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Workers Compensation
• Reinsurance Pricing Considerations
Robert Blanco, FCAS, MAAA, CPCU, ARe
SCOR Reinsurance Corp.
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WC – Reinsurance Pricing Issues:
Experience Rating
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• Quality of Loss Data
• Rate Changes
• Loss Trends
• Excess Loss Development Factors
• Other Considerations
Experience Rating Issues
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• 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?
Quality of Loss Data
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• 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?
Rate Changes
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• 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
Loss Trends
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• 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?
Excess Loss Development Factors
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• 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)?
Other Considerations
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WC – Reinsurance Pricing Issues:
Exposure Rating
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• Ground-Up Loss Ratio
• State / Hazard Group
• Other Considerations
Exposure Rating Issues
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• 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?
Ground-Up Loss Ratio
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• 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
State / Hazard Group
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• 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?
Other Considerations
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WC – Reinsurance Pricing Issues:
Beyond Experience and Exposure Rating
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• 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
Blending Experience and Exposure
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• Federal Exposures
• Re-Underwriting of Portfolios
• Significant law changes/reforms, and their varying impacts by claim type
• Proportional Treaties
• WC Cat Treaties
Other Considerations