technical rating models and airline risk differentiators
DESCRIPTION
Technical Rating Models and Airline Risk Differentiators. Dan Boultwood 9 th December 2009. Background; Current Climate. Financial markets and world recession – airline crisis Insurers capital cost and return on equity Airline Losses – rating cycle – market capacity. - PowerPoint PPT PresentationTRANSCRIPT
Technical Rating Models and Airline Risk DifferentiatorsDan Boultwood9th December 2009
European Operations
• Financial markets and world recession – airline crisis
• Insurers capital cost and return on equity
• Airline Losses – rating cycle – market capacity
Background; Current Climate
Page 2Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
• Net airline premium income greater than operational costs and claims incurred
• Attritionals losses (below $10million) / large losses ($10-$250 million) / catastrophe losses (greater than $250million)
• Technical models aiming to calculate the expected claims for the year
• Expected claims Vs technical target premium
What are Insurers trying to achieve?
Page 3Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
• Underwriters are for intuitive pricing based upon personal experience
• Actuaries are for technical premium based upon historical data
Underwriters Confidence in• expected loss ratio
Actuarial
• Net result of Premium + Investment Return on equityOperational expenses and loses
Actuaries and Underwriters
Page 4Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
• Each airlines historical loss experience for an expected loss cost
• The industry loss experience (Global) since 1999
• Key metrics assume that the past is a reasonable guide to the future
• Data adjusted for inflation, loss development, changes in exposure
• 95% comfort in historical data
Experience Rating – I.T. + Actuarial
Page 5Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
• Selecting base rates
• Peer grouping
• Risk profile – Aircraft Type
Make and model, age, registration, seating capacity, values– Operations
Passenger or cargo – domestic or International – passenger mix – load factors– Departures
Route network – charter or scheduled – ACMI– Additional exposures
Maintenance, ground handling, refuelling, catering, other services
Exposure Rating - Human Experience Evaluation
Page 6Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
Airline Differentiating Risk Factors – Soft Factors
Page 7Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
Safety Equipment
Page 8Airline Underwriting – Dan Boultwood & Adam Spicer/11 June 2009
European Operations
• TCAS - Traffic Alert and Collision Avoidance System
• EGPWS – Enhanced Ground Proximity Warning System
• FADEC – Full Authority Digital Engine Control
• ACARS - Aircraft Communication Address Reporting System
• Wind Shear Altering and Detecting Systems
• QAR – Quick Access Recorders
Safety Equipment
Page 9Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
• FOQA - Flight Operations Quality Assurance Program / Flight Data Monitoring
• LOFT - Line Orientated Flight Training
• EFB - Electronic Flight Bags
• ALAR -Approach Landing Accident Reduction /Stabilized Approach Monitors
• LOSA - Line Operated Safety Audit
Safety Management Systems
Page 10Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
• SMS system
• Human factors
• Voluntary reporting system
• Crew
• Cockpit Resource management
• Company
Safety Awareness / Culture
Page 11Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
• Regulatory bodies – good and bad
• IOSA - IATA operational safety audit - benchmark
• Codeshare partner audits – peer review
Audits / Oversight
Page 12Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
• Technical dispatch reliability – statistics and lies!!
• Key management personnel experience
• Major shareholder or financial backers
Other Factors
Page 13Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
European Operations
Qualitative Information - Pilots
Page 14Airline Underwriting – Dan Boultwood & Adam Spicer/11 June 2009
European Operations
• Flight Crew and Pilots
– Minimum Pilot Requirements
– Training provided and frequency
– Pilot work force
Qualitative Information
Page 15Technical Pricing / Pricing Model – Dan Boultwood/08 Dec 09
The content of this presentation is protected under the UK Copyright law and under the relevant international treaties and conventions.
Q & A
Thank you