Loss Reserve Governance

1
Loss Reserve Governance

• Presented by
• Robert Giambo
• Managing Director
• Swiss Reinsurance America Corp.
• CAS Spring 2008 Meeting

2
Background

• Swiss Re Group is global reinsurer writing both
  PC and LH reinsurance.
• PC gross loss reserves are
• approximately 72B groupwide
• 31B in the Americas
• SR Group has the preponderance of its loss
  reserves in approximately 18 legal entities
  worldwide.

3
Reserving at SR Group

• Loss Reserving is done within Corporate Actuarial
• The reserving function reports to the Chief Risk
  Officer
• maintaining some independence from Marketing,
  Finance and Underwriting
• Reserving units are split
• PC vs. LH
• Regions Americas, Europe, Asia
• Each regional unit is responsible for the local
  legal entities.
• PC Corporate Actuarial staffing levels
• 62 worldwide
• 27 in Americas, 16 members of the CAS

4
Reserving at SR Group

• Reserve reviews are generally performed
  quarterly. May be a combination of
• top-down review for some segments
• Chain Ladder / BF indications, etc.
• Actual vs. Expected for others
• Indications are done on a legal entity basis
  excluding inter-company retros (IGRs) that is
• all assumed from external ceding companies less
• all ceded to external retrocessionaires
• Booked reserves are determined at regional level
  by regional management in the form of a Regional
  Reserve Committee (RRC).

5
Regional Reserve Committee

• Meets quarterly.
• Responsible for setting appropriate GAAP loss
  reserves and related items
• Voting Members include
• Group Actuary
• Regional CFO
• Senior members of underwriting and client markets
• Other attendees include
• regional corporate actuary (responsible for
  preparing indications) plus other actuarial staff
• regional head of claims
• other invited guests

6
Regional Reserve Committee

• RRC has a written charter defining roles and
  responsibilities.
• Meetings have agendas and minutes.
• Regional actuary provides best estimate and
  recommendation.
• Any management selection different from
  recommendation would be minuted with
  justification for management action.

7
Regional Reserve Committee

• Committee is provided with indications by reserve
  segment
• with quarter and year-to-date development.
• explanation of all significant developments.
• Summary exhibits provided to show
• trends by summary LoB
• underwriting year
• indications vs. initial pricing estimates

8
Legal Entity Reserves

• The RRC is not sufficient by itself to fulfill
  the statutory obligations of the legal entities.
• Separate meetings are held with legal entity
  boards.
• RRC minutes and agendas are available to legal
  entitiy board members.
• Usually 3 or 4 RRC members are on the legal
  entity boards.

9
Organizational Structure
10
Role of Group PC Actuarial

• Group PC Actuarial
• calculates a range of reasonable reserves for
  each major legal entity (assumed only).
• provides a quarterly report to Executive
  Committee and Group Audit Committee.
• because it is collecting data on a consistent
  basis from the underlying legal entities, it can
  be a focal point in responding at a group level
  to
• shareholders
• rating agencies
• stock analysts
• Group indications are shared backed to the RRCs.

11
Other Controls

• Quarterly meeting with Claims to discuss large
  cases.
• Review of quarterly indications with underwriting
  and marketing.
• Quarterly meeting with Claims to discuss nat cat
  losses.
• Pricing / Reserving Linkage
• Corporate Actuarial involvement in pricing
  parameters.
• Corporate Actuarial involvement in
  pricing/underwriting audits.
• Dialog with pricing actuaries on current
  underwriting year pricing loss ratio.
• SOX