Pinnacle has several consultants who have appeared as expert witnesses at arbitrations. We are also trained to serve as insurance and reinsurance arbitrators.

Interacting with auditors is an everyday occurrence for Pinnacle’s consultants. We must balance responsiveness to the auditor's needs with the need to represent the interests of the program in a professional manner. Generally accepted actuarial procedures often lead to varying opinions on the indicated unpaid claims liabilities, so the actuary provides documentation in the report supporting the analysis sufficient to satisfy the auditors that the assumptions used and conclusions reached are reasonable and supported by the data.  Pinnacle consultants deal with auditors daily and our work products routinely pass scrutiny by auditors both large and small.

Benchmarking is useful in loss reserving and ratemaking assignments from at least two perspectives. First, to the extent a program’s loss development data is not of sufficient size to be fully reliable, benchmarks are needed to supplement the information to make reliable estimates of unpaid claims liabilities. Second, once an analysis is complete, benchmarking your program’s results to others (i.e., competitors, peer companies or industry aggregates) is useful for comparison purposes.

The benchmarks used to supplement your data are only as good as the nature of the underlying data. A benchmark for commercial auto liability, for instance, may not be predictive of an insurance program for tow truck operators as the former is very broad and the latter is a very narrow business class. Likewise, a benchmark loss development pattern based on countrywide data may not be predictive of future loss emergence of a book of business in California. Pinnacle strives to construct benchmarks for any given analysis as close as possible to replicating the nature of the underlying data being reviewed.
 

A key aspect of a proper reinsurance program is the management of risk. However, when it comes to controlling your property catastrophe exposure, reinsurance may not be sufficient. Pinnacle can assist you in developing a strategy to mitigate your catastrophe exposure. This may include determining the impact of policy changes, including deductibles, or reviewing geographic areas where exposures are driving your reinsurance purchases. We can develop a strategy to mitigate your catastrophe exposure.

We have experience working with model output from all the major catastrophe modelers for hurricane, other wind, earthquake, and fire and can make recommendations for:

• Designing rating plans and territory boundaries
• Determining appropriate catastrophe loads, including the net cost of reinsurance calculation for rate filings
• Supporting rate filings in challenging environments such as Florida and California
• Testing reinsurance/risk financing structures
• Exposure management

Pinnacle helps insurers identify rating plan elements that can be more appropriately priced or added for additional risk segmentation. You can benefit from Pinnacle’s class plan analysis, which evaluates rating relativities with multivariate analysis to eliminate distributional bias in insurance pricing, regardless of the size of your company.

Pinnacle is experienced with using external data to supplement your own experience. For class plan analysis, we have used data from:

• Marshall & Swift / Boeckh (MSB)
• Highway Loss Data Institute (HLDI)
• U.S. Census Bureau
• R.L. Polk
• Dunn and Bradstreet
• TransUnion
• Choice Point
• Carfax
• Explore

Pinnacle provides unique qualifications to assist in collateral negotiations. Loss reserve analyses prepared by Pinnacle may be used as a negotiating tool as it relates to the collateral associated with deductible and/or retentions maintained. Our approach is designed to maximize the usefulness of a program’s actual data. Our extensive expertise with alternative markets, self-insured programs and reinsurance provides us with valuable perspectives on the multitude of factors that can impact collateral negotiations.

Asking the right questions and understanding the answers is key to a successful deposition. Pinnacle consultants are experienced in the often rapid-fire situations presented in depositions.

Assessing the reasonableness of indicated loss and loss adjustment expense reserves after the analysis is completed is an essential element of the loss reserve analysis. In particular, measures such as loss ratios, changes since the prior evaluation, implied claim frequencies and severities and costs per unit of exposure are a few of the diagnostic tests employed when considering the reasonableness of indicated reserves.

Management sometimes wishes to reflect the time value of money in funding projections, accruals for unpaid claims liabilities and other valuations. The two most important parameters for doing so are the assumed interest rate and the underlying claim payment pattern. Assessing reasonable values for these parameters is not trivial as the interest rate may need an adjustment for risk while the claim payment pattern may not be readily available.

Pinnacle consultants have experience in providing expert witness testimony in federal, state and county courts and before state legislatures. We have also defended insurer and bank business practices in complex class action lawsuits.

With a strong knowledge identifying exposures, we recognize that differences exist between businesses. Upon classifying the various exposures, we can establish a proper structure to minimize losses. Other ways we can help you manage exposure include:

• Quantifying expected risk potential for all exposures by frequency, severity, and predictability
• Recommending appropriate risk financing mechanisms for the exposures
• Independently auditing your existing risk management program

Ultimate losses in a loss reserve exercise may be broken down into two components – ultimate claim counts and ultimate average claim severities. Claim frequencies are affected by changes in coverage or product line mix or geographic diversity, safety culture, loss control efforts and employee education. Average claim severities typically trend upwards but may be influenced by risk management techniques such as managed care, vendor analysis, and attitudes towards early settlements. Pinnacle can help you review your claims experience to determine potential improvement areas to control rising costs.

Management often desires to be conservative when setting an accrual for unpaid claims liabilities. Routinely we employ a variety of methods to derive indicated accruals for unpaid claims liabilities at a variety of higher confidence levels to help you assess the potential variability in future loss outcomes. Using evaluation methods to reflect process risk, parameter risk and/or model risk, we can help you find out what you need to know about indicated reserves at specified higher levels of statistical confidence.

Since Pinnacle’s consultants have career backgrounds ranging from large to small insurers, regulatory authorities and statistical organizations, Pinnacle delivers a complete perspective to each assignment. Pinnacle’s commitment to the actuarial profession is demonstrated by committee work and leadership positions for actuarial organizations, which keeps us on the cutting edge of professional developments.

Pinnacle represents the interests of both buyers and sellers of blocks of business. At other times, our independent analysis is used as a reference point between competing valuations of the unpaid claims obligations. Regardless of the viewpoint, our analysis will reflect an independent evaluation of a program’s indicated unpaid claims liabilities often reflecting provisions for the time value of money (i.e., discounting) and uncertainty (risk margins).

Reinsurance loss reserving requires special skills and knowledge. The reinsurance reserving actuary must understand the unique nature of various reinsurance treaty types and their potential impact on reserve estimates. Pinnacle’s consultants understand reinsurance contract language and have the skill set required to properly evaluate reinsurance loss reserves.

Analysis of a program’s ceded reinsurance reserves can take several forms. A typical loss reserve analysis may first estimate indicated loss and loss adjustment expense reserves on a direct and assumed basis, then separately reviews indicated ceded reserves to determine indicated net reserves by subtraction. Other times, the analysis begins with net data and adds the indicated ceded reserves to develop estimates of amounts on a direct and assumed basis. The reinsurance program may combine elements of quota share, surplus share, excess of loss, aggregate excess, clash and catastrophe coverages.

Pinnacle’s approach to each loss reserve analysis is customized to the unique characteristics of each program. Differences in lines of coverage, number of exposure periods, gross versus net, annual or quarterly loss evaluations, and detail by state are different for virtually every assignment. We have found a predetermined loss reserving template doesn’t work efficiently for the unique characteristics of individual programs. Our templates are custom designed to accommodate your needs.

Pricing insurance products today has become much more sophisticated. Insurers are using many new factors to segment insurance risk in innovative ways. We can apply predictive modeling to better segment and price your risks and maintain or gain competitive advantage.

Our pricing services include:

• Identifying and processing insurer data for pricing analyses
• Identifying and introducing external data to supplement pricing plans
• Supporting new pricing plan implementation in many ways - such as internal system specifications and regulatory approvals

Commutation pricing often requires an actuarial review of the net present value of the outstanding losses to the treaty. Pinnacle provides extensive experience in reinsurance reserving and treaty analysis needed for commutations pricing. Pinnacle can estimate the value of the commutation and help negotiate the commutation pricing.

Pinnacle has experience in all stages of program development -- from creating a new, unique program to program conversion. This includes everything from refining existing programs to developing new programs. Pricing, coverage features, and eligibility can all play an essential part in a successful new product. Pinnacle also has experience developing program submission books for taking proposed programs to market seeking fronting carriers.

A rate indication determines the rate change necessary for insurers to meet their target profit levels. The rate indication requires future loss estimates and expenses and must meet actuarial principles and state requirements. Using insurance company and industry benchmarks, Pinnacle can provide rate indications and actuarial memorandums to support your rate filings.

Pinnacle’s consultants can help you realize your strategic objectives by helping you optimize your reinsurance program. We can provide an independent review of your reinsurance strategies to help you determine if you are meeting your reinsurance objectives -- whether those objectives are surplus relief or cost effectively managing underwriting variability.

Pinnacle’s experience and exposure-based pricing models evaluate all property and casualty lines. Our pricing models provide independent cost evaluations of both ceded and assumed reinsurance programs. We also provide additional pricing support during renewal season.

The timely reporting requirements of financial results sometimes leads to a mismatch between the evaluation date of the data and the date shown on the financial statement. Projections of claim activity in the next few months are often requested to accommodate such time constraints. The roll forward projection of future expected loss and loss expense reserves is calculated based on interpolated loss and loss expense payment and reporting patterns. The assumption inherent in this approach is that actual claim activity in the roll forward period will not be materially different than projected.

Certain jurisdictions require a formal Statement of Actuarial Opinion (SAO). Domestic property/casualty insurance companies must furnish an SAO in conjunction with their Annual Statement filings with state regulators each year. Likewise, risk retention groups, self-insured groups and captive insurance companies may be required to file an SAO with state regulators. Offshore domiciles such as Bermuda also require SAOs being filed periodically.

Pinnacle consultants are qualified and approved to prepare SAOs and know the requirements in each jurisdiction. We interact with regulators regularly to understand their needs and concerns. Pinnacle produces hundreds of formal Statements of Actuarial Opinion in any given year.
 

Territories should be regularly updated or reconsidered to ensure risks are competitively priced. Thanks to the emergence of multivariate analysis and clustering and smoothing techniques, we can help you discover state-of-the-art rating territories that will challenge your competitors.

We can help you develop the most appropriate theoretical territorial set, adjust these sets for real-life constraints and review the impact upon your existing portfolio. Pinnacle can also make further adjustments based upon desired maximum rate swing constraints and provide rate filing support.

Pinnacle has developed clustering techniques for territorial analysis, which begin with data at a very refined -- typically ZIP code -- level. Then we smooth and cluster the data in an iterative process to form homogeneous rating territories. We have applied these techniques for many clients, in several states to produce rating territories that comply with any state rating restrictions. This approach can also help you design more objective and predictive territory definitions.

If your data is too sparse to have full credibility, Pinnacle can help obtain additional data to supplement your data with additional experience.

Our Geographic Information Systems analysts create territory boundary maps electronically for use in either PCArcView or MapInfo mapping software. These files allow us to identify areas where mismatch of territory definitions create either competitive advantage or competitive disadvantage.

We have also built a library of rating territory maps for auto and home. These maps have been the backbone of our competitive analysis services and are now available through our mapping services department. The maps are available on paper or in electronic format (Mapinfo, Arc/view). We will export into other formats on request. The files can also be overlaid to show comparisons between companies. If we don't have the company, line or state that you are looking for, custom mapping is available.

Pinnacle provides “been-there-done-that” perspective that is helpful in preparing witnesses for the unfamiliar and frequently stressful litigation landscape.