4
6
13 1
1 0
1 1
1 2
3 3
5
3 6
7 10 17
Mill
ions
Case Reserves IBNR 23
$117.0 M (case reserves of $55.1 M + IBNR of $61.8 M)
ClaimLiabili8es=CaseReserves+IBNR
AsofJune30,2015
ASSETS ($ Millions)
Cash and investments $204.8
Receivables 0.2
Prepaids 0.01
Total assets $205.0
LIABILITIES AND NET ASSETS
Liability for open and incurred but not reported (IBNR) claims $117.0
ULAE 9.0
Other 1.0
Total liability 127.0
Net assets (Surplus) 78.0
Total liabilities and net assets $205.0
BalanceSheetFinancialPosi8onataGivenPointinTime
24
2015201420132012Prior
Outstandinglosses
…2019201820172016
Projectedfunding
December2015
ActuarialReport2TimePerspec8ves
25
$0
$5
$10
$15
$20
$25
$30
$35
$40
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
2015
/16
2016
/17
2017
/18
22 20 22 24 26 20 20 18
14
6
1 2
3 3
5
2 3 4
6
13
1 2
3 3
5
3 6
7 10 17
Mill
ions
Paid Case Reserves IBNR 26
???
Es8matedUl8mateLosses
27
Ul8mateLossesLossRate = Exposure
LossRate
• Exposurebase– Workerscompensa8on–payroll– Autoliability–numberofvehicles– Generalliability–payroll,FTEs,expenditures– Property–totalinsuredvalue(TIV)
• Changesover8me– Infla8on–payroll– Mixbytype–vehicles,employeeclass– Membership
28
ExposureData
1.69
1.491.541.57
1.84
1.261.39
1.251.311.461.39 1.41
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
2015
/16
2016
/17
Historical (2015/16 level)ProjectedLatest 10-Yr Average
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
2015
/16
2016
/17
Millions
Historical Future
$37,286,000=$1.41LossRateX$2.6BillionPayroll
29
LossRateper$100ofPayroll
$0
$5
$10
$15
$20
$25
$30
$35
$40 20
05/0
6
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
2015
/16
2016
/17
2017
/18
22 20 22 24 26 20 20 18
14
6
1 2
3 3
5
2 3 4
6
13
1 2
3 3
5
3 6
7 10 17
36 37 38
Mill
ions
Accident Year Paid Case Reserves IBNR Projected
30
Ul8mateLosses
• Add:– Expectedlosses– Investmentincome– Riskmargin– Adminexpenses– Excessinsurancepremiums
• Rate:
– Dividefundingamountbyexposureunits,saypayrollper$100
31
excesspremiumsadminexpensesriskmargininvestmentincome
losses
FundingComponents
Member’s contribution = member’s payroll
x average Pool rate
x member’s ex mod factor
32
ProjectedMember’sContribu8on
• BuildingBlocksofanActuarialReport– Data:claimsandexposure– Es8mateul8matelosses– Outstandingclaimliabili8es– Funding:losses,expenses,andrates– Discoun8ng– Riskmargin(confidencelevel)
33
Summary
Questions?
Mujtaba Datoo, ACAS, MAAA, FCA Actuarial Practice Leader Aon Risk Consultants (949) 608-6332 [email protected]
34
