# B.09.Gillam & Snader 2 / NCCI

### Card Set Information

 Author: Exam8 ID: 166026 Filename: B.09.Gillam & Snader 2 / NCCI Updated: 2012-08-14 16:36:33 Tags: wc expense retro rating Folders: Description: Fundamentals of Individual Risk Raring, Part II / Retrospective Rating Plan Manual Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user Exam8 on FreezingBlue Flashcards. What would you like to do?

1. WC expense program
• in experience rating, SP = MP * mod
• expenses assumed to be a flat % of P
• appropriate for small risks, but as P incr, expenses should make up a smaller portion of the higher layers
• can reflect this via discount factors
• Guaranteed Cost Premium = SP - Discount
• H ≤ R = (b + cL)T ≤ G
• R/T = b + cL = b + crE
• insurance carrier services
• loss control services
• profit / contingencies
• b = e - (c - 1)E + cI = expense component + cI
• e: provision for expense & profit as ratio of SP
• cI: converted insurance charge
4. Retro - Expense
• e = (1 - D)/T - E
• T(e + E) = 1 - D = Guaranteed Cost Premium
5. Retro - Tax multiplier
• tax: proportional to net premium (τ)
• assessment: proportional to losses (μ)
• 0.2 = expense piece of retro P
6. Retro - Insurance charge
• quantifies the net impact to insr for application of min & max P
• cI = c(XG - SH)E
• XG = table M charge at entry ratio rG
• SH = table M savings at entry ratio rH
7. Retro - Balance equations
• Value difference
• Entry difference
• circular ref of insurance charge
• if satisfy both, expected retro P = GCP
• if no min, SG = [G/T - (e + E)] / cE
8. Constructing a Table M
• Calculate entry ratio. If no E given, use E(hat)
• # risks at LR
• # risks over LR
• losses over LR: start bottom, cumulative sum of previous
• losses over / max losses over = φ(r)
• Ψ(r) = φ(r) + r - 1
9. Retro - Aggregate balance
• retro = (b + cL)T
• apply H and G
• check if sum = # risks * risk amt * GCP
• if yes - actuarial balance btwn retro & prospective rating
10. Insurance charge reflecting loss limitations
• instead of using limited table M, loss grp adj factor = [1+.8(F/E)] / [1-(F/E)], F/E = LER
• mult by state & hazard grp differential
• user regular table M → risk is assigned to higher size grp (less skewed)
11. Continuous case for φ(r) and Ψ(r)

What would you like to do?

Home > Flashcards > Print Preview