RDS Workshop GIRO 2002

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RDS Workshop - GIRO 2002
Robert Humphreys

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Agenda

• Lloyds overview
• Regulatory RDS
• Specific RDS
• Impact of September 11th
• Possible future approaches
• Summary

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Lloyds Overview

• Founded in 1688
• 2002 capacity 12.5bn
• Number of syndicates 88
• Number of brokers 152
• Premium income sources 38 from US

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History of RDS

• Introduced in 1995
• Purpose of Regulatory RDS
• syndicates demonstrate they can manage risk
• establish proper systems and controls in place
• syndicates choose appropriate events that reflect
  their exposures.
• Regulatory RDS broadly same since inception

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Regulatory RDS 2002

• USA Windstorm
• Marine Event
• Major North Sea complex
• Aviation collision
• Major risk loss
• Space storm
• Liability
• Political risks
• Second event

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Major US Natural Catastrophes

• 1811 New Madrid Earthquake 74bn
• 1906 SF Earthquake 34bn
• 1926 Great Miami Hurricane 46bn
• 1938 New England Hurricane 15.5bn
• 1992 Hurricane Andrew 20bn
• 1994 Northridge Earthquake 14bn

2000 values
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Lloyds Catastrophe Risk (1)

• Monitor market exposure to catastrophes
• Assess the resilience of the chain of security
• Input to the market rating
• Facilitate improved assessment of cat exposures
  across the market

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Lloyds Catastrophe Risk (2)
Difference between regulatory and specific RDS
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Specific Scenarios (1)

• Lloyds greatest natural cat exposures are to US
  hurricanes/earthquakes
• Extensive practitioner consultation
• RMS AIR helped specify the events and
  intensities
• Discussion with other cat modelling agencies and
  brokers re. their approach

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Specific Scenarios (2)

• Florida windstorm and California earthquake
  specific scenarios in 2000
• New Madrid scenario in 2001
• N.European windstorm and Japanese earthquake in
  2002

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Specific Scenarios (3)

• Need data on best-estimate basis
• Understand difficulties faced by syndicates
• Encourage underwriting input
• RDS working party set up in 2001

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Specific RDS - Florida Windstorm
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Specific RDS - California Earthquake
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Specific RDS - New Madrid Earthquake
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Specific RDS - European Windstorm
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Specific RDS - Japanese Earthquake
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Impact of September 11th

• Lloyds readiness before the event
• Lloyds immediate response
• Focus on California earthquake and aviation
  collision
• Estimate of market and syndicates potential
  exposures
• Assessment of quality of reinsurance asset

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Possible future developments

• Flood
• Lower severity / higher frequency events
• Terrorism
• Other regions

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Chairmans Strategy Group (CSG)

• Cat exposure should be analysed using tools or
  methods approved by franchisor
• Each franchisee should manage to a minimum return
  period agreed by franchisor
• Maximum gross net exposure to a single Lloyds
  specified RDS are up to 75 and 20 of capacity
  respectively
• Role of Lloyds Franchise Performance Director

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Summary

• Data issues and validation
• Underwriting input
• Role of cat modelling agencies
• FSA proposals for risk-based approach
• Lloyds franchise concept

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