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My Ceding Company's Data is Not Credible, So NOW What Do I Do?
Directors and Officers Liability
My Ceding Company's Data is Not Credible, So NOW What Do I Do?
Directors and Officers Liability
Linda Bjork, FCAS, MAAA
American Re-Insurance Company
Data SourcesData Sources• National Economic Research Associates• Huron Consulting Group• Towers Perrin - Tillinghast• Stanford Law School• Insurance Services Office (ISO)• Reinsurance submission data• Reinsurance claims and reserving data
National Economic Research AssociatesNational Economic Research Associates“Recent Trends in Shareholder Class Action
Litigation: Bear Market Cases Bring Big Settlements” (2005) Information Available
Review of trends in size of settlements Review of federal filings Discussion on relationship of size of settlement to
amount of investor loss Commentary related to current events
Uses: TrendLimitations: High-level information
Huron Consulting GroupHuron Consulting Group“2004 Annual Review of Financial
Reporting Matters” (2005)Information Available
“Huron’s report analyzes the leading causes of and trend in financial restatements filed in amended filings with the U.S. Securities and Exchange Commission (SEC) for the year ending December 31, 2004.”
Uses: TrendLimitations: High-level information
Towers Perrin - TillinghastTowers Perrin - Tillinghast“2004 D&O Liability Survey Executive
Summary: Understanding the Unexpected” Information Available
Results of D&O liability survey of over 2400 U.S. organizations
Premium cost index Coverage limits by asset size Change in deductibles and retentions Claimant distribution by ownership
Uses: TrendLimitations: High-level information
Towers Perrin - TillinghastTowers Perrin - Tillinghast• “2004 D&O Liability Survey U.S. and
Canadian Results”Cost: $700 ($350 for participants)Data Available
Expert Roundtable Section Survey using repeat participants – 1,347 U.S.
organizations that responded to 2003 and 2004 survey
• “Peer Group Report”Cost: $575 ($385 for participants)
Stanford Law SchoolStanford Law SchoolSecurities Class Action Clearinghouse • Data Available
Clearinghouse Research “Securities Class Action Filings 2004: A Year in Review”: Trends
in number of claims and size of settlement “Post-Reform Act Securities Settlements: Updated Through
December 2004”: Contains analysis on settlements filed after the passage of the Private Securities Litigation Reform Act
Indices of securities class action filings Database of federal class action securities fraud litigation
Filings Settlements Decisions
Stanford Law SchoolStanford Law SchoolSecurities Class Action Clearinghouse - continued• Uses
Trend Size of loss distribution
• Limitations Time required to retrieve data Filings limited to filings in the Northern District of California
since the Private Securities Litigation Reform Act of 1995 became effective
©Copyright © 2001 Stanford Law School. Reprinted with permission.
Insurance Services OfficeInsurance Services OfficeDirectors and Officers Database• Data Available
Loss experience of over 9,000 claims Represents approximately 15% of industry Splits profit and non-profit classes Triangles up to 183 months
Paid/incurred loss and allocated loss adjustment expense (ALAE) Occurrence counts
Size of loss distributions Five years of data (accident or report) Limited loss data for the 100k, 250k, 500k, 750k, 1MM, and total limits policy limits
• Cost: $20,000• Uses
Development factors Size of loss distributions
• Limitations New data: unknown issues
Reinsurance Submission DataReinsurance Submission Data• Data Available (many formats)
Primary rate and price changes Historical loss data
Aggregate loss Large loss
• Uses Development factors Historical price and rate changes Size of loss distributions
• Limitations Quality of data Time and resources needed to collect data
Reinsurance Claims and Reserving DataReinsurance Claims and Reserving Data• Data available
Historical individual losses• Uses
Development factorsComparisons to size of loss distributions
Conditional average severity to layer Probability of a loss exhausting the layer limit given
that it has penetrated into the layer
• LimitationsReinsurance reserving systemCost to extract and manipulate data
Questions?Questions?
Data Source - SpecificsData Source - Specifics• National Economic Research Associates
www.nera.com Publications section
• Huron Consulting Group www.huronconsultinggroup.com Resource Library
• Towers Perrin – Tillinghast www.towersperrin.com/tillinghast Publications
• Stanford Law School Securities Class Action Clearinghouse in Cooperation with Cornerstone Research http://securities.stanford.edu
Additional Data SourcesAdditional Data Sources• Institutional Shareholder Services:
www.issproxy.com• U.S. Equal Employment Opportunity
Commission: www.eeoc.gov• U.S Securities and Exchange
Commission: www.sec.gov
Thank you for your Interest.
This material is being provided to you for information only, and is not permitted to be further distributed without the express written permission of American Re. This material is not intended to be legal, underwriting, financial or any other type of professional advice.
© Copyright 2005 American Re-Insurance Company. All rights reserved. The American Re names and logo are registered marks owned by American Re-Insurance Company.