detroit rims day 2012 1.company data: limited 2.actuarial information / statistics: limited...

Detroit Rims Day 2012

1. Company Data:  Limited 2. Actuarial Information / Statistics:  Limited   3. Industry / Peer Information:  Available 4. Coverage Features - Frequency / Severity

Combinations:  High/Low 5. Program Features:  Low Retention 6. Industry Segment:  Stable 7. Company Type:  Public 8. Company Qualitative Information:  Limited 9. Financial Rating / Data:  Available

Detroit Rims Day 2012

Sample Program Agreements

Different approaches

Different goals

Detroit Rims Day 2012

Timing of Adjustments: annually, Company shall review collateral

collateral will be reviewed periodically

at any time We deem necessary

at the time of each collateral adjustment

Detroit Rims Day 2012

Amount of Collateral:in an amount acceptable to the Company

sufficient to secure Your financial obligations

Detroit Rims Day 2012

Calculation of Collateral:calculated by Usin accordance with Our actuarial standards

Detroit Rims Day 2012

Calculation of Collateral:whether now existing or hereafter arisingstatistically expected development on Losses and ALAE reported to usobligations as You and we may agree

Detroit Rims Day 2012

Calculation of Collateral:based on our actuarial evaluation

of relevant statistical data including

available and credible data of Your losses

Detroit Rims Day 2012

Calculation of Collateral:Losses plus applicable incurred ALAE

times the applicable LDF

times the LCF

Detroit Rims Day 2012

Calculation of Collateral:plus the TPAF billed by Us

plus applicable LBA

Detroit Rims Day 2012

Calculation of Collateral:LDF used to compute the Security:

12 mo post policy – 1.35 Incurred Loss 24 mo post policy – 1.25 Incurred Loss 36 mo post policy – 1.10 Incurred Loss and subsequent

Detroit Rims Day 2012

Calculation of Collateral:required security, by line of coverage,

subtracting actual paid amounts from estimated ultimate loss figures

adding additional estimated loss exposure for the next 12 month

Detroit Rims Day 2012

Calculation of Collateral: subtracting future expected paid amounts

associated with all exposure years as of the end of the next 12 month

prospective exposure period

Detroit Rims Day 2012

Calculation of Collateral:consideration may be given to financial strength metrics to account for credit riskexplicit detail must be provided on the financial metrics and the affect on collateral

Detroit Rims Day 2012

Components of the collateral:incurred losses within the Loss Limits

any other fees, charges, or obligations

accrued interest on any unpaid balances

Detroit Rims Day 2012

Components of collateral:this Agreement and any similar primary casualty insurance policies with Us

costs Company incurs enforcing its rights regulatory or court fine or penalty related to the Applicable Policies

Detroit Rims Day 2012

Form of letter of credit:a clean, irrevocable letter of credit subject to a cross collateral agreement

Detroit Rims Day 2012

Form of letter of credit: negotiation credit (multiple partial draws

permitted) by sight draft without notation

Detroit Rims Day 2012

Form of letter of credit: Company as the beneficiary contain an evergreen clause be issued for a term of at least 12 months by a bank “satisfactory” to Company

Detroit Rims Day 2012

Form of letter of credit: To be “satisfactory,” a bank must be:

rated “C” or better

approved by the NAIC, and

otherwise acceptable to the Company in its sole and unreviewable discretion

Detroit Rims Day 2012

Form of letter of credit:

90 days from receipt of written notice

to provide a replacement Letter of Credit

Detroit Rims Day 2012

Questions ??