Risk Management

The Brattle Group has experience with many aspects of the insurance industry, including insurance claim valuation and auditing, rate-setting, evaluation of financial and taxation requirements, and participation in mediation and litigation. We combine our insurance industry knowledge with our expertise in economics, finance, statistics, decision theory, and engineering to solve complex analytical problems unique to the industry.

Insurance Valuation

The Brattle Group values insurance for claims related to environmental remediation and product liability. We have extensive knowledge of asbestos, construction, pharmaceutical and medical device, lead, toxic tort, labor/employment, intellectual property, and other mass tort actions. Our work has involved the estimation of past and future costs, including the economic analysis of large claims databases and the development of statistically valid claims audits. We also address the allocation of indemnity and defense costs to available coverage under various trigger, occurrence, and allocation theories. We assist in the resolution of claim demands in mediation and provide expert testimony at trial.

Regulation of Property and Casualty Rates

Members of The Brattle Group have been involved with property and casualty insurance ratemaking processes since the 1980s. For example, Stewart C. Myers of the Massachusetts Institute of Technology and a principal of The Brattle Group, co-developed the Myers-Cohn model to determine the fair return on insurance capital invested in support of automobile and workers compensation policies in Massachusetts.

The Myers-Cohn model assesses the fair premium with a policy-level, balance-sheet approach: the fair premium is set equal to the sum of (1) the present value of losses and expenses, and (2) the present value of the taxes on the insurer’s underwriting and investment income. The present value of the tax liabilities on investment income from a risky portfolio is independent of the risk level, and depends only on the portfolio tax rate and the risk-free rate (Myers’ Theorem).

Finance and Taxation

We evaluate taxation methods in order to assist in finance disputes, including the economic analysis of fair taxation and capital requirements on behalf of clients.

October 2016
Funded by MetLife, Inc.

A whitepaper discussing the role of life insurance as a critical driver of economic growth that helps provide stability for the U.S. economy while delivering financial protection to millions of American families.