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Whose Line Is It Anyway? Boiler & Machinery . Casualty Actuarial Society Seminar on Ratemaking The Tampa Marriott Waterside Tampa, Florida March 7-8, 2002 COM-24 Christine L. Steben, CPCU, ARe Travelers Property & Casualty. Discussion Highlights . 1. Product Overview

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whose line is it anyway boiler machinery
Whose Line Is It Anyway? Boiler & Machinery
  • Casualty Actuarial Society Seminar on Ratemaking
  • The Tampa Marriott Waterside
  • Tampa, Florida
  • March 7-8, 2002
  • COM-24
  • Christine L. Steben, CPCU,ARe
  • Travelers Property & Casualty
discussion highlights
Discussion Highlights
  • 1. Product Overview
  • 2. Distribution Systems
  • 3. Ratemaking Considerations
  • 4. Emerging Coverage Issues
  • 5. International vs Domestic Ratemaking
market evolution
Market Evolution
  • Large Industrial Risks
    • Steam Boilers - used to heat buildings
    • Turbines - used to produce power
  • Manufacturing Risks
    • Extruders - make shapes out of plastic
    • Corrugating Machines - used to make boxes
  • Non-Manufacturing Risks
    • Air Conditioning Equipment - such as those found at retail stores
    • Refrigeration Equipment - such as those found at grocery stores
exposure rating base
Exposure Rating Base
  • M&E (Machinery and Equipment)Values
    • Schedule of Objects would be presented by Agent
  • Building & Contents Value
    • Schedule of Locations would be presented by Agent
coverage
Coverage
    • Trigger: Accident to covered equipment
  • Property Damage - Covered Equipment
  • Business Interruption
  • Service Interruption
  • Perishable Goods
  • Hazardous Substances
  • Demolition and Increased Cost of Construction
  • Data Restoration
  • Expediting Expense
customer delivery
Customer Delivery
  • Agents (Direct) - Relationship with Customer
    • Expenses - Primary insurer produces paper
    • Losses - Primary insurer is first party
    • Premium Collection - Primary insurer receives payment
  • Reinsurance (Assumed) - Relationship with Primary Insurer
    • Expenses - Primary insurer produces paper
    • Losses - Primary insurer takes 1st notice, contacts reinsurer
    • Premium Collection - Primary insurer remits payment on borderaux
rating pricing by distribution system
Rating / Pricing By Distribution System
  • One By One
    • Manual Rating (ie Business directed through an Agent)
  • Program
    • Many locations of a similar classification / exposure (ie Hotel / Motel Program)
  • Portfolio
    • An entire book or segment of a book of business (ie CPP or BOP)
ratemaking considerations
Ratemaking Considerations
  • Jurisdictional Inspections - Impact on Expense Ratio
    • Varies by classification of business
    • Requirements vary by state
  • Loss Adjustment Expense - Impact on Loss Ratio
    • Varies by classification of business
    • Varies by state
  • Delay in remittance of premiums
    • Varies by distribution system
  • Loss development tail
    • Varies by distribution system
advances in technologies trend
Advances in Technologies (Trend)
  • Replacement Cost of Equipment Increases Comparatively
    • Medical Equipment (ie MRI)
  • Repair Cost of Equipment Increases
    • Level of expertise required may not be readily available
  • Increased Business Interruption Exposure
    • Impact on Web Service Provider ability to provide service (ie AOL)
  • Equipment May Become Obsolete
    • Cost to replace may be prohibitive
emerging coverage issues
Emerging Coverage Issues
  • Toxic Mold
    • Caused by an accident to covered equipment
      • Example: A machine that controls atmospheric temperature and humidity fails
  • Terrorism (International and Domestic)
    • Availability of Reinsurance
    • Managing Spread of Risk
      • Example: A power plant that serves 100% of a population in FL
international vs domestic
International vs Domestic
  • Cost of equipment will vary
    • Supply and demand of certain equipment
  • Cost of inspection will vary
    • Availability of qualified / responsive personnel
    • Existence of jurisdictional inspection requirements
  • Cost of loss adjustment will vary
    • Availability of qualified / responsive personnel
  • US Dollar Conversion
    • Value of a dollar at the time of loss
boiler machinery ratemaking in review
Boiler & Machinery Ratemaking In Review
  • Coverage provided can be increased or decreased
  • Product delivery/distribution impacts Expenses, Losses and Premium
  • Unique characteristics of Boiler & Machinery impacts Expense Ratio, Loss Ratio and Trend (Premium and Loss)
    • Jurisdictional Inspection
    • Loss Adjustment Expense
    • Changes In Repair/Replacement Costs Over Time
  • Emerging coverage issues should be identified
  • International and Domestic exposures should be evaluated