Pinnacle has a team of litigation support consultants who have testified and helped prepare testimony for dozens of administrative hearings on issues such as loss and expense reserve adequacy, reinsurance recoverables, pricing adequacy and many other areas for insurance companies and regulators. Using our experience and expertise, we are ready to help you, regardless of the challenges you face.

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 has a powerful set of competitive analysis products and services that provide in-depth market analysis capabilities. These capabilities enable us to compare premiums and rating plans. Even better, our color-coded maps will give you a clear picture of your competitive position. Our tools can also help answer questions like: "If we are not competitive, is it a concentrated problem or limited to a certain class or territory?" or "In which territories are we both competitive and profitable?"

Pinnacle has experience working with large datasets and creating models to assess damages and develop scenario outcomes.

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 has produced many industry studies to demonstrate differences in regulatory, social and economic conditions within and between states, as well as the impacts of potential legislative and regulatory changes. Many of these studies look at costing of legislation and both historical and expected impacts on insurance coverage availability and affordability. Our studies include evaluations of:

• The impact of tort reforms on liability insurance coverages including automobile, general, products, medical and non-medical professional liability
• The impact of Florida hurricane and wind pools
• No-fault thresholds, repeals and other coverage features
• Uninsured and underinsured motorists stacking provisions
• The role and design features of patient compensation and birth injury funds on medical professional liability insurance
• The impact of both competitive and monopolistic state compensation funds for workers compensation
• The likely impact of the implementation, modification or repeal of caps on non-economic damages on medical professional liability insurance
• The medical professional liability insurance market and its impact on the access to healthcare
• How contractors liability and home warranty tort reforms impact contractors and construction markets
   

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).

Setting a reasonable accrual for unpaid loss and loss adjustment expense obligations is one of the most critical functions of management in preparation of a program’s financials. Performing such analyses is our bread and butter, but emphasis is always placed on using the program’s actual data to the maximum extent possible (rather than relying on external benchmarks) in order to reflect your program’s unique loss characteristics.

When necessary, we will rely on our library of industry, state and insurer/TPA specific benchmarks. These benchmarks allow us to derive reasonable estimates of the accrual for unpaid claims liabilities to the extent your program’s data is not of sufficient volume or reliability to be fully credible for analysis.

You expect your consulting actuary to interact daily with captive managers, auditors, fronting carriers, reinsurers and other service providers, presenting the analysis of the program’s liabilities for unpaid claims – generally the largest item on the Liability side of the balance sheet. Pinnacle leverages its good working relationships with dozens and dozens of service providers, regulators and managers in jurisdictions around the globe to your advantage.

Loss reserve projections generally take one of four forms:

• Point estimate of mean expected loss and loss expense reserves (i.e., “actuarial central estimate" or best estimate)
• Reasonable range of indicated loss and loss expense reserves
• Reserves at a specified higher level of statistical confidence
• Stochastic forecast of the range of all possible outcomes (i.e., a distribution of potential loss and loss expense reserve estimates)

Developing net loss reserves often requires an estimate of ceded loss reserves and distinct knowledge and skills. Pinnacle has the special skills and knowledge to understand the unique nature of various reinsurance treaty types and their potential impact on loss reserve estimates.

Lack of data and significant uncertainty are characteristics of latent mass tort reserving. Pinnacle has significant experience in this arena – including both ground-up analyses and benchmark approaches. Pinnacle’s expertise can help you understand the issues surrounding latent mass torts and project loss reserves for these difficult and uncertain exposures.

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.

A predictive analytics marketing analysis can help you more effectively use your limited resources to target potential new business. Based on marketing response and hit ratio analysis, insurers can determine:

• Which potential marketing targets are most likely to respond?
• Of those who respond, which are most likely to purchase a policy?
• How do I optimize my marketing plan to maximize profitable business?
• What are the characteristics of a customer that shops? Who is most likely to switch?
• How likely is it that a certain type of customer will respond to cross selling?

Pinnacle is experienced at comparing and contrasting coverage forms for many commercial and personal lines of insurance. For many specialty products, unique coverage features are essential to avoiding coverage pitfalls, meeting agency and insured expectations and setting your products apart from companies using industry boilerplate forms.

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 analytics 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.

We can handle product management in several ways, including:

• Profitability Estimates: to determine expected profitability after identifying and comparing a risk’s loss potential with proposed premium
• Customer Response Modeling: finds which customers buy or renew policies
• Price Optimization: shows the influence of price, competition and customer demand of an insurer’s profitability and growth
• Marketing Solutions: evaluates how successfully marketing initiatives are identifying and attracting targeted and profitable risks
• Agency Management: considers agency performance relative to the book of business

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 reinsurance underwriting submission is one of the primary means of communicating to reinsurers the unique qualities of your company. Pinnacle’s consultants are more than actuaries. Our experience as reinsurance underwriters and product managers will provide valuable insight on best representing your firm to potential reinsurance partners.

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.

Using external data, Pinnacle creates vehicle classification factors that replace or supplement existing model year and symbol factors. Pinnacle can help insurers develop their own vehicle classification factors so introducing new models is quick and easy.

With Pinnacle’s help, changing systems and programs do not have to cause large disruptions. We can smooth such transitions by:

• Identifying class dislocations
• Developing loss cost multipliers by state, program, and potentially class to help maintain current rate adequacy
• Identifying program segments that may be disparately impacted from the conversion
• Creating transition controls -- such as transition rules and company-specific class codes -- necessary for a smooth conversion

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.