CAS 2004 Fall Meeting | November 17, 2004

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CAS 2004 Fall Meeting November 17,
2004 Actuaries in Non-Traditional Roles
John Ferrara President Specialty Products
Division Jferrara_at_ArrowheadGrp.com
212.918.4603
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John Ferrara Background

• July 2003- Present Arrowhead NYC
• Founded New York City Operation
• General Agency/Wholesaler
• Consultant
• Binding Authority Business
• Ski Program

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Background cont.

• QBE 1/99 7/03
• Board Member in the United States
• QBE Insurance Corporation
• QBE Reinsurance Corporation
• Chief Actuary
• In Charge of the Regulatory Compliance
  Department
• In Charge of the Corporate Risk Management Ceded
  Reinsurance Administration, Reinsurance
  Underwriting Audits
• Team Leader for Formation of QBE Reinsurance
  Bermuda (utilized as a segregated cell captive
  for agency partners)
• Helped to Re-underwrite Reinsurance Portfolio
• Help to Develop Insurance Company Business
• QBE grew profitability 7 fold during my tenure

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Experience- cont.

• CNA 10/96 1/99 pricing and reserving actuarial
  support for ES books of business
• Ernst Young 11/93-10/96 Consulting Actuary
  pricing, reserving work, statements of actuarial
  opinion, self insurance studies, commutation
  litigation, mergers and acquisition support work
• Crum Forster 3/90-11/93 reserving studies, risk
  based capital work, mergers and acquisition work
• New York Compensation Insurance Rating Board 2/89
  3/90 workers compensation rate filings in New
  York
• FCAS 1996
• ACAS 1993
• Bachelor of Engineering in Mechanical Engineering
  1998 SUNY at Stony Brook
• Bachelor of Science in Applied Math and
  Statistics 1988

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Practical Approach to Problem Solving

• A lot of problems an actuary is asked to solve
  are not worth the time involved to solve them
  down to an exact science.
• A lot of problems an actuary is asked to solve
  can be solved by an algorithmic approach.

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Problem Solving

• Need to Prioritize to Maximize Production
  While Maintaining the Highest Level of
  Quality.If you can solve a problem simply it is
  often better in the business world than the more
  complex solution that no one understands.It may
  make sense to perform the calculation on a
  complex basis but make the presentation for the
  simple solution especially in terms of pricing
  and reserving analyses (be practical).Certain
  times call out for a complex solution with all
  the supporting details. Different problems
  require different levels of accuracy, and the
  ability to tell the difference separates many
  Actuaries.

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Example

• A red flag in determining the feasibility of
  particular opportunity can be as simple as
  whether the individual can explain to you what
  business they are covering.
• If you dont get it, how can one make financial
  projections associated with the coverage?
• If someone consistently under performs in the
  market and loses money, what is going to change
  from year-to-year?
• As if analyses
• Big Company Supports the Account
• Disproportionate Risk
• More Sophisticated Clients
• Client Makes Money, Risk Partners Do Not

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Keys to My Business Model

• Be Aggressive dont be afraid to make decisions
• Calculate your downside
• Meet deadlines
• Have people skills (client and inter-office)
• Make statements as to what you know and be silent
  as to what you dont know
• Learn from others - Learn about the other
  disciplines you do business with
• Use different approaches for different problems
• Answer the telephone
• Look professional
• Bring bad news in a non-confrontational manner
• Stick to your guns and dont cave in to popular
  demands
• Know your adversary, trading partners and
  competition

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Keys to Success In the Insurance Industry

• Know Your Strengths and Weaknesses.
• Strive to Improve.
• Be Honest.
• Build your resources and contacts (Dont let an
  adversarial deal ruin all your relationships).
• Handle the rate increase or commission request in
  a professional, high level manner.
• Dont get drawn into a personal battle when you
  are attacked.
• Admit the imprecision, basic assumptions
  associated with your calculations (admit flaws
  but stand pat on your projections).
• Try to get involved in situations that are
  mutually beneficial.
• Be prepared when you have the proper capabilities
  to step outside the traditional actuarial roles.

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Insurance Industry Cycles

• The insurance industry is an easy entry-easy exit
  marketplace.
• Historically the insurance industry has had
  periods of unprofitable underwriting results.
• How can you position yourself in the insurance
  industry to make money regardless of the market
  cycle? Personally and on a corporate level?
• The answer to the previous should consider the
  following facts
• Insurance people tend to be followers
• Insurance Companies do not return capital to
  investors in times of underwriting loss
• Insurers do not make market rates of return on
  their investments
• The answer as I see it would be
  diversification away from purely cyclical lines
  of insurance, or sticking to underwriting and
  rating disciplines regardless of market cycles.

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Thank You!
John Ferrara President Specialty Products
Division Jferrara_at_ArrowheadGrp.com
212.918.4603