NCCI 2 - Retro Rating for WC and Employers Liablity

Question 1

Excess loss premium

Answer 1

Intend to minimize the effect that high cost losses will have on retro premium

Excess loss premium = SP * ELPF *LCF

Question 2

Retro Development Prem

Reason why an insurance company will include retro development factor

Answer 2

stabilize premium adjustment. Included in first 3 adjustment of retro premium.

Retro development premium = SPRDPFLCF

• include this b/c it stabilizes premium adj. bringing them closer to ultimate so that premium paid upfront is closer to final amount.
• it reduces credit risk of collecting subsequent premiums from adjustment.