1. Reserve Actuary & Risk Assessment – 2005 CLRS Robert Eramo - Risk Assessment & Strategies,Inc. and Representative of Insureware

2. Objective An Assessment of Risk Associated with Loss Reserves Statistically Based Assessment of Risk Reduce or Eliminate Arbitrary Rules in Disclosure by Actuary Make Risk Assessment Understandable to Regulators, Executives and Investors

3. Statistical Bases of Risk Assessment Determination of Needed Reserves Calculation of Reserve Confidence Levels Compare Reserve Confidence Levels to Needed Reserves Ratio Proxy of Risk Compare 95%, 90% Confidence Levels to Needed Reserves

4. Risk Profile – Two Layer Example 95%90%75%Needed Level Reserve $1 Million764708623556 $1 M xs $ 1M587527442381

5. Risk Ratios – Two Layer Example 95%90%75% Level $1 Million1.37411.27341.1205 $1 M xs $ 1M1.54071.38321.1601

6. Model Determination Guidelines Features of Data – Trends and Variability Model Should Have Features in Historical Data Preference - Probabilistic Trend Modeling Estimates of Needed Reserves Scientifically Determined Just as Important Second Moment Output Also Scientifically Determined i.e. Standard Deviations, Confidence Level Displays

7. Model Determination Guidelines Include Process Risk Include Parameter Risk Multiple Line Problem Reflect Correlation Matrix Between Lines Note the Panel on Multiple Line Modeling w Ben Zehnwirth & Glen Barnett

8. Recommendations Replace Qualitative Accounting Guidelines Incorporate Risk Profile/Ratios in Actuarial Opinion Guide to Risk Transfer Analysis & Determination

9. Consequences of Risk Profile Clear Internal Guide For Management – Understanding of Nature of Company Effects of Adding Books of Business Effects of Disposition of Exposures through Sale or Reinsurance Regulators Can React Based on Comfort Zone Investors Better Idea of Risk in Evaluating Stock Price