IV. RESULTADOS Y DISCUSIÓN
4.2. Diversidad vegetal en parcelas a largo plazo para el monitoreo de la
4.3.2. Cobertura Vegetal Reiterada (CR%)
Whilst the losses arising from the Atlantic hurricanes in 2004 and 2005 broadly support the RDS analysis there is no guarantee that the assumptions and techniques deployed in calculating these figures are accurate. Furthermore there could also be an unmodelled loss which exceeds these figures. The likelihood of such a catastrophe is considered to be remote but the most severe scenarios modelled are simulated events and these simulations could prove to be unreliable.
Insurance liabilities and reinsurance assets
Calculation of IBNR and claims development
Amlin adopts a consistent process in the calculation of an adequate provision for insurance claim liabilities. The overriding aim is to establish reserves which are expected to be at least adequate and that there is consistency from year to year. Therefore the level of reserves are set at a level above the actuarial‘best estimate’ position. However, there is a risk that, due to unforeseen circumstances, the reserves carried are not sufficient to meet insurance claim liabilities reported in future years on policy periods which have expired.
Process and methodology
The reserving process commences with the proper recording and reporting of claims information which is made up of paid and notified or outstanding claims. For our London Market business information is received through Xchanging (the London Market bureau) and, in the case of our UK commercial business and service companies, directly from policyholders. Claims records are maintained for each class by the underwriting year to which the policy incepts. For notified or outstanding claims a case reserve is established based on the views of underwriting management and claims managers, using external legal or expert advice where appropriate. This reserve is expected to be sufficient to meet the claim payment when it is finally determined. For some classes of business, particularly liability business, settlement may be several years after the initial notification of the claim, as it may be subject to complexities or Court action. Underwriters and claims staff are responsible for setting case reserves for outstanding claims. For claims received from Xchanging, the market reserve is generally set by the leading underwriter but there are circumstances on larger claims where Amlin will post higher or lower case reserves than those notified. These cases are explained and discussed in reserving review.
To establish a provision for incurred but not reported (‘IBNR’) claims, the businesses’ underwriting and claims teams use their experience and knowledge of the class of business to estimate the potential future development of each class for every year of account. The development period varies by class, by method of acceptance and is also determined by the deductible of each policy written. For casualty business the policy form will determine whether claims can be made on a claims made (as advised) or as a losses occurring (determined by date of loss) basis. This has a significant impact on the reporting period in which claims can be notified. In setting the IBNR provision estimates are made for the ultimate premium and ultimate gross claims value for each underwriting year. Allowance is then made for anticipated reinsurance recoveries to reach a net claim position.
To assist with the process of determining the reserves, triangulation statistics for each class are produced which show the historical development of premium, as well as paid and incurred losses, for each underwriting year, from inception to the date of review. Each class triangulation is also independently analysed by the internal actuarial team using actuarial software as appropriate. The aim of the actuarial exercise is to produce ‘best estimate’ ultimate premium and claims amounts which can be compared to the figures proposed by divisional management. Meetings are held in which executive management, actuarial staff and business management discuss claims issues and analyse the proposed and independently generated reserves to conclude the provision to be carried. These provisions are also reviewed annually by external actuaries who examine the work carried out and opine on the sufficiency of reserves. Areas of uncertainty
The reserves established can be more or less than adequate to meet eventual claims arising. The level of uncertainty varies significantly from class to class but can arise from inadequate case reserves for known large losses and catastrophes or from inadequate provision for IBNR. The impact on profit before tax of a 1% variation in the total net claims reserves would be £11.0 million (2004: £7.9 million).
Large loss case reserves are determined through careful analysis of the individual claim, often with the advice of legal advisers. Liability claims arising from events such as the 11 September 2001 terrorist attacks in the United States is an example of a case where there continues to be some uncertainty over the eventual value of claims.
Property catastrophe claims such as earthquake or hurricane losses can take several months or years to develop as adjusters visit damaged property and agree claim valuations. Until all the claims are settled it requires an analysis of the area damaged, contracts exposed and the use of models to simulate the loss against the portfolio of exposure in order to arrive at an estimate of ultimate loss to the Company. There is uncertainty over the adequacy of information and modelling of major losses for a period of several months after a catastrophe loss. Account should also be taken of factors which may influence the size of claims such as increased inflation or a change in law.
The long tail liability classes for which a large IBNR has to be established represent the most difficult classes to reserve because claims are notified and settled several years after the expiry of the policy concerned. This is particularly the case for US liability written on a losses occurring basis. The use of historical development data adjusted for known changes to wordings or the claims environment is fundamental to reserving these classes. It is used in conjunction with the advice of lawyers and third party claims adjusters on material single claims.
In the course of reserving the businesses provide a reserve for future events occurring to the existing portfolio. These provisions are removed in order to reflect GAAP accounting practice.
Risk disclosures
Claims development
The table below illustrates the development of the estimate of cumulative claims for Syndicate 2001 after the end of the underwriting year, illustrating how amounts estimated have changed from the first estimate made.
Gross basis
2001 2002 2003 2004 2005Underwriting Year £m £m £m £m £m
Estimate of cumulative claims:
At end of underwriting year 667.9 495.5 554.5 675.2 931.2
One year later 605.9 399.1 441.1 665.7
Two years later 600.1 354.9 375.1
Three years later 603.8 343.1
Four years later 605.7
Cumulative payments 477.3 254.8 237.0 335.4 153.5
Estimated balance to pay 128.4 88.3 138.1 330.3 777.7
Net basis
2001 2002 2003 2004 2005Underwriting Year £m £m £m £m £m
Estimate of cumulative claims:
At end of underwriting year 411.0 445.1 489.9 542.6 575.3
One year later 398.3 369.2 388.9 493.4
Two years later 388.3 324.5 331.8
Three years later 381.9 311.4
Four years later 380.9
Cumulative payments 275.4 208.3 195.0 226.9 90.4
86 Amlin plc Annual Report 2005
A breakdown of the asset classes is given below.
31 December 2005 31 December 2004
Syndicate Corporate Total Syndicate Corporate Total
£m £m £m £m £m £m)
Global equities – 116.2 116.2 – 90.1 90.1
Bonds
Government securities 736.7 14.5 751.2 329.1 8.4 337.5
Government index-linked securities 5.5 – 5.5 11.1 – 11.1
Government agencies 13.9 – 13.9 17.6 – 17.6
Supranational – – – – 10.5 10.5
Asset backed securities 23.6 – 23.6 15.1 – 15.1
Mortgage backed securities 73.4 – 73.4 29.4 – 29.4
Corporate bonds 184.9 89.6 274.5 222.1 65.1 287.2
1,038.0 104.1 1,142.1 624.4 84.0 708.4
Other liquid investments
Money market instrument/CDs 52.9 61.2 114.1 38.9 58.6 97.5
Cash and cash equivalents 52.4 13.2 65.6 17.2 30.4 47.6
Money market funds 66.6 639.2 705.8 328.3 78.2 406.5
171.9 713.6 885.5 384.4 167.2 551.6
1,209.9 933.9 2,143.8 1,008.8 341.3 1,350.1
The global equity fund at 31 December 2005 can be broken down by industry sector and geographical area as follows:
Industry £m Region £m
Cyclical consumer services 26.7 United Kingdom 37.2
Financials 23.2 USA and Canada 12.8
Industrials 4.6 Europe (ex UK) 38.3
Non-cyclical consumer services 30.2 Far East 20.9
Resources 16.3 Emerging markets 7.0
Technology 3.5
Utilities 3.5
Other 8.2
116.2 116.2
Investment management
The investment portfolios are managed by external investment professionals under the direction of Amlin’s Investment Management Executive. Specialist managers are appointed for the different asset classes. The managers are monitored on an ongoing basis and are reviewed periodically using specialist investment consultants, currently Watson Wyatt Worldwide. Selection is based on a range of criteria that leads to the expectation that the managers will add value to the funds, whilst keeping within the strict guidelines.
The managers have discretion to manage the funds on a day-to-day basis but must operate, and are monitored to ensure adherence under the investment guidelines to ensure compliance with the regulations and Amlin’s investment frameworks. In particular, the guidelines provide rules governing such factors as: eligible assets, minimum holdings in cash and government bonds and maximum exposures to non-government assets, single issuers, and credit. The bond managers are also given tactical duration ranges, within which they can position the funds compared to the benchmarks depending on the outlook for markets.
The managers at 31 December 2005 were:
Manager Mandates
Aim Global Euro and US dollar liquid funds
Alliance Capital Sterling bonds and sterling liquid funds
Barclays Global Investors Sterling, Euro and US dollar liquid funds
Citibank US dollar liquid funds
Goldman Sachs Asset Management Sterling, Euro and US dollar liquid funds HSBC Asset Management Sterling, Euro and US dollar liquid funds Insight Investment Management Sterling bonds and sterling liquid funds
Taube Hodson Stonex Partners Global equities
Weiss Peck & Greer Investments US and Canadian dollar bonds
Western Asset Management US dollar and Euro bonds
Union Bank of Switzerland Canadian and US dollar liquid funds
Amlin plc Annual Report 2005 87
Risk disclosures
31 December 2005 31 December 2004
Syndicate Corporate Total Syndicate Corporate Total
£m £m £m £m £m £m
Equities – 116.2 116.2 – 90.1 90.1
Bonds 1,038.0 104.1 1,142.1 624.4 84.0 708.4
Other liquid investments 171.9 713.6 885.5 384.4 167.2 551.6
Total 1,209.9 933.9 2,143.8 1,008.8 341.3 1,350.1
% % % % % %
Equities – 12 5 – 26 7
Bonds 86 12 53 62 25 52
Other liquid investments 14 76 42 38 49 41
Total 100 100 100 100 100 100