Review

Development of pricing modelling and exposure management capability

During 2007 we invested further in our pricing capabilities with the recruitment of pricing actuaries within our Non-marine and Marine divisions. Increased sophistication in the methodology for calculating technical price will assist us in the next phase of the market where a larger proportion of the business offered to our underwriters may become marginally priced. Further review of our methodologies and the introduction of more advanced technical benchmarks are planned during 2008.

The catastrophe modelling team has been enhanced by the employment of new team members during 2007 and we have extended our modelling capability through the use of more than one model on certain classes of business.

The development of our location mapping software during 2007 included completion of the detailed mapping of our direct, non-facility catastrophe and terrorism exposures, enabling more accurate management of our exposures against agreed limits. We are nearing completion of a system to upload location data from delegated underwriting facilities, which are currently managed by broad aggregate limits. In 2008 we expect to complete the detailed location mapping of our direct account and be able to conduct our own stress testing and modelling on our direct portfolio.

A particularly valuable recent development has been the use of our dynamic financial analysis (DFA) model to compute the annual aggregate catastrophe costs and associated probability of occurrence. This has been done through feeds from the catastrophe models into the DFA model and is therefore subject to the inherent model error of the proprietary models themselves.

© Copyright Amlin 2007