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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
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Detroit Rims Day 2012
Sample Program Agreements
Different approaches
Different goals
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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
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Detroit Rims Day 2012
Amount of Collateral:in an amount acceptable to the Company
sufficient to secure Your financial obligations
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Detroit Rims Day 2012
Calculation of Collateral:calculated by Usin accordance with Our actuarial standards
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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
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Detroit Rims Day 2012
Calculation of Collateral:based on our actuarial evaluation
of relevant statistical data including
available and credible data of Your losses
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Detroit Rims Day 2012
Calculation of Collateral:Losses plus applicable incurred ALAE
times the applicable LDF
times the LCF
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Detroit Rims Day 2012
Calculation of Collateral:plus the TPAF billed by Us
plus applicable LBA
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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
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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
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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
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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
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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
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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
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Detroit Rims Day 2012
Form of letter of credit:a clean, irrevocable letter of credit subject to a cross collateral agreement
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Detroit Rims Day 2012
Form of letter of credit: negotiation credit (multiple partial draws
permitted) by sight draft without notation
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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
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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
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Detroit Rims Day 2012
Form of letter of credit:
90 days from receipt of written notice
to provide a replacement Letter of Credit
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Detroit Rims Day 2012
Questions ??