On The Job

What Will It Take to Get Actuaries and Underwriters on the Same Page?

A good relationship between underwriters and actuaries helps insurers price risk more effectively.
By: | October 11, 2018 • 6 min read

Emily Gilde, a senior vice president and chief actuary with Ethos Specialty Insurance, is in a happy place.


A holder of a Masters and a PhD in Economics from Yale, the veteran of almost 25 years in the insurance industry finds herself aligned with an underwriting team where she is viewed as a partner in writing new business, rather as someone who is viewed as an obstacle because she thinks the numbers aren’t right.

“I think it started at the top of the organization,” Gilde says, in recalling how it all went right for her with the managing general agency and Ascot subsidiary, which she joined in January. Before Ethos, she spent time with Nationwide and AIG, and before that a brief stint in academia back in the early 1990s.

“At Ethos I think there was a conscious decision to make the actuary a part of the underwriting team,” she said. “It wasn’t seen as window-dressing but really a recognition of the fact that for an MGA to be successful, you have to have a lot of credibility with your underwriting.”

So, was there a time when Gilde was not happy in this industry? Not necessarily unhappy; let’s just say she has seen her share of disconnect between actuaries and underwriters.

Emily Gilde, VP and chief actuary, Ethos Specialty Insurance

Speaking generally, actuaries, many of them highly trained and competent mathematicians, are charged with analyzing the risk across a carrier’s portfolio and drawing lines on what should and should not be underwritten.

Underwriters, speaking generally again, are the part of the insurance team that meets with brokers and insureds. They shoulder that crucial dialogue that should result in the insured’s risk being made transparent as possible, giving the underwriter an idea of whether the carrier can safely and profitably insure it.

The problem, where there is a problem, is that the underwriter may say “yes” to the risk and the actuary, for what look like sound reasons to them, may say “no.” This leads to friction, mistaken assumptions, and at its worst, downright stereotyping about the actuarial profession.

“I think the stereotype is the that the actuary is the bad cop and they are going to tell the underwriter that they can’t do something that the underwriter feels strongly would be a good thing to do,” Gilde said. “That they are inflexible, can’t take any risk at all and are risk averse.

“You hear of situations where there is poor communication between the people on the team and what each team member might be trying to optimize may be different.” –  Dale Hall, managing director of research, Society of Actuaries

“As a result of that they have often been left out of the conversation at the strategic or development stage, and are brought into the decision-making phase to get a rating plan filed.”

“You hear of situations where there is poor communication between the people on the team and what each team member might be trying to optimize may be different,” said Dale Hall, the managing director of research for the Society of Actuaries.

“I think you encounter situations at times where the actuary is looking through their own lens and seeing a different picture,” Hall said.

“The actuary is trying to understand that risk and price that risk but without the context of the underwriting and the distribution. And on the flip side, distribution is clearly looking at clients, acquisition, asking how are we going to underwrite these risks and how are they going to be priced?”

“I think there is a place to understand what everyone’s common goals might be, what are the intentions that we might be heading for?”


At Ethos, Gilde says she’s in a position where any divide has been lessened.

“I feel like there was a consistent desire to reflect an actuarial perspective,” Gilde said.

“Now I will say that requires some flexibility.  I can’t just insist on it, you do have to be open to everyone’s point of view. It’s being cross-functional and flexible as much as possible.”

Aaron Hillebrandt, a consulting actuary with Pinnacle Actuarial Resources based in Bloomington, Ill., said some negative assumptions about actuaries do exist.

“I think what you are getting at is the notion of the well-rounded actuary,” Hillebrandt said. “They can perform those mathematical and modeling tasks, but they can also consult and communicate in the same way that others can who are not actuaries.”

Steven Byam, assistant vice president, Small Commercial Actuarial at The Hartford, said what’s true in any relationship is what will make for the best relationships between actuaries and the rest of the underwriting team.

“I think what you are getting at is the notion of the well-rounded actuary. They can perform those mathematical and modeling tasks, but they can also consult and communicate in the same way that others can who are not actuaries.” – Aaron Hillebrandt, consulting actuary, Pinnacle Actuarial Resources

“It starts with appreciating and respecting the value each brings to the table,” Byam said.

“The best decisions are made when all parties share different perspectives and engage in constructive debate regarding the best solution. Leaders in the organization need to foster an environment where listening to alternative viewpoints and respectfully challenging each other is the norm. This starts with trust, credibility and alignment of goals between underwriting and actuarial teams,” he said.

For his part, Hillebrandt said he spends a good deal of time working with underwriting companies, explaining what it is that actuaries do. This makes for a better educated client, and a client that feels more empowered to ask questions and enter into a productive, collaborative dialogue with an actuary.

“At the end of the day, we are really good at what we do, and the client is really good at their business,” Hillebrandt said. “If we can come together with a better understanding of what we do and what the other side is working on, and how we can do it together, we’ll get a better result.”

The SOA’s Hall said that’s the end goal of the society’s decision making and communication module.

“I think the profession recognizes that, while we bring a lot of analytical and mathematical skills to look at risk, an important part of being an actuary is being a decision maker and a communicator,” Hall said.

Hillebrandt and Gilde said actuaries also owe it to themselves and the industry to brush up on their communication and presentation skills. That way, they can get their message across, the underwriting team will have a better understanding of what they do and everyone will be happy: Not as happy as Emily Gilde perhaps, but it will be a start.


“Relationships between underwriters and actuaries need to be stronger now than ever,” the Hartford’s Byam said.

“Actuaries often need to explain complex models to non-technical people and be able to tell the story behind numbers. When this happens effectively, the art of underwriting is blended with the science in order to reach better decisions. Access to more robust data, better analytical tools and stronger computing power has led to greater use of analytics across the organization. Actuaries have the skills needed to analyze large volumes of data to make decisions when there is uncertainty in the outcome. As a result, you’re now seeing an increase in actuaries working outside the traditional actuarial functions of ratemaking and reserving and working alongside their business partners in underwriting,” Byam said.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.


Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.

R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.


We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?


Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.


Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.


More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]