Solvency Surveillance What is Working and What Is Not Casualty Loss Reserve Seminar Las Vegas Nevada 9/14/2004 Chap Cook MBA Actuaries, Inc.
Solvency Surveillance View From the Bottom -- Memoirs of a former CEO What did not work in my own case: • Replacing the former CEO (with me) • Eliminating half the business • New but funny capital (it was phony too) • Cease and desist orders from little states • Replacing me (with an experienced crook)
Solvency Surveillance What was actually helpful in my own case: • Capital Infusion from parent • Very frank discussions with Auditor • New Board of Directors: • Parent and Grandparent controller and CEO • An Agent in each country • An Insurance Economist • A retired professional director with time available
Solvency Surveillance What was actually helpful in my own case: • Disciplined Reinsurer Support They really can help if you ask them • Early planning with Home State Regulators For instance, helped us get out of some small markets more quickly • Good Tax Assistance Recovered significant cash from IRS • Sold off Canadian Subsidiary – a distraction
Solvency Surveillance What was confusing or confounding or counterproductive in my own case: • Premiums that went up when we withdrew from business (tail coverage) • Pools that kill you if you leave Profitable cessions stop -- but lousy assumptions continue – it seems like forever • State Agency termination restrictions Do these really protect agents?
Solvency Surveillance View From the Press Box -- Memoirs of a consultant (and witness) What does not work in my experience: • Suing everybody in sight indiscriminately • Accusing Management If they didn’t do anything really stupid or illegal • Retaining Management If they are guilty of something
Solvency Surveillance View From the Press Box -- Memoirs of a consultant (and witness) What does work in my experience: • Early Intervention • RBC Company Action Level is the best idea ever! • If and only if the state gets the plan, negotiates on it, and monitors it -- and measures the effects • Try to keep the good stuff -- “cease and desist” or “no renewals” are excessively blunt instruments
Solvency Surveillance View From the Press Box -- Memoirs of a consultant (and witness) What does work in my experience: • Direct state assistance with downsizing • Agent replacement (especially MGA’s) • Rate filings expedited • Comfort and soothe the other states • Don’t reduce premiums, reduce exposure!
Solvency Surveillance View From the Press Box -- Memoirs of a consultant (and witness) What does work in my experience: • Sell off the good parts – a win, win, win idea • Management must be serious • Sell it all – people, files, office lease • Regulators – help with a novation agreement • Try a contingent price
Solvency Surveillance View From the Bench -- Memoirs of a sometime Special Master, Mediator, and Second Opinion What does work in my experience: • Always get a second opinion! We have seen sound companies almost seized • Whatever you must do, do it quickly! • Seize, fix and release must be done within days • Some companies need to be stopped right now • You can’t sell the good pieces after they cancel • Dead fish will never smell better