October 2004      
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The Captives are coming, the Captives are coming!
Yes, the Captives are coming – Captive Insurance
Companies are coming into the Group Life and
Disability Marketplace. Some large U.S. employers
are forming captive insurance companies, or utilizing
existing captive insurance companies, in order to
reinsure employee benefits. Until recently, the
Department of Labor would not allow an employer’s
captive to reinsure the employer’s ERISA regulated
U.S. employee benefits. Now, it has become easier
to obtain Department of Labor approval. The first
employers to do this were Archer Daniels Midland,
Columbia Energy and International Paper.

Why would an employer want to do this?

An employer might do this in order to reduce taxes
on Property & Casualty risks that are reinsured
thru their captive, in order to gain greater control
over risk, or to reduce insurance premiums.

What coverages would an employer want
to reinsure thru their captive?

The most likely employee benefits to be reinsured
include Group Life, Group AD&D, Long Term Disability
and Retiree Medical.

How does this impact Group Insurers, beside the
potential loss of premium from these large employers?

Employers will need an insurer who is highly rated by
AM Best to act as a fronting company and help them
administer the plan.

How does this impact reinsurers?

An employer might want to cede some of the risk
to a reinsurer, such as high maximum benefits.

What are some of the obstacles to an employer
reinsuring employee benefits thru their captive
insurance company?

• Benefits must be enhanced for plan participants
• Lack of interest by insurers in being a fronting
• No commissions may be paid

It will be interesting to watch developments in this
arena, as U.S. employers look for more efficient
ways to manage employee benefit risk.
Building the ‘Perfect’ Underwriter
How does the classified ad read when searching for
an underwriter? Scientist Wanted. Mathematician?
Counselor? Psychic?! In reality, a combination of all
of these, and then some, are what many experienced
underwriters are. The true challenge is how to mold
new underwriters into seasoned professional

The Dental Committee will host a session at
the Las Vegas meetings entitled Transforming
Underwriters into Underwriting Professionals.
David Ward, Director of Corporate Dental & Life
Underwriting at Humana will facilitate this session.
Some of the topics will be:
• Yesterday's view of the traditional underwriter
  vs. today's requirements of the underwriting
• Using tools and resources to leverage talent and
  develop the underwriting staff to deliver the results
  necessary to succeed in today's competitive
• Cultivating talent and identifying tomorrow's leaders

We will follow this up with a Let’s Talk Shop
session to allow for an expanded conversation
on other carriers’ perspectives and practices.
This should prove to be a great resource for any
GUAA members who currently recruit and manage
underwriting staffs and for those who are new to
the profession. Don’t miss this session in November.

GUAA’s reinsurance committee
is looking forward to the November
2004 meeting in Las Vegas,
Nevada. The committee has been
working hard to put together three
separate sessions pertaining to
reinsurance topics.

Dave Wilson of Windsor Strategy
Partners will speak about The Two
Sides of Employer Stop Loss
Underwriting. Dave will share
knowledge he has gained over
the last 30 years while consulting
with reinsurers, MGU’s and direct
carriers. The session will address
how employer stop loss underwriting
manuals are viewed by the actuaries
who create them and by the
underwriters who use them. Dave
will present his view on the specific
points that the actuaries look at
when evaluating a manual and what
the underwriters should consider
when evaluating a manual and
why they don’t always look at the
manuals the same way. Dave will
also discuss how different
underwriting manuals affect the
terms and conditions of the
reinsurance treaty.

Achim Dauser, PhD., Actuary
(DAV), MAAA, from Gen Re Life
Health will speak about Cost
Trends in the Group Insurance
Marketplace. Despite the fact
that 2003 healthcare inflation
was lower than anticipated,
costs of medical care and
pharmaceuticals are still rising
sharply and well above acceptable
levels. Medical cost trend, the
measurement of average forecasted
change in claims cost, continues
to be a very crucial factor that
both insurers and reinsurers need
to monitor in order to price their
products accurately. Achim will
present Gen Re’s Medical cost
trend recommendations as
updated in July 2004. Gen Re’s
estimates are based on A) Their
own database and observations
of the market, including rate
actions and their impact on
loss ratios, B) Current industry
surveys and their findings for
base trend C) Trend assumption
in different group medical
manuals, and D) Gen Re’s
mathematical model (based
on log normal distribution).
Achim leads the Gen Re team
that updates their medical trend
assumption twice a year, with
the next trend analysis scheduled
for February 2005.

Reinsurance Committee Co-Chairs
Steve Ginsburg of CNA Group Re
and Boris García Zakzuk, MD, HIA
from Gen Re Life Health will host
the Reinsurance Let’s Talk Session.
The interactive session will provide
an opportunity for GUAA conference
attendees to discuss reinsurance
topics amongst a diverse group of
session participants from reinsurers,
carriers, consultants, TPAs, MGU’s
and Brokers. The session will cover
topics that range from participants
impression about the current
direction of the underwriting cycle
to discussion about market trends
and changes in market practices.
The repeat session has proven to
provide valuable insight, as
participants are encouraged to
ask questions and respond to
other participant’s questions.

The reinsurance committee is now
recruiting new members interested
in joining our committee. Anyone
interested should talk with Boris
or Steve and we look forward to
seeing you at the November 2004
GUAA meeting.

     Volume 1, Issue 1

For the November GUAA meeting in
Las Vegas the Disability Committee
will present a full slate of workshops
and presentations, as is its habit.
As usual, our material will revolve
around a theme and for Las Vegas
the theme is profitable growth. The
information below outlines the
sessions we are planning.

Product Features
This presentation will address
a couple of product themes:
1. Current activity on the
     Product front
2. Past Product enhancements,
     did we get them right?

Chris Jerome
Vice President - Underwriting

Mike Simonds
Vice President - Market Development

Kevin Riley
Vice President

Underwriting Challenges of
Takeover Blocks

Two views will be presented:
1. Managing the acquisition of
     a block of business from
     another carrier, and
2. Managing the acquisition of
     a block offered by a broker

Mickey Meyer
Supervisor – National Accounts

Dave Fitzpatrick
Assistant Vice President

Jon Becker
Chief Underwriting Officer

Economics of Growing Distribution
This session will present views on
growing distribution at both the
strategic and tactical levels.

Mark Andruss
Vice President - Corporate Development

Alan GaNun
Underwriting Officer

Letís Talk Shop I
This Letís Talk session will divide
the attendees along Large and
small case lines for a more
focused discussion.

Judy Buczek

Senior Project Manager

Matt Clark
Vice President - National Underwriting
Standards and Practices

Role of the Underwriter in
achieving profitable growth
Ways in which underwriters can
support their companies in achieving
profitable growth will be presented.
This will include a discussion of how
the distribution chain (underwriter –
group rep – broker) can work
towards this end.

Rich Clement
Vice President Underwriting
Smith Group

Don Russell
SALT Associates

Discovery after the sale.
You have made the sale. Now the
case comes in and you discover…
The presentation will cover the
issues that can arise and ways
of handling them.

Ron Ragan
Director – Disability Underwriting

Leo Tinkham
Head of Products – Group Insurance

Let’s Talk Shop II
Topics for discussion will be
developed in advance.

Jim Ojala
Director of Risk Management

Additionally, the Disability Committee
will be conducting a survey of
underwriters at the Las Vegas
meeting and the results will be
presented at the Spring 2005
meeting. The survey will deal with
market trends in employee benefits
and how underwriters view these.
The trends include such items as:

• Voluntary Benefits
• Consumer Driven Health Plans
Medical Trends
• Disease Management
• Behavioral Health
• Mergers & Acquisitions
• Small Business vs. Large Business
• Growth of the Market
• Aging of the Work Force
• Rise in Obesity

The Medical Committee is looking
forward to our fall meeting in
Las Vegas. We are excited about
our presentations and workshops.
We are trying a new format for this
meeting of our Let's Talk Shop
session. Feedback from our
members indicated that the Let's
Talk Shop session should be longer
than 1 hour. Therefore, we have
decided to have two back to back
one hour sessions. We anticipate
that this will enable the lively
discussions to continue unabated
except for a food and beverage
break. We will also continue our
tradition of providing whimsical
door prizes for our Let's Talk Shop
on Wednesday morning. The table
below outlines the sessions we
are planning.

Underwriting Tools / Software;
What's available and how is it
being used?

This presentation will discuss
predictive modeling, using
prescription drug information for
evaluating New Business and other
tolls available to Underwriters.

Jim Minnich

Senior Consultant
Reden & Anders, Minneapolis Office

Underwriting Large Case Study

An interactive workshop where
participants will be provided with
basic case details and discuss
various approaches to developing
renewal rates and partnering with
sales staff to place the renewal.
Group will explore "what if's"
and anticipate the results of
implementing different strategies.

Lori Heverly

Underwriting Consultant
Guardian Life Insurance Co.
Bethlehem Office

Consumer Driven Health Plans

Evolution of CDHC products
in terms of their ability to
drive favorable utilization
• Extensive discussion of Reden
& Ander's recent study of a large
national health plan's CDHC
experience (we believe the largest
such study conducted to date) and
how well CD plans have actually
contained costs (not just shifted them)

• Environmental conditions under
which CDHC plans tend to best
land TPA's work

• How to design DCHC employer
plans to maximize cost saving

Kismet Toksu
Senior Consultant
Reden & Anders, New York Office

Prior to joining R&A, she
was President of Candor
Consulting, a consumer
directed and e-healthcare
strategies and solutions
practice. Before that, she
was a VP at Lumenos where
she led the company's business
development and strategic alliance
successes, and drove the launch
of their private-label product
targeting health plans.