University of Illinois Finance 230 – Intro to Insurance A Career as a Property/Casualty ActuaryAgendaInsurance / Actuarial CareerActuaries – “Risk is Opportunity”Challenges for the P/C ActuaryNon-Insurance PricingInsurance PricingSlide 8Slide 9Enterprise Risk Management - ExampleSlide 11Slide 12Slide 13Slide 14Slide 15Actuarial CareerSlide 17Exciting AssignmentsWeb-Sites and Contact InfoSlide 20Slide 21University of IllinoisUniversity of Illinois Finance 230 – Intro to Insurance Finance 230 – Intro to InsuranceA Career as a Property/Casualty ActuaryA Career as a Property/Casualty ActuaryPresentation byPresentation by Gail M. Ross, FCAS, MAAAGail M. Ross, FCAS, MAAASeptember 14, 2007September 14, 2007AgendaAgendaBackgroundBackgroundThe Role of the ActuaryThe Role of the ActuaryChallenges for the P/C ActuaryChallenges for the P/C ActuaryExciting AssignmentsExciting AssignmentsUseful SitesUseful SitesQ&AQ&AInsurance / Actuarial CareerInsurance / Actuarial CareerBegan with Travelers Insurance Co.-1976Began with Travelers Insurance Co.-1976Got into Consulting Upon Becoming an Got into Consulting Upon Becoming an FCAS - 1985FCAS - 1985Became active in the CAS upon becoming Became active in the CAS upon becoming an FCASan FCASActuaries – “Risk is Opportunity”Actuaries – “Risk is Opportunity”Actuaries are experts in:Actuaries are experts in:evaluating risk, evaluating risk, designing creative ways to reduce risk potential, designing creative ways to reduce risk potential, decreasing the impact of undesirable events that do decreasing the impact of undesirable events that do occur. occur. Actuaries evaluate the financial impact of current Actuaries evaluate the financial impact of current economic, legal, and social trends on future economic, legal, and social trends on future events. events. We focus on accurate and responsible matching We focus on accurate and responsible matching of risk to price.of risk to price.Challenges for the P/C ActuaryChallenges for the P/C ActuarySetting the Price to Charge for the Setting the Price to Charge for the Insurance ProductInsurance ProductNon-Insurance PricingNon-Insurance PricingInsurance PricingInsurance PricingChallenges for the P/C ActuaryChallenges for the P/C ActuaryDetermining the appropriate level of Determining the appropriate level of reserves to set – varies by exposure:reserves to set – varies by exposure:Short “Tail”– Property , Physical DamageShort “Tail”– Property , Physical DamageMedium “Tail” – Auto LiabilityMedium “Tail” – Auto LiabilityLong “Tail” – Workers CompensationLong “Tail” – Workers CompensationWhat Will the Lawyers Dream Up Next “Tail” – What Will the Lawyers Dream Up Next “Tail” – Asbestos, Pollution, Tobacco, Firearms, MoldAsbestos, Pollution, Tobacco, Firearms, MoldChallenges for the P/C ActuaryChallenges for the P/C ActuaryEnterprise Risk Management – Helping Enterprise Risk Management – Helping businesses manage businesses manage allall risks facing the risks facing the organization:organization:Hazard RiskHazard RiskFinancial RiskFinancial RiskOperational RiskOperational RiskStrategic RiskStrategic RiskEnterprise Risk Management - Enterprise Risk Management - ExampleExampleColdhard Steel Company (CSC) Coldhard Steel Company (CSC) manufactures steel products. It’s a family manufactures steel products. It’s a family owned business operating in the owned business operating in the Midwestern US and has a unionized labor Midwestern US and has a unionized labor force.force.Enterprise Risk Management - Enterprise Risk Management - ExampleExampleTypes of RiskTypes of RiskHazard RiskHazard Risk11stst Party – Loss to building & equipment due to fire, Party – Loss to building & equipment due to fire, tornadoes, etc.tornadoes, etc.22ndnd Party – Injury or illness to employees included Party – Injury or illness to employees included work related injurieswork related injuries33rdrd Party – Slip/falls, product recalls, product Party – Slip/falls, product recalls, product lawsuitslawsuitsEnterprise Risk Management - Enterprise Risk Management - ExampleExampleTypes of RiskTypes of RiskFinancial RiskFinancial RiskForeign exchange risk - CSC has large volumes of Foreign exchange risk - CSC has large volumes of sales in Latin Americasales in Latin AmericaCommodity risk – changes in prices of raw Commodity risk – changes in prices of raw materialsmaterialsCredit risk – CSC has a large accounts receivableCredit risk – CSC has a large accounts receivableEnterprise Risk Management - Enterprise Risk Management - ExampleExampleTypes of RiskTypes of RiskOperational RiskOperational RiskLabor relationsLabor relationsFamily succession planningFamily succession planningAssessment of the reliability of machinery and Assessment of the reliability of machinery and processesprocessesEnterprise Risk Management - Enterprise Risk Management - ExampleExampleTypes of RiskTypes of RiskStrategic RiskStrategic RiskCompetitionCompetitionRegulatory/political issuesRegulatory/political issuesTechnological advances that could leave CSC Technological advances that could leave CSC obsoleteobsoleteEnterprise Risk Management - Enterprise Risk Management - ExampleExampleThe Casualty Actuary will:The Casualty Actuary will:Assess the hazard riskAssess the hazard riskWork with others to assess the financial, Work with others to assess the financial, operational and strategic risksoperational and strategic risksDevelop models that will integrate all of the Develop models that will integrate all of the potential risk outcomes/probabilities so that potential risk outcomes/probabilities so that an overall impact on CSC’s results can be an overall impact on CSC’s results can be understood and managed.understood and managed.Actuarial CareerActuarial CareerWhy Consulting ?Why Consulting ?DiverseDiverseChallengingChallengingProjects Completed in Short TimeframeProjects Completed in Short TimeframeDeal w/ Senior ManagementDeal w/ Senior ManagementGlobal OpportunitiesGlobal OpportunitiesVery Good CompensationVery Good CompensationActuarial CareerActuarial CareerWhy Why NotNot Consulting ? Consulting ?Long HoursLong HoursOften UnpredictableOften UnpredictableActuaries in the “Hot Seat”Actuaries in the “Hot Seat”Exciting AssignmentsExciting AssignmentsM&A Due Diligence