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Workers Compensation

Workers Compensation. Reinsurance Pricing Considerations. Robert Blanco, FCAS, MAAA, CPCU, ARe SCOR Reinsurance Corp. WC – Reinsurance Pricing Issues: Experience Rating. Experience Rating Issues. Quality of Loss Data Rate Changes Loss Trends Excess Loss Development Factors

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Workers Compensation

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  1. Workers Compensation Reinsurance Pricing Considerations Robert Blanco, FCAS, MAAA, CPCU, ARe SCOR Reinsurance Corp.

  2. WC – Reinsurance Pricing Issues:Experience Rating

  3. Experience Rating Issues • Quality of Loss Data • Rate Changes • Loss Trends • Excess Loss Development Factors • Other Considerations

  4. Quality of Loss Data • Reporting Threshold – is ½ the retention low enough? • Are the losses discounted vs. undiscounted? • Are the losses on an occurrence (vs. individual claimant) basis? • Is indemnity vs. medical detail available for individual claims?

  5. Rate Changes • Reliable, client-specific changes available? • “Discretionary” rate changes – the devil is in the detail. • Changes in average experience mod – to use or not to use?

  6. Loss Trends • By state vs. countrywide • Frequency trends – ground-up vs. large loss, working layers vs. higher layers • Severity trends – ground-up vs. large loss, working layers vs. higher layers • Indemnity vs. Medical severity

  7. Excess Loss Development Factors • Lack of industry benchmarks • How important are state-specific differences on patterns? • Working layers vs. higher layers • Indemnity vs. Medical • Client-specific LDFs and claims practices – how to reflect in pricing?

  8. Other Considerations • Has the mix of states shifted over the experience period? • Has the hazard group mix changed over the experience period? • Have company underwriting and claims philosophies changed? • Does the portfolio include non-standard policies (Large Ded, XS, Retros)?

  9. WC – Reinsurance Pricing Issues:Exposure Rating

  10. Exposure Rating Issues • Ground-Up Loss Ratio • State / Hazard Group • Other Considerations

  11. Ground-Up Loss Ratio • Critical to establish expected TOTAL losses before splitting into layers. • Many of the same experience rating considerations apply (rate changes, loss trends, loss development) • Loading for Unused Capacity?

  12. State / Hazard Group • Premium vs. Payroll HG split • State-specific vs. combined HG split • New vs. old NCCI HG definitions • California-specific HG definitions • NCCI vs. Non-NCCI exposure curves

  13. Other Considerations • Do the existing industry HG mappings adequately reflect differences in exposure between portfolios? • Impact of non-standard policies (Large Ded, XS, Retros) on exposure curves. • How to reflect impact of MAOL (Maximum Any One Life) treaty provision?

  14. WC – Reinsurance Pricing Issues:Beyond Experience and Exposure Rating

  15. Blending Experience and Exposure • Years of data for experience • Volume of claims vs. “credit” for loss-free experience • Stability of portfolio over experience period • Unused exposure in experience period • Confidence in exposure curves

  16. Other Considerations • Federal Exposures • Re-Underwriting of Portfolios • Significant law changes/reforms, and their varying impacts by claim type • Proportional Treaties • WC Cat Treaties

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