Property and casualty (P&C) insurance headlines these days generally focus on issues relevant to current policies. Although not receiving as much attention, historical accident years have also been experiencing deteriorating trends, both for mature exposures such as asbestos, environmental pollution, and construction defect claims as well as for emerging exposures related to talc, sexual abuse, and opioid litigation.
Understanding the impact of these potential legacy losses is important, not only in the context of establishing an appropriate reserve, but also to form a view of the load for mass torts needed for pricing current policy years. Very often insurance companies segregate these mass tort claims, housing them in discontinued operations, ceding such exposures as part of adverse development covers or simply removing them from actuarial analyses to prevent them from “distorting” the analyses of the “normal” claims.
In this article, Milliman’s Raji Bhagavatula, Mark Goldburd, and Jason Russ discuss a number of these “legacy” topics that affect the general liability books of commercial insurance companies.
In 2018, Oklahoma became the center of discussion of the U.S. run-off insurance market. Oklahoma’s Insurance Business Transfer Act created a buzz as the U.S. market now gets even closer to its first ever deal to transfer and novate insurance policies from a transferring insurer to an assuming insurer without policyholder consent by way of an insurance business transfer (IBT). This legislation gives insurers and reinsurers of U.S. risks much needed finality with respect to obligations for liabilities.
An essential voice in this process is the Independent Expert (IE), whose role has traditionally been filled by an actuary in venues outside the United States. The Independent Expert provides insight and perspective on the fairness of the transaction to the regulators and courts that must ultimately approve the transfers. Policyholder protection is the most important consideration in the IBT and the role of the IE is critical in protecting the interests of the policyholders from both the assuming and transferring companies.
Under the Oklahoma IBT law, the companies involved in transferring and assuming the business must jointly provide a list of IEs, from which one is selected by the Insurance Commissioner. The IE ultimately works for the state court and is relied upon to assess the terms of proposed transfers with specific focus on protecting the interests of the policyholders involved.
In this article, Milliman’s Stephen DiCenso and Tom Ryan provide background on this new opportunity for all companies with legacy liabilities and discuss why actuaries will be at the center of that process.