Review of iso’s New ilf tables

Review of ISO’s New ILF Tables

• Seminar on Reinsurance

• June 16th, 2000

• Ralph Cellars

Review of ISO’s New ILF Tables

• Mixed Exponential vs. Pareto Soup

• Excess on Excess

• Treatment of ALAE

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

• Changes in Methodology

• Exponential vs. Pareto
• Min. Distance vs. MLE
• Tail of the Distribution

Review of ISO’s New ILF Tables

• Tail of the Distribution

• “For the higher limits of liability, the empirical data is sparse.”
• ISO Circular AS-GL-1000-036

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

• Truncation

• Prem/Ops $4.0MM
• Prod/Comp Ops 2.5MM

Review of ISO’s New ILF Tables

• Large Loss Data

• “ISO standard increased limit tables provide increased limit factors up to $10,000,000 per occurrence policy limits. We do not use the methodology described here to model losses above this point. We encourage the use of supplemental sources of information for analysis of higher limits.”
• ISO Circular AS-GL-1999-036

Review of ISO’s New ILF Tables

• Who’s Data Is It?

• Excess & Surplus Lines Ins. Co.
• St. Paul Surplus Lines
• Lexington Ins. Co.
• General Star
• Scottsdale
• Foreign Insurer
• ACE
• Lloyd’s
• Starr Excess
• XL

Review of ISO’s New ILF Tables

• Umbrella and Excess Policies: Example 1

• Primary Unknown Ins. Co.
• $5MM x P SIR
• $10 x 5 x P Various Ins. Co.’s
• $10 x 15 x P Swiss Re
• $75 x 25 x P XL
• $100 x 100 x P Starr Excess
• $100 x 200 x P ACE

Review of ISO’s New ILF Tables

• Umbrella and Excess Policies: Example 2

• $1MM Primary American National Fire
• $25 x P National Union
• $75 x 25 x P Lloyd’s
• $100 x 100 x P XLE

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

• ALAE Pro Rata

• Flat ALAE Load Disappears with Difference in ILF Approach
• Cession Premium
• ALAE Load For Excess Loss Same as First Dollar Loss

• ALAE Varying with Size of Loss

Review of ISO’s New ILF Tables

• ALAE Included with Loss

• ALAE on Claims Closed w/o Payment
• ALAE May be Unlimited

Review of ISO’s New ILF Tables

• Needs:

• Joint Distribution of Loss and ALAE
• Distribution of ALAE by Size of Loss
• Distribution of Loss plus ALAE

Review of ISO’s New ILF Tables

• The End Thank You!

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables

Review of ISO’s New ILF Tables