publication date: thursday, september 3, 2015circular ml ... circular.pdf · publication date:...

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Publication Date: Thursday, September 3, 2015

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Circular ML-2015-09

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ML-2015-RLA1

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PACKAGE MODIFICATION FACTOR REVISION

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These changes are applicable to all policies effective on or after

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January 1, 2016

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Compliance Department 2101 4th Avenue Suite 300 Seattle, WA 98121 206.273.7161 [email protected]

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We offer nationwide Actuarial & Compliance services, individualized based upon your specific company needs for all lines of business. Please contact us at [email protected]

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CHANGES

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COMPANY ACTION

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If you have authorized us to file on your behalf and decide: • To use our revision and effective date, you are NOT required to file anything with the Insurance Department. • To use our revision with a different effective date, to use our revision with modification, or to NOT use our revision, you must make an appropriate submission with the Insurance Department. In all correspondence with the Insurance Department regarding this revision, include the WSRB Filing Designation Number not this Circular number.

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MANUAL DISTRIBUTION

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Insurance Service Office, Inc. will print and distribute revised manual pages prior to the effective date. A complete copy of the filing is available at the WSRB web site using the Compliance Filings Library. Circular notification is available by e-mail only. Register to receive electronic notification at the Compliance Filings Library page inside the Members section at wsrb.com

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We have revised the Package Modification Factors (PMFs) in Washington. These revisions result in a -0.2% overall statewide change on Commercial Package Policy (CPP) business.

mailto:[email protected]

mailto:[email protected]

http://www.wsrb.com

Filing at a Glance Company: Washington Surveying and Rating Bureau

Product Name: Package Modification Factor Revision

State: Washington

TOI: 05.1 CMP Non-Liability Portion Only

Sub-TOI: 05.1003 Commercial Package

Filing Type: Rate/Rule

Date Submitted: 08/05/2015

SERFF Tr Num: WSRB-130191996

SERFF Status: Closed-Approved

State Tr Num: 289991

State Status: Approved

Co Tr Num: ML-2015-RLA1

Co Status: Approved

Effective DateRequested (New):

01/01/2016

Effective DateRequested (Renewal):

01/01/2016

Author(s): Jim Antush

Reviewer(s): Dan Forsman (primary)

Disposition Date: 08/25/2015

Disposition Status: Approved

Effective Date (New): 01/01/2016

Effective Date (Renewal):

SERFF Tracking #: WSRB-130191996 State Tracking #: 289991 Company Tracking #: ML-2015-RLA1

State: Washington Filing Company: Washington Surveying and Rating Bureau

TOI/Sub-TOI: 05.1 CMP Non-Liability Portion Only/05.1003 Commercial Package


Project Name/Number: Package Modification Factor Revision/ML-2015-RLA1

PDF Pipeline for SERFF Tracking Number WSRB-130191996 Generated 08/26/2015 09:17 AM

General Information

Company and Contact

Filing Fees

State Specific

Project Name: Package Modification Factor Revision Status of Filing in Domicile:

Project Number: ML-2015-RLA1 Domicile Status Comments:

Reference Organization: Reference Number:

Reference Title: Advisory Org. Circular:

Filing Status Changed: 08/25/2015 Company Status Changed: 08/26/2015

State Status Changed: 08/25/2015 Deemer Date:

Created By: Jim Antush Submitted By: Jim Antush

Corresponding Filing Tracking Number:

Filing Description:

This filing presents a revision of Package Modification Factors (PMFs). The analyses used to derive these revised PMFs havebeen included for your review.

Filing Contact InformationJim Antush, Compliance Manager [email protected]

2101 4th Avenue

Suite 300

Seattle, WA 98121

206-273-7161 [Phone]

206-217-9329 [FAX]

Filing Company InformationWashington Surveying and RatingBureau

2101 4th Avenue, Suite 300

Seattle, WA 98121

(206) 217-9772 ext. [Phone]

CoCode:

Group Code:

Group Name:

FEIN Number: 74-3049163

State of Domicile: Washington

Company Type: RatingOrganization - Property

State ID Number: 1425

Fee Required? No

Retaliatory? No

Fee Explanation:

Is the Co Tracking # field populated on the General Information Tab? (yes/no): YesForm Tab Only - Are the Form # and Form Description fields populated corresponding to the attached form? (yes/no): N/A

SERFF Tracking #: WSRB-130191996 State Tracking #: 289991 Company Tracking #: ML-2015-RLA1

State: Washington Filing Company: Washington Surveying and Rating Bureau

TOI/Sub-TOI: 05.1 CMP Non-Liability Portion Only/05.1003 Commercial Package


Project Name/Number: Package Modification Factor Revision/ML-2015-RLA1

PDF Pipeline for SERFF Tracking Number WSRB-130191996 Generated 08/26/2015 09:17 AM

© Insurance Services Office, Inc., 2015 Washington ML-2015-RLA1 ES-1

WASHINGTON

ADVISORY PACKAGE MODIFICATION FACTOR REVIEW

COMMERCIAL PACKAGE POLICY

ML-2015-RLA1

EXECUTIVE SUMMARY

PURPOSE

This document:

presents a review of advisory Package Modification Factors (PMFs). PMFs

are relativity factors used to adjust monoline loss costs as appropriate for

multiline risks.

provides the analyses used to derive these advisory PMFs.

PMF CHANGES The proposed Commercial Package Policy (CPP) Package Modification Factor

changes are:

Prop. & Liab.

Type of Policy Property Liability Total

Motel/Hotel 0.0% 0.0% 0.0%

Apartment -2.0 -1.0 -1.7

Office -1.0 +1.2 +0.6

Mercantile -2.1 +8.5 +3.7

Institutions 0.0 +11.4 +3.2

Services -5.0 0.0 -2.7

Indust./Proc. -2.0 +7.3 +3.3

Contractors -4.0 0.0 -0.3

Statewide -2.0% +1.1% -0.2%

INDICATED

VS. CAPPED

Indicated PMF changes are based on standard ISO methodology. Differences

between indicated and capped PMF changes are caused by rounding each indicated

PMF to the nearest one percent and applying an upper cap of 1.00, where

necessary.

© Copyright, Washington Surveying & Rating Bureau, 2015


WASHINGTON



ML-2015-RLA1

EXECUTIVE SUMMARY

HISTORICAL

SOURCE DATA

The data used in this review is from ISO reporting companies for:

Basic Group I: five fiscal accident years ended 03/31/14.

Basic Group II: ten fiscal accident years ended 03/31/14.

Special Causes of Loss: five fiscal accident years ended 03/31/14.

Crime: five calendar accident years ended 06/30/12.

Inland Marine: five calendar accident years ended 12/31/12.

Fidelity: five policy years ended 12/31/11.

Owners, Landlords, and Tenants: three fiscal accident years ended 03/31/14.

Manufacturers and Contractors: three fiscal accident years ended 03/31/14.

Products: three calendar accident years ended 12/31/13.

Local Products and Completed Operations: three calendar accident years

ended 12/31/13.

PRIOR ISO

REVISIONS

The latest revisions in this state are:

Filing ML-12-RLA1 ML-11-RLA1 ML-09-RLA1

Dates

Implemented 02/01/13 06/01/12 04/01/10

Changes

Indicated +5.6% +9.0% +1.4%

Filed +2.0% +6.7% +1.4%

Implemented +2.0% +6.7% +1.4%



WASHINGTON



ML-2015-RLA1

EXECUTIVE SUMMARY

ADJUSTMENTS

TO REPORTED

EXPERIENCE

Standard actuarial procedures have been used in the reviews underlying the

calculation of the PMFs, including adjusting the fire and liability losses to

ultimate settlement level and, for all coverages, reflecting all loss adjustment

expenses and trend. Specific procedures vary by subline.

TEN LARGEST

GROUPS IN

ISO DATA BASE

Insurers are listed in descending order based on the percent of statewide written

premium volume from Annual Statement Page 15 for the year ending 12/31/13

for the Annual Statement Line of Business (ASLOB) indicated.

COMMERCIAL MULTI PERIL (ASLOB 51 & 52)

1. Liberty Mutual Insurance Company

2. Travelers Indemnity Company

3. Tokio Marine Companies

4. Continental Casualty Company

5. Allstate Insurance Company

6. Hartford Accident & Indemnity Company

7. Admiral Insurance Company

8. California Capital Insurance Company

9. Fireman's Fund Insurance Company

10. Oregon Mutual Insurance Company

SIZE OF ISO

DATA BASE

The market share of ISO participating insurers as measured by Annual

Statement Page 15 written premium for the year ending 12/31/13 is:

Commercial Multi Peril (ASLOB 51 & 52). 59.4%.

ADDITIONAL

SUPPORTING

MATERIAL

Additional supporting material underlying the calculation of the experience

review indications used in this PMF analysis may be found in the respective

monoline experience review documents for each line.



WASHINGTON



ML-2015-RLA1

EXECUTIVE SUMMARY

COMPANY DECISION

We encourage each insurer to decide independently whether the judgments

made and the procedures or data used by ISO in developing the PMFs contained

herein are appropriate for your use. We have included within this document the

information upon which ISO relied in order to enable companies to make such

independent judgments. The data underlying the enclosed material comes from

companies reporting to Insurance Services Office, Inc. Therefore, the ISO

experience permits the establishment of a much broader statistical ratemaking

base than could be employed by using any individual company's data. A

broader data base enhances the validity of ratemaking analysis derived

therefrom.

At the same time, however, an individual company may benefit from a

comparison of its own experience to the aggregate ISO experience, and may

reach valid conclusions with respect to the manner in which its own costs can be

expected to differ from ISO's projection based on the aggregate data.

Some calculations included in this document involve areas of ISO staff

judgment. Each company should carefully review and evaluate whether the ISO

selected PMFs are appropriate for its use.

The material has been developed exclusively by the staff of Insurance Services

Office, Inc.


© Insurance Services Office, Inc., 2015 Washington ML-2015-RLA1 TC-1


TABLE OF CONTENTS

SECTION A - SCOPE OF PMF REVISION

Methodology Overview .......................................................................................................... A-2

Summary of Package Modification Factor (PMF) Review (Table 1) ..................................... A-3

Calculation of Revised Package Modification Factors (Table 2) ........................................... A-4-12

SECTION B - CALCULATION OF PROPOSED CHANGES

PROPERTY COVERAGES

Commercial Fire & Allied Lines

Distribution of Advisory Loss Cost Level Change (Tables 3-7) ................................ B-2-20

Crime and Fidelity………………………………………………………………………….. B-21

Commercial Inland Marine

Revision of Implicit Package Modification Factor (Tables 8-9) ................................. B-22-26

LIABILITY COVERAGES

Distribution of Advisory Loss Cost Level Change (Tables 10-18) ........................................ B-27-44

SECTION C - REVISED CLM DIVISION NINE

Commercial Package Policy Package Modification Factors (Revised MLCP-PMF-1) .............. C-2


© Insurance Services Office, Inc., 2015 Washington ML-2015-RLA1 A-1


TABLE OF CONTENTS

SECTION A - SCOPE OF PMF REVISION

Methodology Overview .......................................................................................................... A-2

Summary of Package Modification Factor (PMF) Review (Table 1) ..................................... A-3

Calculation of Revised Package Modification Factors (Table 2) ........................................... A-4-12




METHODOLOGY OVERVIEW

OBJECTIVE A Commercial Package Policy (CPP) is essentially a combination of monoline

coverages. CPP pricing employs monoline loss costs modified by Package

Modification Factors (PMFs). These factors vary by the eight CPP types of policy

and are reviewed biennially. Monoline and multiline experience are combined and

reviewed via a monoline/multiline relativity analysis. The resulting indicated PMFs

represent the loss cost for a CPP relative to that for monoline policies providing the

same coverages.

STEP 1: THE

RELATIVITY

ANALYSES

Each line of insurance develops indicated changes to monoline and multiline

aggregate loss costs based on an experience ratio relativity analysis for that coverage.

The monoline indication represents the needed change to monoline loss costs. The

multiline indication represents the needed change to multiline aggregate loss costs,

which is implemented through changes to the PMFs. For this PMF analysis,

multiline indications are developed for each line of insurance and Type of Policy.

Relativity analyses are explained in Section B.

STEP 2:

CALCULATION

OF THE PMFs

The procedure described above generates indicated Implicit PMFs (IPMFs) which

vary by the various lines of insurance and by type of policy. IPMFs represent what

the PMF would be for the CPP risk if only a single coverage were written. For each

Type of Policy, IPMFs are weighted by CPP aggregate loss costs to determine the

indicated property and liability PMFs. These PMFs may be capped, or rounded to the

nearest one percent, and certain component IPMFs appropriately adjusted for this

change. These calculations are explained in the remainder of Section A.



WASHINGTON

TABLE 1


SUMMARY OF THIS REVIEW

The display below summarizes the review and shows the capped

Package Modification Factors for Property and Liability.

For each type of risk, the PMFs are determined to be those

factors which when applied to the monoline loss costs

produce the appropriate CPP aggregate loss cost level as

determined by an analysis of the CPP experience.

PROP. & LIAB.

PROPERTY PMFS LIABILITY PMFS TOTAL

________________________ _________________________ ________

TYPE OF RISK CURRENT CAPPED % CHANGE CURRENT CAPPED % CHANGE % CHANGE

MOTEL/HOTEL(31) 1.00 1.00 0.0 1.00 1.00 0.0 0.0

APARTMENT (32) 1.00 0.98 -2.0 1.00 0.99 -1.0 -1.7

OFFICE (33) 0.97 0.96 -1.0 0.85 0.86 1.2 0.6

MERCANTILE (34) 0.94 0.92 -2.1 0.82 0.89 8.5 3.7

INSTITUTION(35) 1.00 1.00 0.0 0.88 0.98 11.4 3.2

SERVICES (36) 1.00 0.95 -5.0 1.00 1.00 0.0 -2.7

IND/PROC (37) 1.00 0.98 -2.0 0.82 0.88 7.3 3.3

CONTRACTORS(38) 1.00 0.96 -4.0 1.00 1.00 0.0 -0.3

_____ _____ _____

STATEWIDE -2.0% 1.1% -0.2%



WASHINGTON

TABLE 2


CALCULATION OF REVISED CPP PACKAGE MODIFICATION FACTORS(PMF)

MOTEL/HOTEL(31) (1) (2) (3) (4) (5)

************ AGGREG- CURRENT

ATE LOSS IMPLICIT NET INDIC. CAPPED

COVERAGE COSTS PMF INDICATION PMF PMF

PROPERTY-

BASIC GRP I 506,775 1.114 1.9% 1.135 1.105

BASIC GRP II 46,409 0.873 7.3 0.937 0.912

SP CAUSE/LOSS 116,034 0.745 1.4 0.755 0.735

*CRIME 12,559 0.893 0.0 0.893 0.893

*INL. MAR. 1,266 0.824 3.2 0.850 0.850

*FIDELITY 10,356 1.000 0.0 1.000 1.000

TOTAL 693,399 1.00 2.7% 1.027 1.00

LIABILITY-

OL&T 1,321,163 1.000 2.0% 1.020 1.000

TOTAL 1,321,163 1.00 2.0% 1.020 1.00

------------ ----------- -------- ---------- ------- ------

PROP. & LIAB. 2,014,562 2.2%

TOTAL

APARTMENT (32) (1) (2) (3) (4) (5)




PROPERTY-

BASIC GRP I 4,297,300 1.156 3.9% 1.201 1.202

BASIC GRP II 332,631 0.500 1.5 0.508 0.508

SP CAUSE/LOSS 1,057,616 0.629 5.0 0.660 0.660

*CRIME 1,393 0.893 0.0 0.893 0.893

*INL. MAR. 201 0.824 3.2 0.850 0.850

*FIDELITY 22,442 1.000 0.0 1.000 1.000

TOTAL 5,711,583 1.00 -2.5% 0.975 0.98

LIABILITY-

OL&T 2,314,983 1.000 -0.7% 0.993 0.994

TOTAL 2,314,983 1.00 -0.7% 0.993 0.99

------------ ----------- -------- ---------- ------- ------

PROP. & LIAB. 8,026,566 -2.0%

TOTAL

* indicates coverage for which reviews are on a MULTISTATE basis.



WASHINGTON

TABLE 2



OFFICE (33) (1) (2) (3) (4) (5)




PROPERTY-

BASIC GRP I 920,471 1.233 -0.3% 1.229 1.230

BASIC GRP II 139,103 0.628 1.0 0.634 0.634

SP CAUSE/LOSS 549,811 0.756 4.8 0.792 0.793

*CRIME 6,123 0.893 0.0 0.893 0.893

*INL. MAR. 13,192 0.824 3.2 0.850 0.850

*FIDELITY 54,246 1.000 0.0 1.000 1.000

TOTAL 1,682,946 0.97 -0.6% 0.964 0.96

LIABILITY-

OL&T 4,248,735 0.871 1.5% 0.884 0.884

M&C 393,032 0.637 3.4 0.659 0.659

TOTAL 4,641,767 0.85 1.1% 0.859 0.86

------------ ----------- -------- ---------- ------- ------

PROP. & LIAB. 6,324,713 0.6%

TOTAL

MERCANTILE (34) (1) (2) (3) (4) (5)




PROPERTY-

BASIC GRP I 5,287,677 1.018 2.7% 1.045 1.046

BASIC GRP II 1,097,814 1.226 -5.1 1.163 1.164

SP CAUSE/LOSS 1,725,748 0.610 0.7 0.614 0.614

*CRIME 41,963 0.893 0.0 0.893 0.893

*INL. MAR. 194,064 0.824 3.2 0.850 0.850

*FIDELITY 359,863 1.000 0.0 1.000 1.000

TOTAL 8,707,129 0.94 -1.9% 0.922 0.92

LIABILITY-

OL&T 7,017,934 0.755 13.6% 0.858 0.859

M&C 1,531,655 1.014 0.0 1.014 1.015

LOCAL PRODUCT 679,435 1.304 4.5 1.363 1.364

*MULTI PRODUCT 1,367,053 0.778 6.9 0.832 0.832

TOTAL 10,596,077 0.82 8.8% 0.892 0.89

------------ ----------- -------- ---------- ------- ------

PROP. & LIAB. 19,303,206 4.0%

TOTAL




WASHINGTON

TABLE 2



INSTITUTION(35) (1) (2) (3) (4) (5)




PROPERTY-

BASIC GRP I 3,871,391 1.181 1.4% 1.198 1.197

BASIC GRP II 846,103 0.967 13.8 1.100 1.099

SP CAUSE/LOSS 1,398,316 0.647 2.6 0.664 0.663

*CRIME 22,187 0.893 0.0 0.893 0.893

*INL. MAR. 8,897 0.824 3.2 0.850 0.850

*FIDELITY 157,462 1.000 0.0 1.000 1.000

TOTAL 6,304,356 1.00 0.1% 1.001 1.00

LIABILITY-

OL&T 1,984,722 1.105 -0.4% 1.101 1.104

M&C 503,418 0.681 -2.7 0.663 0.665

TOTAL 2,488,140 0.88 10.6% 0.973 0.98

------------ ----------- -------- ---------- ------- ------

PROP. & LIAB. 8,792,496 3.1%

TOTAL

SERVICES (36) (1) (2) (3) (4) (5)




PROPERTY-

BASIC GRP I 3,729,347 1.183 -3.5% 1.142 1.143

BASIC GRP II 549,742 0.887 2.4 0.908 0.909

SP CAUSE/LOSS 1,226,965 0.631 3.7 0.654 0.654

*CRIME 22,257 0.893 0.0 0.893 0.893

*INL. MAR. 60,912 0.824 3.2 0.850 0.850

*FIDELITY 128,868 1.000 0.0 1.000 1.000

TOTAL 5,718,091 1.00 -5.0% 0.950 0.95

LIABILITY-

OL&T 1,920,543 0.939 2.2% 0.960 0.970

M&C 1,873,824 0.909 -1.1 0.899 0.909

LOCAL PRODUCT 734,176 1.500 5.2 1.578 1.500

*MULTI PRODUCT 184,911 0.837 12.4 0.941 0.941

TOTAL 4,713,454 1.00 -0.4% 0.996 1.00

------------ ----------- -------- ---------- ------- ------

PROP. & LIAB. 10,431,545 -2.9%

TOTAL




WASHINGTON

TABLE 2



IND/PROC (37) (1) (2) (3) (4) (5)




PROPERTY-

BASIC GRP I 3,616,668 1.065 3.8% 1.105 1.106

BASIC GRP II 349,278 0.706 -2.0 0.692 0.692

SP CAUSE/LOSS 1,651,177 0.948 -14.8 0.808 0.809

*CRIME 6,889 0.893 0.0 0.893 0.893

*INL. MAR. 4,224 0.824 3.2 0.850 0.850

*FIDELITY 152,364 1.000 0.0 1.000 1.000

TOTAL 5,780,600 1.00 -2.3% 0.977 0.98

LIABILITY-

M&C 5,281,793 0.877 1.8 0.893 0.894

LOCAL PRODUCT 131,728 0.885 1.2 0.896 0.897

*MULTI PRODUCT 2,359,583 0.753 11.7 0.841 0.841

TOTAL 7,773,104 0.82 6.7% 0.875 0.88

------------ ----------- -------- ---------- ------- ------

PROP. & LIAB. 13,553,704 2.9%

TOTAL

CONTRACTORS(38) (1) (2) (3) (4) (5)




PROPERTY-

BASIC GRP I 691,628 1.139 -1.1% 1.126 1.127

BASIC GRP II 90,312 0.872 1.2 0.882 0.883

SP CAUSE/LOSS 384,087 0.791 -3.4 0.764 0.765

*CRIME 1,739 0.893 0.0 0.893 0.893

*INL. MAR. 4,797 0.824 3.2 0.850 0.850

*FIDELITY 51,687 1.000 0.0 1.000 1.000

TOTAL 1,224,250 1.00 -4.1% 0.959 0.96

LIABILITY-

M&C 5,658,302 0.760 3.4 0.786 0.786

LOCAL PRODUCT 9,137,904 1.202 -0.1 1.201 1.202

TOTAL 14,796,206 1.00 -0.5% 0.995 1.00

------------ ----------- -------- ---------- ------- ------

PROP. & LIAB. 16,020,456 -0.8%

TOTAL




WASHINGTON

TABLE 2



STATEWIDE (1) (2) (3) (4) (5)




PROPERTY-

BASIC GRP I 22,921,257 1.116 1.6% 1.134 1.133

BASIC GRP II 3,451,392 0.879 2.3 0.898 0.898

SP CAUSE/LOSS 8,109,754 0.692 -1.0 0.685 0.684

*CRIME 115,110 0.893 0.0 0.893 0.893

*INL. MAR. 287,553 0.824 3.2 0.850 0.850

*FIDELITY 937,288 1.000 0.0 1.000 1.000

TOTAL 35,822,354 0.982 -2.0% 0.962 0.962

LIABILITY-

OL&T 18,808,080 0.869 5.7% 0.918 0.918

M&C 15,242,024 0.829 1.7 0.843 0.845

LOCAL PRODUCT 10,683,243 1.219 0.6 1.226 1.223

*MULTI PRODUCT 3,911,547 0.765 10.1 0.842 0.842

TOTAL 48,644,894 0.926 1.0% 0.935 0.936

------------ ----------- -------- ---------- ------- ------

PROP. & LIAB. 84,467,248 -0.3%

TOTAL




WASHINGTON

TABLE 2


COMBINED PMFs

CURRENT INDICATED CAPPED

TYPE OF RISK COMBINED COMBINED COMBINED

MOTEL/HOTEL(31) 1.00 1.022 1.00

APARTMENT (32) 1.00 0.980 0.98

OFFICE (33) 0.90 0.884 0.88

MERCANTILE (34) 0.88 0.905 0.91

INSTITUTION(35) 0.97 0.993 0.99

SERVICES (36) 1.00 0.971 0.97

IND/PROC (37) 0.91 0.915 0.92

CONTRACTORS(38) 1.00 0.993 0.99

NOTE: Combined PMFs are provided for informational purposes only.



EXPLANATORY NOTES TO TABLE 2

CALCULATION OF REVISED PACKAGE MODIFICATION FACTORS

OBJECTIVE Commercial package policies were introduced in the 1960's as a convenient tool for

both insurer and insured to have the many types of insurance needed by commercial

risks packaged under one cover. Thus fire, extended coverage, crime, liability

insurance, etc. could be written using a single policy instead of several. Today,

virtually any type of monoline coverage can also be purchased as part of a package

policy such as the CPP.

The types of insured which can be written under a CPP are generally categorized into

the following Types of Policy:

. Motels and Hotels (TOP 31)

. Apartments (TOP 32)

. Offices (TOP 33)

. Mercantile Operations (TOP 34)

. Institutions (TOP 35)

. Service Operations (TOP 36)

. Industrial and Processing Operations (TOP 37)

. Contractors (TOP 38)

PRICING OF

POLICIES

Since a CPP is essentially a combination of monoline coverages, CPP pricing

employs monoline loss costs modified by PMFs (Package Modification Factors).

These factors vary by the categories shown above and are reviewed annually.

CPP PMF

REVIEW

PROCEDURE

The CPP review of Package Modification Factors, which appears in Table 2 of this

document, determines the appropriate PMF loss cost level for each of the eight CPP

categories. This is done by combining the indications of the simultaneous reviews of

monoline and multiline experience for the various lines (or coverages).

A detailed explanation of the calculation of the revised PMFs follows.



EXPLANATORY NOTES TO TABLE 2 (Cont'd)

LINES OF

INSURANCE

(COVERAGES)

INCLUDED

The CPP review reflects the contribution from each significant coverage which can

be written on a CPP. Included are:

Property Coverages

. Basic Group I (BGI) - the predominant property coverage included.

. Basic Group II (BGII) - both Basic Group I and Basic Group II must be

purchased under a CPP contract.

. Special Causes of Loss (SCL) - typically a type of insurance which is

purchased in addition to Basic Group I and Basic Group II in order to provide

"all risk" property coverage for the insured.

. Crime (CRIME) - Crime insurance is a commonly purchased CPP coverage.

. Inland Marine (INL. MAR.) - A highly specialized line of property insurance,

Inland Marine coverages can be purchased as part of a package policy.

. Fidelity (FIDELITY) - Certain forms of fidelity insurance can be part of the

CPP package. Various forms of employee dishonesty coverage are available.

Liability Coverages

. Owners, Landlords and Tenants (OL&T) Liability - this is the prevalent type of

Premises/Operations liability for CPP insureds.

. Manufacturers and Contractors Liability (M&C) - this is the type of

Premises/Operations liability insurance for risks whose liability exposure is

more heavily off-premises than on.

. Products/Completed Operations Liability (PROD) - this type of insurance

protects against claims for damages arising from products/completed

operations in conjunction with an insured's business. For review purposes, this

line of insurance is split into the following two categories:

- Products: experience for this category is reviewed on a multistate basis.

- Local Products/ Completed Operations: experience for this category

reflects an exposure to loss which is local in nature; therefore, individual

state experience is used.




THE IMPLICIT

PACKAGE

MODIFICATION

FACTOR

For each applicable coverage listed under each of the eight (8) CPP categories, a

"current implicit PMF" is shown in column (2). The definition of this factor follows:

For a given CPP category (e.g., apartments) the published Package Modification

Factor (PMF) represents the loss cost for a CPP relative to that for monoline policies

providing the same coverages. Thus a property (liability) PMF of .80 represents a

20% lower aggregate loss cost for a CPP than for the comparable monoline policies.

This PMF, however, represents the CPP "loss cost" for all property (liability)

coverages combined. Based on CPP experience, it has been determined that this CPP

"loss cost" can differ significantly if it is determined for each property (liability)

coverage individually. The IPMF represents what the PMF would be for that CPP

risk if only a single coverage were written. The use of the IPMF in monoline/

multiline ratemaking and in the determination of revised CPP Package Modification

Factors is significant in that it appropriately identifies how different the component

parts of the multiline "loss cost" are.

THE MULTILINE

INDICATION

Under the CPP ratemaking procedures, monoline and multiline experience are

combined for each coverage. The results of these coverage analyses are indicated

changes to monoline loss costs and also indicated CPP aggregate loss cost level

changes. The CPP indications by coverage are then incorporated in the CPP PMF

review. These indications (shown in column (3)) represent the needed adjustments to

the IPMFs (shown in column (2)) described above.

The development of these indications is detailed in Section B.

THE INDICATED

PMF

For each CPP category (and for property vs. liability), the indicated PMF is

calculated as follows:

Each of the current IPMFs in column (2) is multiplied by the indicated percent

change shown in column (3). A weighted average of the indicated IPMFs, using

weights based on latest year aggregate loss costs at current ISO loss cost level

(column (1) divided by column (2)), yields the indicated PMF at the bottom of

column (4).

THE CAPPED

PMF

The indicated PMF for each category (and for property vs. liability) shown at the

bottom of column (4) is limited to a maximum of 1.00 in arriving at the proposed

PMF (bottom of column (5)). All indicated PMFs which are below 1.00 are rounded

to the nearest .01 in determining the proposed PMF. To the extent that any indicated

PMFs are capped at 1.00, indicated PMFs below this value are adjusted in order to

minimize any revenue changes which would result from capping.

In addition to the adjustments just described, the IPMFs (for property and liability)

shown in column (4) are subject to minimum and maximum values and adjusted in

column (5) so that they average to the proposed PMF shown at the bottom of column

(5).


© Insurance Services Office, Inc., 2015 Washington ML-2015-RLA1 B-1


TABLE OF CONTENTS

SECTION B - CALCULATION OF PROPOSED CHANGES

PROPERTY COVERAGES

Commercial Fire & Allied Lines

Distribution of Advisory Loss Cost Level Change (Tables 3-7) .............................. B-2-20

Crime and Fidelity…………………………………………………………………… B-21

Commercial Inland Marine

Revision of Implicit Package Modification Factor (Tables 8-9) .............................. B-22-26

LIABILITY COVERAGES

Distribution of Advisory Loss Cost Level Change (Tables 10-18) .............................. B-27-44



WASHINGTON

TABLE 3 - BASIC GROUP I RELATIVITY ANALYSIS

(1) (2) (3) (4) (5)

$ LST SQ CREDIBILITY Z-WTD. BALANCED INDICATED

FORMULA Z RELATIVITY RELATIVITY CHANGE *

TOP RELATIVITY

---------------------------------------------------------------------------------

10 0.911 0.128 0.988 0.986

31 1.259 0.030 1.007 1.005 +1.9%

32 1.146 0.188 1.026 1.024 +3.9%

33 0.720 0.048 0.984 0.983 -0.3%

34 1.069 0.220 1.015 1.013 +2.7%

35 1.011 0.174 1.002 1.000 +1.4%

36 0.745 0.163 0.953 0.951 -3.5%

37 1.173 0.152 1.025 1.023 +3.8%

38 0.515 0.035 0.977 0.975 -1.1%

BALANCED RATING ID RELATIVITY: SPECIFIC 0.983 CLASS 1.018

RATING

GROUP

01 0.869 0.315 0.957 0.952

02 0.854 0.137 0.979 0.974

03 1.371 0.067 1.021 1.017

04 1.071 0.424 1.030 1.025

05 0.844 0.026 0.996 0.991

06 0.927 0.222 0.983 0.979

07 1.030 0.076 1.002 0.998

08 1.381 0.247 1.083 1.078

09 1.207 0.207 1.040 1.035

10 0.817 0.074 0.985 0.981

11 1.012 0.028 1.000 0.996

13 0.879 0.132 0.983 0.979

14 0.704 0.108 0.963 0.959

15 0.956 0.119 0.995 0.990

17 0.380 0.076 0.929 0.925

18 0.595 0.073 0.963 0.959

19 0.513 0.018 0.988 0.984

20 0.613 0.010 0.995 0.991

21 0.881 0.151 0.981 0.977

22 1.237 0.101 1.022 1.017

* INDICATED CHANGE = (BALANCED RELATIVITY FOR TOP) / (MONOLINE RELATIVITY (TOP 10)) - 1



WASHINGTON

TABLE 4 - SPECIAL CAUSES OF LOSS RELATIVITY ANALYSIS

____________________________________________________

(1) (2) (3) (4) (5)

$ LST SQ CREDIBILITY Z-WTD. BALANCED INDICATED

FORMULA Z RELATIVITY RELATIVITY CHANGE *

TOP RELATIVITY

--------------------------------------------------------------------------------------

10 0.960 0.190 0.992 1.009

31 1.288 0.021 1.005 1.023 +1.4%

32 1.430 0.114 1.042 1.059 +5.0%

33 1.695 0.073 1.039 1.057 +4.8%

34 0.992 0.189 0.998 1.016 +0.7%

35 1.118 0.152 1.017 1.035 +2.6%

36 1.236 0.132 1.028 1.046 +3.7%

37 0.380 0.173 0.846 0.860 -14.8%

38 0.442 0.052 0.958 0.975 -3.4%

CATEGORY

01 0.979 0.651 0.986 0.995

02 0.876 0.086 0.989 0.997

03 0.660 0.150 0.940 0.948

04 0.699 0.175 0.939 0.947

05 1.154 0.097 1.014 1.023

06 1.110 0.051 1.005 1.014

07 0.851 0.024 0.996 1.005

08 0.878 0.094 0.988 0.996

09 0.837 0.129 0.977 0.986

10 0.715 0.096 0.968 0.977

11 1.701 0.197 1.110 1.120

12 0.638 0.095 0.958 0.967

13 0.979 0.096 0.998 1.007

14 1.865 0.086 1.055 1.064




EXPLANATORY NOTES TO TABLES 3 AND 4

BASIC GROUP I AND SPECIAL CAUSES OF LOSS RELATIVITY ANALYSIS

OBJECTIVE The explanations which follow clarify Tables 3 and 4, the Basic Group I Relativity

Analysis and the Special Causes of Loss Relativity Analysis, respectively. The

purpose of these analyses is to:

(1) determine monoline classification loss cost level needs for Basic

Group I for class versus specifically rated risks;

(2) determine monoline category loss cost level needs for Special

Causes of Loss;

(3) determine indicated changes to the eight property CPP Package

Modification Factors (PMFs) based on Basic Group I/Special Causes of

Loss experience.

COLUMN (1) LEAST SQUARES FORMULA RELATIVITIES

The Least Squares Formula Relativities are the marginal relativities which result

from the application of the simultaneous review procedure to the raw experience

(where marginal refers to the relativities for a given rating variable, e.g. type of

policy, across all subsets of any other rating variables, i.e. rating group and rating

ID for Basic Group I, and category for Special Causes of Loss).

The purpose of such a simultaneous review procedure is to arrive at a set of type

of policy relativities (which will serve to price CPP policies relative to monoline

policies via the PMF); a set of rating group relativities for Basic Group I; and a set

of category relativities for Special Causes of Loss that best represent the

experience. This procedure is in contrast to a review of each rating variable's

experience separately. Such one-way types of review do not take into account

differing percentages of monoline and multiline experience in each rating variable,

nor differing percentages of a particular rating variable's experience in the

monoline and multiline types of policy. The simultaneous relativity procedure

accounts for these different distributions in generating relativities for the various

rating variables.



EXPLANATORY NOTES TO TABLES 3 AND 4 (Cont'd)

COLUMN (1)

(Cont'd)

The procedure uses an iterative technique to determine a set of marginal

relativities by rating variable that is a best fit to the individual cell relativities,

with each cell being defined as the cross-section of specific values of each rating

variable. The process uses the relativity of the five year experience ratios by

rating cell to the overall statewide experience ratio and the latest year aggregate

loss costs for each rating cell. (This experience is shown in Table 5 for Basic

Group I and Table 6 for Special Causes of Loss). Specifically, the iteration

procedure uses the following formulas:

BASIC GROUP I:

n

j

jij

n

j

jijij

i

RGW

RGRW

TOP

1

22

1

2

, where 1 i m;

m

i

iij

m

i

iijij

j

TOPW

TOPRW

RG

1

22

1

2

, where 1 j n;

SPECIAL CAUSES OF LOSS:

n

j

jij

n

j

jijij

i

CATW

CATRW

TOP

1

22

1

2

, where 1 i m;

m

i

iij

m

i

iijij

j

TOPW

TOPRW

CAT

1

22

1

2

, where 1 j n;




COLUMN (1)

(Cont'd)

. TOPi is the relativity for the ith Type of Policy;

. RGj is the relativity for the jth Rating Group;

. CATj is the relativity for the jth Category;

. Wij is the aggregate loss costs for the ith Type of Policy, jth Rating

Group or Category;

. Rij is the experience ratio relativity for the ith

Type of Policy, jth Rating Group or Category;

. m is the number of Types of Policy in the analysis;

. n is the number of Rating Groups or Categories in the analysis.

The procedure determines m Type of Policy relativities using the above

formulas. Then, using those results, a set of n Rating Group or Category

relativities are determined. These steps form an iterative process which

continues until there is no appreciable difference in results from one iteration to

the next.

COLUMN (2) CREDIBILITY

The credibility of the experience for each rating variable is determined from the

formula:

KP

PZ

where P is the 5-year adjusted aggregate loss costs for a given rating variable,

and K is a constant value. For Basic Group I, K equals an aggregate loss cost

volume of $40,000,000 for rating group and $100,000,000 for type of policy.

For Special Causes of Loss, K equals an aggregate loss cost volume of

$15,000,000.




COLUMN (3) CREDIBILITY-WEIGHTED RELATIVITIES

Credibility-weighted relativities are calculated based on the formula

ZRW

where Z is the credibility, R is the least squares formula relativity and W is the

credibility-weighted relativity for a given rating variable.

This formula implicitly assigns the complement of credibility to a relativity of

unity.

COLUMN (4) BALANCED RELATIVITIES

The credibility-weighted relativities are balanced to assure that the average

relativity across all rating variables remains at unity.

BALANCED RELATIVITIES - RATING ID (BASIC GROUP I ONLY)

For Basic Group I, balanced relativities are calculated for rating IDs (class

versus specific). These relativities are calculated via a separate simultaneous

procedure, which differs in a number of ways from the simultaneous review

discussed above.

The BGI rating ID relativities resulting from this procedure are balanced and

weighted together with the results of the Table 3 simultaneous review procedure

used to generate marginal relativities for the other BGI rating variables to

produce the monoline loss cost changes.

MULTILINE

CONSIDERATIONS

The type of policy (TOP) relativities are used to generate multiline indications

which apply to the current Implicit Package Modification Factors (IPMFs). The

indicated IPMFs are calculated as follows:

TOP y indicated = (TOP y current IPMF)x(TOP y relativity)

IPMF monoline relativity




MULTILINE

CONSIDERATIONS

(Cont'd)

For each CPP Type of Policy the indicated IPMF is subject to a minimum value of

0.50 and a maximum value of 1.50. If an indicated IPMF falls outside one of those

limits, it is capped at that amount, the aggregate loss costs for that Type of Policy

are adjusted to the capped IPMF level, and the entire relativity review as described

above is re-performed to take this into account. If an IPMF has been capped it is so

noted at the bottom of Table 3 and Table 4.

Loss cost changes for each TOP are calculated as described on Tables 3 and 4.



Entire State (Washington)

**************************

WASHINGTON

BASIC GROUP I RELATIVITY ANALYSIS

TABLE 5 - SUMMARY OF EXPERIENCE USED IN SIMULTANEOUS REVIEW

(1) (2) (3) (4) (5)

ACCIDENT YEAR 5 - YEAR 5 - YEAR Z-WEIGHTED

ENDING 03/31/14 AGGREGATE EXPERIENCE EXPERIENCE Z-WEIGHTED

AGGREGATE LOSS LOSS COSTS RATIO RATIO RELATIVITY

TYPE OF POLICY CATEGORY COSTS

------------------------------------------------------------------------------------------------------------------------------------

10 MONOLINE 01 APARTMENTS 108,788 409,820 0.101 0.483 0.601

02 OTHER HABITATIONAL 85,368 580,410 0.429 0.587 0.731

03 RESTAURANTS & BARS 22,195 133,519 0.000 0.539 0.671

04 OTHER MERCANTILE RS 852,259 4,387,618 0.807 0.789 0.983

05 PUBLIC BUILDINGS 50,981 209,417 0.000 0.510 0.635

06 CHURCHES 13,354 69,885 0.023 0.571 0.711

07 SCHOOLS 22,666 132,922 0.293 0.608 0.757

08 OFFICES AND BANKS 386,192 2,048,256 1.844 1.489 1.854

09 REC. FACILITIES 276,320 1,463,500 0.073 0.314 0.391

10 HOTELS AND MOTELS 37,685 172,633 0.279 0.596 0.742

11 HOSPITALS/NURS H0ME 74,284 382,461 4.200 1.953 2.432

13 MOTOR VEHICLE RISKS 136,475 816,159 0.104 0.407 0.507

14 OTHER NON-MANUF. 153,949 927,572 0.348 0.519 0.646

15 STORAGE 98,291 453,553 0.004 0.436 0.543

17 FOOD MANUFACTURING 16,665 101,850 0.000 0.552 0.687

18 WOOD MANUFACTURING 49,052 352,424 0.000 0.463 0.577

19 WEARING APPAREL 14,992 91,269 0.000 0.557 0.694

20 CHEM. MANUFACTURING 32,445 259,142 0.000 0.492 0.613

21 METAL MANUFACTURING 253,250 1,224,018 0.104 0.356 0.443

22 OTHER MANUFACTURING 96,254 516,146 0.867 0.771 0.960

TOTAL* 2,781,465 14,732,574 0.710 0.741 0.924

31 MULTILINE 10 HOTELS AND MOTELS 506,776 3,041,499 0.762 0.852 1.061

MOTEL/HOTEL TOTAL* 506,776 3,041,499 0.762 0.852 1.061

32 MULTILINE 01 APARTMENTS 3,327,037 17,964,232 0.723 0.825 1.027

APARTMENT 02 OTHER HABITATIONAL 970,264 5,174,918 0.577 0.810 1.009

TOTAL* 4,297,301 23,139,150 0.690 0.821 1.023

33 MULTILINE 08 OFFICES AND BANKS 920,472 5,030,806 0.641 0.824 1.026

OFFICE TOTAL* 920,472 5,030,806 0.641 0.824 1.026

34 MULTILINE 03 RESTAURANTS & BARS 424,983 2,433,299 2.734 1.218 1.517

MERCANTILE 04 OTHER MERCANTILE RS 3,812,126 19,600,302 1.094 0.948 1.181

08 OFFICES AND BANKS 153,325 821,761 0.008 0.729 0.908

13 MOTOR VEHICLE RISKS 159,384 1,421,924 0.398 0.791 0.985

14 OTHER NON-MANUF. 116,722 577,694 0.234 0.768 0.956

15 STORAGE 621,138 3,421,158 0.892 0.877 1.092

TOTAL* 5,287,678 28,276,138 1.131 0.946 1.178




**************************

WASHINGTON



(1) (2) (3) (4) (5)





------------------------------------------------------------------------------------------------------------------------------------

35 MULTILINE 02 OTHER HABITATIONAL 99,977 603,820 0.425 0.800 0.996

INSTITUTIONAL 05 PUBLIC BUILDINGS 120,402 878,289 0.000 0.727 0.905

06 CHURCHES 2,024,586 11,365,524 0.514 0.776 0.966

07 SCHOOLS 568,646 3,179,550 0.817 0.863 1.075


09 REC. FACILITIES 328,487 1,616,339 1.933 1.060 1.320

11 HOSPITALS/NURS H0ME 222,587 774,212 0.002 0.728 0.907


14 OTHER NON-MANUF. 80,019 430,693 0.018 0.734 0.914

TOTAL* 3,871,392 21,062,119 0.821 0.848 1.057

36 MULTILINE 03 RESTAURANTS & BARS 56,534 307,268 0.019 0.540 0.672

SERVICES 04 OTHER MERCANTILE RS 335,941 1,662,659 0.853 0.738 0.919


09 REC. FACILITIES 1,329,894 7,344,576 0.819 0.772 0.961

13 MOTOR VEHICLE RISKS 750,733 3,810,029 0.463 0.552 0.687

14 OTHER NON-MANUF. 441,223 2,293,151 0.122 0.421 0.524

15 STORAGE 296,460 1,477,589 0.032 0.433 0.539

21 METAL MANUFACTURING 75,214 360,135 0.023 0.535 0.666

22 OTHER MANUFACTURING 76,049 405,999 1.111 0.759 0.945

TOTAL* 3,729,348 19,443,994 0.540 0.626 0.779

37 MULTILINE 04 OTHER MERCANTILE RS 206,663 1,034,954 2.271 1.164 1.450

INDUST/PROCESS 08 OFFICES AND BANKS 133,372 615,936 0.109 0.527 0.656


14 OTHER NON-MANUF. 90,916 441,280 0.283 0.582 0.725

15 STORAGE 12,928 42,402 0.000 0.572 0.712

17 FOOD MANUFACTURING 592,899 3,181,879 0.093 0.369 0.460

18 WOOD MANUFACTURING 493,072 2,790,992 0.487 0.578 0.720

19 WEARING APPAREL 108,044 658,863 0.000 0.496 0.618


21 METAL MANUFACTURING 1,178,926 5,510,806 0.982 0.867 1.080

22 OTHER MANUFACTURING 773,493 3,561,615 1.659 1.204 1.499

TOTAL* 3,616,669 17,986,156 0.897 0.801 0.997




**************************

WASHINGTON



(1) (2) (3) (4) (5)





------------------------------------------------------------------------------------------------------------------------------------

38 MULTILINE 04 OTHER MERCANTILE RS 537,414 2,730,323 0.225 0.451 0.562

CONTRACTORS 08 OFFICES AND BANKS 126,757 666,446 0.684 0.670 0.834

14 OTHER NON-MANUF. 27,458 182,196 0.042 0.560 0.697

TOTAL* 691,629 3,578,965 0.302 0.496 0.617

TOTAL ALL TOPS* 01 APARTMENTS 3,435,825 18,374,052 0.703 0.814 1.014

02 OTHER HABITATIONAL 1,155,609 6,359,148 0.553 0.793 0.987

03 RESTAURANTS & BARS 503,712 2,874,086 2.309 1.112 1.385

04 OTHER MERCANTILE RS 5,744,403 29,415,856 0.998 0.873 1.088

05 PUBLIC BUILDINGS 171,383 1,087,706 0.000 0.662 0.825

06 CHURCHES 2,037,940 11,435,409 0.511 0.775 0.965

07 SCHOOLS 591,312 3,312,472 0.797 0.853 1.063

08 OFFICES AND BANKS 2,506,827 13,147,716 1.013 0.911 1.135

09 REC. FACILITIES 1,934,701 10,424,415 0.902 0.756 0.941

10 HOTELS AND MOTELS 544,461 3,214,132 0.729 0.834 1.039

11 HOSPITALS/NURS H0ME 296,871 1,156,673 1.052 1.035 1.288

13 MOTOR VEHICLE RISKS 1,055,024 6,081,843 0.403 0.571 0.711

14 OTHER NON-MANUF. 910,287 4,852,586 0.179 0.530 0.660

15 STORAGE 1,028,817 5,394,702 0.548 0.703 0.876

17 FOOD MANUFACTURING 609,564 3,283,729 0.090 0.374 0.466

18 WOOD MANUFACTURING 542,124 3,143,416 0.443 0.567 0.707

19 WEARING APPAREL 123,036 750,132 0.000 0.503 0.627


21 METAL MANUFACTURING 1,507,390 7,094,959 0.787 0.764 0.952

22 OTHER MANUFACTURING 945,796 4,483,760 1.534 1.124 1.400

TOTAL* 25,702,730 136,291,401 0.799 0.803 1.000

* TOTALS IN COLUMNS (3), (4) & (5) ARE AVERAGES USING COLUMN (1) AS WEIGHTS.



WASHINGTON

SPECIAL CAUSES OF LOSS RELATIVITY ANALYSIS


(1) (2) (3) (4) (5)





-------------------------------------------------------------------------------------------------------------------------------------

10 MONOLINE 01 BUILDINGS 846,773 4,206,910 1.884 1.754 1.065

02 RES. APTS. AND COND 22,639 165,247 0.372 1.042 0.633

03 OFFICES 235,630 1,197,163 0.933 1.106 0.672

04 MERCANTILE - HIGH 292,626 1,474,712 0.538 0.862 0.523

05 MERCANTILE - MEDIUM 45,674 250,447 1.797 1.462 0.888

06 MERCANTILE - LOW 27,682 162,916 0.645 1.120 0.680

07 MOTELS AND HOTELS 4,986 30,353 0.000 1.010 0.613

08 INSTITUTIONAL - HIG 21,422 82,674 0.355 1.069 0.649

09 INSTITUTIONAL - LOW 95,516 318,796 0.162 0.920 0.559

10 INDUST-PROC - HIGH 23,409 155,120 0.496 1.081 0.656

11 INDUST-PROC - LOW 131,499 613,862 1.935 1.573 0.955

12 SERVICE - HIGH 26,424 153,728 0.263 1.016 0.617

13 SERVICE - LOW 87,163 585,400 0.774 1.086 0.659

14 CONTRACTORS 3,060 4,033 0.222 1.073 0.651

TOTAL* 1,864,503 9,401,361 1.311 1.390 0.844

31 MULTILINE 01 BUILDINGS 78,395 523,632 2.805 2.221 1.349

MOTEL/HOTEL 07 MOTELS AND HOTELS 37,640 345,476 1.668 1.936 1.175

TOTAL* 116,035 869,108 2.436 2.128 1.292

32 MULTILINE 01 BUILDINGS 887,658 3,891,037 2.723 2.467 1.498

APARTMENT 02 RES. APTS. AND COND 169,959 1,253,388 2.511 2.211 1.342

TOTAL* 1,057,617 5,144,425 2.689 2.426 1.473


OFFICE 03 OFFICES 212,002 1,454,643 1.933 1.978 1.201

04 MERCANTILE - HIGH 14 14 0.000 1.770 1.075


11 INDUST-PROC - LOW 11 11 0.000 1.770 1.075

12 SERVICE - HIGH 208 232 0.000 1.770 1.075

14 CONTRACTORS 2,093 2,115 0.000 1.769 1.074

TOTAL* 549,812 3,128,962 3.171 2.548 1.547



WASHINGTON



(1) (2) (3) (4) (5)





-------------------------------------------------------------------------------------------------------------------------------------

34 MULTILINE 01 BUILDINGS 1,134,622 5,563,956 1.569 1.696 1.030

MERCANTILE 04 MERCANTILE - HIGH 280,925 1,696,019 1.024 1.557 0.945

05 MERCANTILE - MEDIUM 192,450 1,351,766 2.087 2.043 1.240

06 MERCANTILE - LOW 94,866 642,285 1.977 2.002 1.216

08 INSTITUTIONAL - HIG 434 943 0.000 1.770 1.075

12 SERVICE - HIGH 2,212 7,366 0.000 1.766 1.072

13 SERVICE - LOW 15,131 45,536 0.126 1.758 1.067

14 CONTRACTORS 5,109 14,966 0.000 1.761 1.069

TOTAL* 1,725,749 9,322,837 1.541 1.730 1.050


INSTITUTIONAL 03 OFFICES 23 23 0.000 1.770 1.075

08 INSTITUTIONAL - HIG 247,480 1,429,895 1.360 1.734 1.053

09 INSTITUTIONAL - LOW 330,897 1,799,392 1.347 1.697 1.030

12 SERVICE - HIGH 280 481 0.000 1.770 1.075

14 CONTRACTORS 719 1,925 0.000 1.769 1.074

TOTAL* 1,398,317 7,165,759 1.655 1.835 1.114


SERVICES 03 OFFICES 251 620 0.000 1.075 0.653

04 MERCANTILE - HIGH 3,160 7,358 0.000 1.021 0.620

05 MERCANTILE - MEDIUM 62 69 0.000 1.080 0.656


09 INSTITUTIONAL - LOW 33,791 106,990 0.000 0.584 0.355

11 INDUST-PROC - LOW 478 935 0.000 1.072 0.651

12 SERVICE - HIGH 283,618 1,408,582 1.400 1.389 0.843

13 SERVICE - LOW 158,155 959,445 2.380 2.267 1.376

14 CONTRACTORS 12,907 35,305 0.000 0.844 0.512

TOTAL* 1,226,966 6,060,186 1.905 1.907 1.158


INDUST/PROC 10 INDUST-PROC - HIGH 244,978 1,445,648 0.424 0.481 0.292

11 INDUST-PROC - LOW 607,729 3,074,658 1.293 1.292 0.784

12 SERVICE - HIGH 201 619 0.000 1.075 0.653

14 CONTRACTORS 0 113 0.000 1.000 1.000

TOTAL* 1,651,178 8,356,849 0.770 0.788 0.479



WASHINGTON



(1) (2) (3) (4) (5)





-------------------------------------------------------------------------------------------------------------------------------------

38 MULTILINE 01 BUILDINGS 159,982 825,493 0.555 0.635 0.386

CONTRACTORS 03 OFFICES 2,081 2,081 0.000 1.063 0.645

08 INSTITUTIONAL - HIG 465 1,263 0.000 1.070 0.650

11 INDUST-PROC - LOW 4 4 0.000 1.080 0.656

12 SERVICE - HIGH 102 102 0.000 1.080 0.656

14 CONTRACTORS 221,454 1,348,880 1.504 1.485 0.902

TOTAL* 384,088 2,177,823 1.098 1.128 0.685

TOTAL ALL TOPS* 01 BUILDINGS 5,782,000 27,959,625 1.887 1.792 1.088

02 RES. APTS. AND COND 192,598 1,418,635 2.260 2.074 1.259

03 OFFICES 449,987 2,654,530 1.399 1.517 0.921

04 MERCANTILE - HIGH 576,725 3,178,103 0.772 1.201 0.729

05 MERCANTILE - MEDIUM 238,186 1,602,282 2.031 1.931 1.173

06 MERCANTILE - LOW 122,548 805,201 1.676 1.803 1.095

07 MOTELS AND HOTELS 42,626 375,829 1.473 1.828 1.110

08 INSTITUTIONAL - HIG 282,447 1,548,861 1.219 1.654 1.004

09 INSTITUTIONAL - LOW 460,204 2,225,178 1.002 1.454 0.883

10 INDUST-PROC - HIGH 268,387 1,600,768 0.430 0.533 0.324

11 INDUST-PROC - LOW 739,721 3,689,470 1.406 1.341 0.815

12 SERVICE - HIGH 313,045 1,571,110 1.291 1.361 0.826

13 SERVICE - LOW 260,449 1,590,381 1.712 1.842 1.119

14 CONTRACTORS 245,342 1,407,337 1.360 1.455 0.884

TOTAL* 9,974,265 51,627,310 1.636 1.647 1.000

* TOTALS IN COLUMNS (3) & (4) ARE AVERAGES USING COLUMN (1) AS WEIGHTS.




BASIC GROUP I/SPECIAL CAUSES OF LOSS RELATIVITY ANALYSIS

SUMMARY OF EXPERIENCE USED IN SIMULTANEOUS REVIEW

INTRODUCTION The experience used in the relativity analysis and displayed in Tables 5 and 6 is

the latest five years of accident year data as reported under the Commercial

Statistical Plan. As in the overall review, loss costs have been adjusted to

current ISO loss cost and prospective amount of insurance levels (with

multiline aggregate loss costs adjusted additionally by the current implicit

package modification factors). Incurred losses are adjusted to prospective cost

levels, and are further adjusted by the Basic Group I large loss procedure and

the Special Causes of Loss excess procedure. Losses have also been developed

to their ultimate settlement value by application of loss development factors.

COLUMN (1) AGGREGATE LOSS COSTS

The latest year adjusted aggregate loss costs (adjusted as described above) are

used as weights both in the calculation of any totals shown in this table and in

the iterative formulae used in the simultaneous review procedure.

COLUMN (2) 5 - YEAR AGGREGATE LOSS COSTS

The combined five-year adjusted aggregate loss costs (adjusted as described

above) are used to calculate the experience ratios in column (3).

COLUMN (3) FIVE-YEAR EXPERIENCE RATIOS

These are the ratio of the combined five-year adjusted incurred losses (adjusted

as described above) to the combined five-year adjusted aggregate loss costs as

shown in Column (2). Any totals which are shown are weighted averages using

the adjusted aggregate loss costs in Column (1).

COLUMN (4)

CREDIBILITY (Z) WEIGHTED EXPERIENCE RATIO

A credibility procedure is applied to the initial experience ratios in column (3)

on a cell-by-cell basis prior to the simultaneous review procedure. The

credibility values are calculated using an empirical Bayesian credibility

procedure. In the following discussion, cell refers to an individual combination

of TOP, rating group or category, and territory (where applicable).




COLUMN (4)

(Cont'd)

The important concept underlying empirical Bayesian credibility is that the

credibility should depend both on the overall variation of the group of which

the cell is a member, in addition to the variation of the yearly experience ratios

for each cell. Therefore, if a cell's data is itself very stable then we would

assign a relatively high credibility value, and vice versa.

The empirical Bayesian credibility formula for individual cell credibility is

Z = ((C-3)/C) (P/(P+K)) + (3/C). P equals the cell's five-year adjusted

aggregate loss costs and C equals the number of unique combinations of rating

variables (Territory, TOP and Rating Group/Category) within a class group.

The K value is estimated from the underlying data using the empirical Bayes

method and varies by TOP group and by territory where applicable. The three

TOP groups used in this analysis are: Monoline (TOP 10), Premises (TOP's 31-

35), and Operations (TOP's 36-38). The 3/C term corrects for the statistical

bias associated with the credibility process. The minimum credibility that is

possible is 3/C.

The calculated credibility (Z) is then applied to the five-year experience ratio

with the complement of credibility applied to the credibility-weighted average

of the individual experience ratios of the group, where group refers to the

specified TOP/territory group. In a non-territory state, K values would be

determined for the three TOP groups on an entire state basis.

COLUMN (5) WEIGHTED RELATIVITIES

The relativities are the ratios of the five-year credibility-weighted experience

ratios shown in column (4) to the average five-year credibility-weighted

experience ratio for all TOP's, rating groups and territories (where applicable)

combined. These relativities represent how much better or worse than average

the experience for a given cell is. They are used along with the aggregate loss

costs in column (1) as input for the simultaneous review procedure.



WASHINGTON

TABLE 7 - BASIC GROUP II RELATIVITY ANALYSIS

(1) (2) (3) (4) (5) (6) (7) (8)

ACCIDENT YEAR ACCIDENT YEARS

ENDING 03/31/14 2005-2014 Z BALANCED NORMALIZED

AGGR. LOSS COSTS EXPER. RATIO FORMULA CREDI- WEIGHTED FORMULA FORMULA

AT CURRENT AT CURRENT RELATIVITY BILITY Z RELA- RELA- RELA- INDICATED

IMPLICIT PMF PMF (2)/ 1.060 C TIVITY D TIVITY E TIVITY F CHANGE G

-------------------------------------------------------------------------------------------------------

MONOLINE 559,202 0.941 0.888 0.126 0.986 0.986 0.9812

MULTILINE 3,451,399 1.079 1.018 0.469 1.008 1.008 1.0034

---------------- ------- ------ ------ ------ ------ --------

COVERAGE 4,010,601 1.060 1.000 1.0049 B 1.0003

MULTILINE TOP

31 MOTEL/HOTEL 46,410 4.572 4.313 0.016 1.053 1.058 1.0528 +7.3%

32 APARTMENT 332,631 0.993 0.937 0.061 0.996 1.001 0.9961 +1.5%

33 OFFICE 139,104 0.801 0.756 0.037 0.991 0.996 0.9911 +1.0%

34 MERCANTILE 1,097,815 0.739 0.697 0.227 0.931 0.936 0.9314 -5.1%

35 INSTITUTIONAL 846,104 1.675 1.580 0.200 1.116 1.122 1.1165 +13.8%

36 SERVICES 549,743 1.109 1.046 0.108 1.005 1.010 1.0051 +2.4%

37 INDUST/PROCESS 349,279 0.488 0.460 0.072 0.961 0.966 0.9613 -2.0%

38 CONTRACTORS 90,313 0.694 0.655 0.020 0.993 0.998 0.9931 +1.2%

---------------- ------- ------ ------ ------ ------ --------

3,451,399 1.079 B 1.018 1.003 B 1.008 B 1.0034 B

B - AVERAGE WEIGHTED BY COLUMN (1)

C - CREDIBILITY = P/(P+K) WHERE P REPRESENTS THE TOTAL 10 YEAR ADJUSTED LOSS COSTS AND K = 45,000,000

D - (5) = (3) * (4) + (1.000 - (4))

E - (6) = (5) * (1.008/1.003)

F - (7) = (6) / 1.0049

G - (8) = (NORMALIZED RELATIVITY FOR TOP) / (NORMALIZED MONOLINE RELATIVITY (TOP 10)) - 1



EXPLANATORY NOTES TO TABLE 7

BASIC GROUP II RELATIVITY ANALYSIS

OBJECTIVE The explanations which follow clarify Table 7, the Basic Group II (BGII)

relativity analysis. The purpose of this analysis is to:

(1) determine the monoline loss cost level need;

(2) determine indicated changes to the eight property Commercial

Package Policy (CPP) Package Modification Factors (PMFs)

based on Basic Group II experience.

COLUMN (1) AGGREGATE LOSS COSTS

The latest accident year adjusted aggregate loss costs (adjusted in the same

manner as in the overall review, i.e. to current manual loss cost and prospective

amount of insurance levels, with multiline aggregate loss costs further adjusted

to current IPMF level) are used as weights in the calculation of any totals shown

in this table.

COLUMN (2) 10 - YEAR EXPERIENCE RATIO

These experience ratios are the ratio of the combined ten year CSP adjusted

incurred losses (adjusted to current deductible and prospective cost levels

including loss development, and also adjusted to reflect the BGII excess loss

procedure) to the combined ten year CSP adjusted aggregate loss costs. Any

totals which are shown are weighted averages using the aggregate loss costs in

Column (1). When a dash is displayed in the column, it indicates that the

indicated IPMF which resulted from this procedure was capped. The procedure

which follows when capping occurs is described below.

COLUMN (3) FORMULA RELATIVITY

The formula relativities are the ratios of the ten year experience ratios for the

type of policy (either monoline vs. multiline or individual multiline programs) to

the average ten year experience ratio for monoline and multiline combined.

These relativities represent how much better or worse than average the

experience for a given type of policy is. Again, any totals which are shown are

weighted averages and the display of a dash indicates that the resulting IPMF

was capped.




COLUMN (3)

(Cont'd)

Unlike the BGI and SCL relativity analyses, the BGII analysis does not employ

a simultaneous review procedure since a one way review is involved. That is,

the overall loss cost change is only distributed across type of policy; no other

rating variables are considered.

COLUMN (4) CREDIBILITY

The credibility of the experience for each type of policy is determined from the

formula:

KP

PZ

where P is the ten year adjusted aggregate loss costs for a given type of policy,

and K is a constant loss cost volume of $45,000,000.

COLUMN (5) Z - WEIGHTED RELATIVITY

The weighted relativity is a weighted average of the individual TOP formula

relativity and the overall (coverage) formula relativity using credibility and its

complement as the respective weights. Therefore, to the extent that the

indication for a type of policy is not fully credible, the complement of credibility

is assigned to the statewide coverage level change.

COLUMN (6) BALANCED FORMULA RELATIVITY

The individual multiline weighted relativities are balanced to the multiline

weighted relativity level by applying a factor equal to the overall multiline

relativity (i.e. the weighted relativity for all multiline combined which is shown

on the top of the exhibit directly under the corresponding monoline relativity)

divided by the average multiline relativity (i.e. the weighted average of the

individual multiline weighted relativities which is shown on the bottom of the

exhibit). When the indicated IPMF for a type of policy is capped, the balanced

relativity is set equal to the product of the capped IPMF and the monoline

balanced formula relativity, divided by the current IPMF.




COLUMN (7) NORMALIZED FORMULA RELATIVITY

The normalized relativity is equal to the balanced formula relativity divided by

the average monoline/multiline combined relativity. This balances the average

monoline/multiline relativity to unity.

COLUMN (8) INDICATED LOSS COST CHANGES

The indicated multiline (by TOP) changes are calculated by taking the ratio of

the TOP relativity (Column 7) to the monoline relativity.

For each type of policy the indicated IPMF is subject to a minimum value of

0.50 and a maximum value of 1.50. If an indicated IPMF falls outside one of

those limits, it is capped at that amount, the aggregate loss costs for that type of

policy are adjusted to the capped IPMF level, and the entire relativity review as

described above is redone to take this into account. If an IPMF has been capped

it is so noted in footnote A.



CRIME AND FIDELITY

Crime and Fidelity filing CR-2013-RLA1 revised advisory prospective loss costs for both the Burglary and Theft

and the Fidelity coverages. The reviews for Burglary and Theft and for Fidelity were done on a multistate basis,

combining both multiline and monoline experience. However, unlike other coverages included in a Commercial

Package Policy, there is no simultaneous review procedure for either Burglary and Theft or for Fidelity in which

separate loss cost level changes can be determined for multiline and monoline experience. In the absence of a

simultaneous review procedure we are unable to determine Type of Policy relativities with which to price CPP

policies relative to monoline policies and therefore have assumed a multiline change of 0.0% and thus no change

to the historic Crime or Fidelity IPMFs.



WASHINGTON

TABLE 8

COMMERCIAL I.M. RELATIVITY ANALYSIS

(1) (2) (3) (4) (5)

BALANCED CURRENT INDICATED SELECTED

TOP RELATIVITY IPMF IPMF* IPMF

10 0.986 0.824 0.850 0.850

3X & 7X 1.018

CLASSIFICATION

150 0.581

191 1.364

192 0.900

220 0.934

221 0.947

234 1.061

235 0.810

240 0.984

241 0.824

327 0.947

328 1.676

340 0.947

341 0.947

342 0.950

343 0.947

403 0.873

451 0.825

452 0.792

453 1.164

454 0.850

460 0.738

482 0.906

510 0.709

514 0.998

530 0.578

534 0.947

*COLUMN(4) = COLUMN(3)*(TOP 3X & 7X COLUMN(2)/TOP 10 COLUMN(2))



WASHINGTON

COMMERCIAL INLAND MARINE RELATIVITY ANALYSIS


(1) (2) (3) (4)

RATING 2012 AGGREGATE 2008 - 2012 FIVE-YEAR

TYPE OF POLICY GROUP LOSS COSTS AGGREGATE LOSS COSTS EXP RATIO RELATIVITY

MONOLINE 10 150 314,481 1,654,242 1.821 1.899

191 2,616,974 9,783,792 1.589 1.657

192 451,946 1,333,293 0.827 0.862

220 16,517 76,263 0.123 0.128

221 420 3,767 0.000 0.000

234 2,886,563 13,221,606 0.895 0.933

235 4,322,297 12,302,495 0.726 0.757

240 1,025,405 4,604,627 0.982 1.024

241 101,927 136,118 0.006 0.006

327 30,551 146,499 0.000 0.000

328 2,992,830 13,607,177 1.940 2.023

340 6,165 36,694 0.000 0.000

341 0 0 0.000 0.000

342 312 2,495 0.000 0.000

343 189 1,238 0.000 0.000

403 1,592,716 6,914,972 0.840 0.876

451 3,490,297 14,442,401 0.747 0.779

452 30,138 258,095 0.407 0.424

453 69,657 654,373 2.681 2.796

454 130,725 640,114 1.070 1.116

460 696,560 2,902,338 0.610 0.636

482 374,148 1,581,934 0.904 0.943

510 6,360 615,925 0.010 0.010

514 274,664 837,150 1.304 1.360

530 611,790 2,859,730 0.609 0.635

534 0 0 0.000 0.000

TOTAL# 22,043,632 88,617,338 1.062 1.107



WASHINGTON



(1) (2) (3) (4)



MULTILINE ## 150 859,610 4,456,944 0.174 0.181

3X & 7X 191 651,281 4,161,943 0.235 0.245

192 156,579 678,482 0.098 0.102

220 9,090 51,291 1.695 1.767

221 2,471 2,474 0.000 0.000

234 11,084,896 43,452,337 1.064 1.109

235 568,014 2,581,720 0.782 0.815

240 24,059 100,037 0.548 0.571

241 1,609 24,343 0.123 0.128

327 4,680 42,335 0.000 0.000

328 1,557 2,881,208 0.072 0.075

340 17,892 55,645 0.000 0.000

341 0 0 0.000 0.000

342 7,623 16,567 2.280 2.377

343 1,473 22,831 0.000 0.000

403 786,286 3,704,680 0.651 0.679

451 76,269 960,752 0.205 0.214

452 67,585 209,525 0.029 0.030

453 18,163 776,345 0.007 0.007

454 221,459 1,084,210 0.418 0.436

460 2,391,309 9,647,429 0.651 0.679

482 209,780 1,355,831 0.474 0.494

510 23,951 96,662 0.075 0.078

514 74,879 338,326 0.179 0.187

530 962,497 4,466,197 0.298 0.311

534 0 0 0.000 0.000

TOTAL# 18,223,012 81,168,114 0.833 0.869

## REFLECTS CURRENT IPMF OF 0.824.



WASHINGTON



(1) (2) (3) (4)



TOTAL ALL TOPS# 150 1,174,091 6,111,186 0.615 0.641

191 3,268,255 13,945,735 1.319 1.375

192 608,525 2,011,775 0.639 0.666

220 25,607 127,554 0.681 0.710

221 2,891 6,241 0.000 0.000

234 13,971,459 56,673,943 1.029 1.073

235 4,890,311 14,884,215 0.733 0.764

240 1,049,464 4,704,664 0.972 1.014

241 103,536 160,461 0.008 0.008

327 35,231 188,834 0.000 0.000

328 2,994,387 16,488,385 1.939 2.022

340 24,057 92,339 0.000 0.000

341 0 0 0.000 0.000

342 7,935 19,062 2.190 2.284

343 1,662 24,069 0.000 0.000

403 2,379,002 10,619,652 0.778 0.811

451 3,566,566 15,403,153 0.735 0.766

452 97,723 467,620 0.146 0.152

453 87,820 1,430,718 2.128 2.219

454 352,184 1,724,324 0.660 0.688

460 3,087,869 12,549,767 0.642 0.669

482 583,928 2,937,765 0.750 0.782

510 30,311 712,587 0.061 0.064

514 349,543 1,175,476 1.063 1.108

530 1,574,287 7,325,927 0.419 0.437

534 0 0 0.000 0.000

TOTAL# 40,266,644 169,785,452 0.959 1.000

# TOTAL IN COLUMN (3) IS AN AVERAGE USING COLUMN (1) AS WEIGHTS.





EXPERIENCE

BASE

The Commercial Inland Marine IPMF review presented in the attached exhibits is

based on a review of the latest available five years of monoline and multiline

experience through accident year 2012 for all companies reporting data to Insurance

Services Office under the Inland Marine Module of the Commercial Statistical Plan

(CSP) and the Intermediate Level of the Commercial Minimum Statistical Plan

(CMSP).

ADJUSTMENT

OF DATA

Aggregate loss costs for each year in the review period have been adjusted to the

levels which would have been earned had the current loss costs applied throughout

the experience period. Reported premiums are adjusted to current level on an

individual policy basis by applying a factor equal to all loss cost level changes that

have been implemented subsequent to the policy being written. These adjusted

premiums are then converted to a loss cost at current level. In order to eliminate the

impact of company deviations from the manual level and individual risk

modifications which were in effect at the time the policy was written, aggregate loss

costs are further adjusted based on reported Rate Modification and Rate Departure

Factors/Loss Cost Multipliers. Multiline aggregate loss costs are further adjusted to

the level of the current Implicit Package Modification Factor (IPMF). Incurred

losses are loaded for all loss adjustment expenses by applying a factor of 1.105.

RELATIVITY

ANALYSIS

For Inland Marine coverage, a multistate IPMF level is determined via a two-way

relativity analysis similar to the analysis used in Basic Group I. The experience for

all reviewed classes is used to form class group relativities. These relativities for

monoline and multiline (all programs combined) are determined through an iterative

procedure. The ratio of the multiline relativity to the monoline relativity is multiplied

by the current IPMF to yield the indicated IPMF. The indicated IPMF is subject to a

minimum value of 0.500 and a maximum value of 1.500. If an indicated IPMF falls

outside one of those limits, it is capped at that amount, the premiums for that Type of

Policy (i.e., TOP 10 versus TOP 3X) are adjusted to the capped IPMF level, and the

entire relativity review is reperformed to take this into account.



TABLE 10

WASHINGTON

OWNERS, LANDLORDS AND TENANTS

BASIC LIMIT RELATIVE CHANGE ANALYSIS

------------------------------------

(1) (2) (3) (4) (5)

BAILEY

FORMULA CREDIBILITY Z-WTD BALANCED INDICATED

TOP RELATIV. Z RELATIV. RELATIV. CHANGE *

10 0.855 0.212 0.967 0.965

31 0.898 0.131 0.986 0.984 +2.0%

32 0.719 0.123 0.960 0.958 -0.7%

33 0.893 0.165 0.981 0.979 +1.5%

34 1.536 0.220 1.099 1.096 +13.6%

35 0.767 0.142 0.963 0.961 -0.4%

36 0.916 0.129 0.989 0.986 +2.2%

CLASS

GROUP

01 0.776 0.077 0.981 0.985

02 0.542 0.149 0.913 0.916

03 0.940 0.120 0.993 0.997

04 1.318 0.039 1.011 1.015

05 0.610 0.043 0.979 0.983

06 0.939 0.056 0.996 1.000

07 1.131 0.120 1.015 1.019

08 0.726 0.030 0.990 0.994

09 1.276 0.147 1.037 1.041

10 1.896 0.155 1.104 1.109

11 1.488 0.133 1.054 1.058

12 0.888 0.238 0.972 0.976

13 1.002 0.070 1.000 1.004

16 0.000 0.000 1.000 1.004

TERRITORY

1 1.208 0.219 1.042 1.048

2 0.936 0.377 0.975 0.980




TABLE 11

WASHINGTON

MANUFACTURERS AND CONTRACTORS


------------------------------------

(1) (2) (3) (4) (5)

BAILEY



10 0.973 0.224 0.994 0.990

33 2.252 0.035 1.029 1.024 +3.4%

34 0.933 0.089 0.994 0.990 0.0%

35 0.323 0.030 0.967 0.963 -2.7%

36 0.829 0.093 0.983 0.979 -1.1%

37 1.118 0.111 1.012 1.008 +1.8%

38 1.149 0.203 1.029 1.024 +3.4%

CLASS

GROUP

30 1.246 0.095 1.021 1.017

31 1.523 0.167 1.073 1.068

32 1.089 0.226 1.019 1.015

33 0.542 0.077 0.954 0.950

34 0.733 0.097 0.970 0.966

35 0.395 0.041 0.963 0.959

36 0.450 0.083 0.936 0.932

37 0.773 0.048 0.988 0.984

38 1.147 0.091 1.013 1.008




TABLE 12

WASHINGTON



------------------------------------

SUMMARY OF EXPERIENCE USED IN RELATIVE CHANGE ANALYSIS

TERRITORY ALL

(1) (2) (3) (4) (5) (6)

FISCAL A.Y.E. FISCAL A.Y.E.

03/31/2014 AGGREGATE 2010 - 2014 FIVE YEAR

LOSS COSTS AT AGG LOSS COST EXPERIENCE NUMBER OF BAL CELL

TYPE OF POLICY CLASS GROUP CURRENT LEVEL CURRENT LEVEL RATIO RELATIV. OCCURRENCES RELATIV.

10 MONOLINE 01 FOOD&BEV.(RETAIL) $61,930 $268,553 1.119 12

02 RESTAURANTS 198,414 641,263 0.652 33

03 STORES 199,428 1,048,800 0.957 102

04 VENDING & RENTAL 11,364 81,204 5.291 8

05 FOOD & BEV. DIST. 40,173 153,700 0.672 5

06 NON-FOOD&BEV.DIST 62,781 299,453 0.204 5

07 CLUBS,AMSMT&SPRTS 455,387 2,589,513 1.068 118

08 HEALTH CARE FACIL 71,922 326,341 0.138 2

09 HOTELS AND MOTELS 381,623 1,253,562 1.080 70

10 SCHLS & CHURCHES 353,315 1,742,097 1.767 134

11 APARTMENTS 472,988 1,903,189 1.298 82

12 BUILDINGS&OFFICES 1,326,393 5,827,893 0.848 232

13 MISC. PREMISES 62,461 263,720 0.859 13

TOTAL * $3,698,179 $16,399,288 1.032 816

31 MULT MOTEL/HOTEL 09 HOTELS AND MOTELS $779,908 $4,656,929 1.225 309

TOTAL * $779,908 $4,656,929 1.225 309

32 MULT APARTMENT 11 APARTMENTS $1,080,758 $7,718,028 1.185 241

12 BUILDINGS&OFFICES 285,821 1,414,759 0.605 33

TOTAL * $1,366,579 $9,132,787 1.063 274

33 MULT OFFICE 12 BUILDINGS&OFFICES $2,493,806 $13,446,735 0.869 492

13 MISC. PREMISES 14,304 315,673 0.000 0

TOTAL * $2,508,110 $13,762,408 0.864 492

34 MULT MERCANTILE 01 FOOD&BEV.(RETAIL) $798,248 $2,147,567 1.215 96

02 RESTAURANTS 1,656,846 7,044,297 0.900 367

03 STORES 647,551 2,313,734 1.516 128

04 VENDING & RENTAL 9,028 33,480 0.764 10

05 FOOD & BEV. DIST. 236,366 989,874 0.979 29

06 NON-FOOD&BEV.DIST 284,979 1,314,067 1.668 53


13 MISC. PREMISES 2,788 16,433 0.000 0

TOTAL * $4,142,821 $16,378,623 1.198 875



TABLE 12

WASHINGTON



------------------------------------


TERRITORY ALL

(1) (2) (3) (4) (5) (6)





35 MULT INSTITUT. 07 CLUBS,AMSMT&SPRTS $157,857 $1,038,364 0.356 25


10 SCHLS & CHURCHES 801,005 4,159,642 1.514 301

12 BUILDINGS&OFFICES 16,855 82,481 5.079 22

13 MISC. PREMISES 10,435 43,094 0.000 0

16 GOVT SUBDIVISIONS 10,776 399,188 0.000 0

TOTAL * $1,171,620 $6,593,753 1.276 363

36 MULT SERVICES 03 STORES $202,250 $1,016,852 1.094 31

04 VENDING & RENTAL 47,440 255,533 0.498 10



09 HOTELS AND MOTELS 66,898 341,067 1.633 13

10 SCHLS & CHURCHES 830 10,604 0.000 0


13 MISC. PREMISES 192,223 989,863 1.201 77

TOTAL * $1,133,734 $6,471,873 1.011 302

TOTAL ALL TOP 01 FOOD&BEV.(RETAIL) $860,178 $2,416,120 1.208 108

02 RESTAURANTS 1,855,260 7,685,560 0.874 400

03 STORES 1,049,229 4,379,386 1.328 261

04 VENDING & RENTAL 67,832 370,217 1.336 28

05 FOOD & BEV. DIST. 276,539 1,143,574 0.935 34

06 NON-FOOD&BEV.DIST 347,760 1,613,520 1.404 58


08 HEALTH CARE FACIL 249,606 1,217,420 0.602 17

09 HOTELS AND MOTELS 1,228,429 6,251,558 1.202 392

10 SCHLS & CHURCHES 1,155,150 5,912,343 1.590 435

11 APARTMENTS 1,553,746 9,621,217 1.219 323

12 BUILDINGS&OFFICES 4,897,553 24,895,206 0.912 1,024

13 MISC. PREMISES 282,211 1,628,783 1.008 90

16 GOVT SUBDIVISIONS 10,776 399,188 0.000 0

TOTAL * $14,800,951 $73,395,661 1.081 3,431

* TOTALS IN COLUMN (3) ARE AVERAGES USING COLUMN (1) AS WEIGHTS.



TABLE 13

WASHINGTON



------------------------------------


(1) (2) (3) (4) (5) (6)





10 MONOLINE 30 SERVICE $319,209 $1,095,641 0.953 1.089 40 1.007

31 LIGHT CONTRACTING 1,496,813 4,406,593 1.587 1.812 277 1.058

32 MEDIUM CONTRCTING 3,078,052 14,005,396 0.820 0.936 432 1.005

33 HEAVY CONTRACTING 404,838 1,848,555 0.596 0.680 40 0.940

34 DEALER OR DISTRIB 239,845 1,338,552 0.812 0.927 42 0.957

35 LGT. MANUFACTURER 29,208 138,036 0.555 0.634 2 0.949

36 MED. MANUFACTURER 523,404 1,742,983 0.262 0.299 19 0.923

37 HVY. MANUFACTURER 120,324 566,272 0.120 0.136 7 0.974

38 MISC. OPERATION 368,367 1,593,189 0.868 0.991 50 0.998

TOTAL * $6,580,060 $26,735,217 0.931 909

33 MULT OFFICE 31 LIGHT CONTRACTING $9,444 $136,774 1.770 2.020 2 1.095

32 MEDIUM CONTRCTING 1,598 10,377 0.269 0.307 0 1.040

33 HEAVY CONTRACTING 137,368 646,733 0.239 0.273 5 0.973

38 MISC. OPERATION 83,605 353,951 3.801 4.339 16 1.033

TOTAL * $232,015 $1,147,835 1.585 23

34 MULT MERCANTILE 30 SERVICE $46,106 $196,543 0.124 0.142 3 1.006



38 MISC. OPERATION 90,947 434,817 0.411 0.469 32 0.998

TOTAL * $904,166 $4,634,085 0.685 143

35 MULT INSTITUT. 31 LIGHT CONTRACTING $6,285 $33,003 0.017 0.020 1 1.028

32 MEDIUM CONTRCTING 290,893 2,297,770 0.317 0.362 16 0.977

TOTAL * $297,178 $2,330,773 0.311 17

36 MULT SERVICES 30 SERVICE $42,684 $298,242 0.401 0.458 16 0.995

31 LIGHT CONTRACTING 163,311 656,120 2.183 2.492 38 1.046




36 MED. MANUFACTURER 45,789 152,610 0.007 0.008 1 0.912

38 MISC. OPERATION 266,089 1,215,033 0.946 1.080 47 0.987

TOTAL * $1,106,155 $5,392,153 0.719 158



TABLE 13

WASHINGTON



------------------------------------


(1) (2) (3) (4) (5) (6)





37 MULT INDUST/PROC. 31 LIGHT CONTRACTING $426 $3,142 0.841 0.960 0 1.077

32 MEDIUM CONTRCTING 308,854 1,548,996 0.488 0.557 31 1.024


34 DEALER OR DISTRIB 89,412 398,178 1.432 1.635 11 0.974

35 LGT. MANUFACTURER 483,531 1,706,218 0.374 0.427 29 0.967

36 MED. MANUFACTURER 1,451,747 6,618,373 0.494 0.564 105 0.940

37 HVY. MANUFACTURER 709,765 2,965,850 0.848 0.968 35 0.992

38 MISC. OPERATION 23,668 139,026 0.336 0.383 3 1.017

TOTAL * $3,117,944 $13,593,891 0.581 223

38 MULT CONTRACTORS 30 SERVICE $494,920 $2,547,682 1.451 1.657 104 1.042

31 LIGHT CONTRACTING 681,280 6,193,908 0.664 0.758 186 1.094

32 MEDIUM CONTRCTING 1,715,718 9,047,440 1.368 1.562 398 1.040

33 HEAVY CONTRACTING 381,838 2,160,468 0.757 0.864 51 0.973

38 MISC. OPERATION 66,448 423,743 0.370 0.423 3 1.033

TOTAL * $3,340,204 $20,373,241 1.147 742

TOTAL ALL TOP 30 SERVICE $902,919 $4,138,108 1.158 163

31 LIGHT CONTRACTING 2,357,559 11,429,540 1.358 504

32 MEDIUM CONTRCTING 5,625,462 28,268,272 0.951 920

33 HEAVY CONTRACTING 1,044,094 5,294,343 0.571 107

34 DEALER OR DISTRIB 1,384,796 7,026,831 0.593 172

35 LGT. MANUFACTURER 512,739 1,844,254 0.384 31

36 MED. MANUFACTURER 2,020,940 8,513,966 0.423 125

37 HVY. MANUFACTURER 830,089 3,532,122 0.742 42

38 MISC. OPERATION 899,124 4,159,759 1.067 151

TOTAL * $15,577,722 $74,207,195 0.876 2,215




TABLE 14

WASHINGTON

PRODUCTS


------------------------------------

(1) (2) (3) (4) (5)

BAILEY



10 0.835 0.389 0.932 0.929

34 1.025 0.444 1.011 1.008 +8.5%

36 1.278 0.231 1.058 1.055 +13.6%

37 1.073 0.578 1.041 1.038 +11.7%

CLASS

GROUP

3 1.127 0.580 1.072 1.058

4 0.980 0.463 0.991 0.979

5 0.773 0.122 0.969 0.957

6 1.009 0.372 1.003 0.991

7 0.774 0.176 0.956 0.944


NOTE: THE INDICATED CHANGES BY TOP WERE FURTHER ADJUSTED BY THE

FOLLOWING DIFFERENTIALS: TOP 34: 0.985

TOP 36: 0.989

TOP 37: 1.000



TABLE 15

MULTISTATE

PRODUCTS


------------------------------------


(1) (2) (3) (4) (5) (6)

CALENDAR A.Y.E. CALENDAR A.Y.E.




10 MONOLINE 03 MAN,DLR,DSTFD/DRG $16,536,214 $67,523,384 1.071 0.989 1,658 0.983

04 DLR,DST-NOTFD/DRG 11,186,953 41,139,189 0.891 0.823 565 0.909

05 MAN.NTFD/DRG(LOW) 1,914,235 8,808,823 0.387 0.358 48 0.889

06 MAN.NTFD/DRG(MED) 9,673,966 47,693,417 0.845 0.781 607 0.920

07 MAN.NTFD/DRG(HGH) 3,149,312 11,922,955 0.795 0.735 152 0.877

TOTAL * $42,460,680 $177,087,768 0.921 3,030

34 MULT MERCANTILE 03 MAN,DLR,DSTFD/DRG $5,919,769 $29,644,057 1.262 1.166 1,271 1.066

04 DLR,DST-NOTFD/DRG 34,403,785 173,361,305 1.086 1.003 2,674 0.986

06 MAN.NTFD/DRG(MED) 18,531 61,062 0.000 0.000 0 0.998

TOTAL * $40,342,085 $203,066,424 1.111 3,945

36 MULT SERVICES 04 DLR,DST-NOTFD/DRG $4,560,684 $22,242,189 1.355 1.252 1,061 1.032

06 MAN.NTFD/DRG(MED) 82,327 383,106 1.438 1.329 7 1.045

TOTAL * $4,643,011 $22,625,295 1.356 1,068

37 MULT INDUST/PROC. 03 MAN,DLR,DSTFD/DRG $20,584,794 $98,014,714 1.262 1.166 3,814 1.098

05 MAN.NTFD/DRG(LOW) 4,969,801 27,926,556 1.018 0.940 250 0.993

06 MAN.NTFD/DRG(MED) 29,239,676 141,165,738 1.193 1.103 2,165 1.028

07 MAN.NTFD/DRG(HGH) 10,419,262 45,896,931 0.870 0.804 469 0.980

TOTAL * $65,213,533 $313,003,939 1.150 6,698

TOTAL ALL TOP 03 MAN,DLR,DSTFD/DRG $43,040,777 $195,182,155 1.188 6,743

04 DLR,DST-NOTFD/DRG 50,151,422 236,742,683 1.067 4,300

05 MAN.NTFD/DRG(LOW) 6,884,036 36,735,379 0.842 298

06 MAN.NTFD/DRG(MED) 39,014,500 189,303,323 1.107 2,779

07 MAN.NTFD/DRG(HGH) 13,568,574 57,819,886 0.853 621

TOTAL * $152,659,309 $715,783,426 1.082 14,741




TABLE 16

WASHINGTON

LOCAL PRODUCTS/COMPLETED OPERATIONS


------------------------------------

(1) (2) (3) (4) (5)

BAILEY



10 0.990 0.812 0.992 0.992

34 1.061 0.612 1.037 1.037 +4.5%

36 1.080 0.553 1.044 1.044 +5.2%

37 1.028 0.168 1.005 1.004 +1.2%

38 0.991 1.000 0.991 0.991 -0.1%

CLASS

GROUP

1 0.908 0.607 0.943 0.938

2 0.910 0.544 0.950 0.945

11 1.111 0.347 1.037 1.031

12 1.021 1.000 1.021 1.015

13 0.858 0.309 0.954 0.948




TABLE 16

MULTISTATE


BASIC LIMIT RELATIVE CHANGE ANALYSIS *

--------------------------------------

(1) (2) (3) (4)

BAILEY

FORMULA CREDIBILITY Z-WTD BALANCED

STATE RELATIV. Z RELATIV. RELATIV.

1.502 0.386 1.170 1.165

1.153 0.651 1.097 1.093

1.219 0.404 1.083 1.079

1.235 0.357 1.078 1.074

1.175 0.430 1.072 1.068

1.272 0.287 1.072 1.067

1.172 0.241 1.039 1.035

1.222 0.193 1.039 1.035

1.089 0.413 1.036 1.032

WASHINGTON 1.097 0.363 1.034 1.030

1.194 0.183 1.033 1.029

1.088 0.333 1.028 1.024

1.039 0.615 1.024 1.020

1.044 0.503 1.022 1.018

1.043 0.395 1.017 1.013

1.025 0.643 1.016 1.012

1.024 0.556 1.013 1.009

1.066 0.180 1.012 1.008

1.012 0.583 1.007 1.003

1.004 0.406 1.002 0.998

0.999 0.457 1.000 0.996

0.992 0.228 0.998 0.994

0.989 0.313 0.996 0.992

0.981 0.411 0.992 0.988

0.980 0.516 0.990 0.986

0.961 0.254 0.990 0.986

0.946 0.247 0.986 0.982

0.961 0.402 0.984 0.980

0.963 0.462 0.983 0.979

0.970 0.623 0.981 0.978

0.902 0.240 0.975 0.972

0.776 0.100 0.975 0.971

0.938 0.449 0.972 0.968

0.877 0.234 0.970 0.966

0.916 0.347 0.970 0.966

0.851 0.229 0.964 0.960

0.792 0.160 0.963 0.960

0.932 0.562 0.961 0.958

0.757 0.140 0.962 0.958

0.833 0.223 0.960 0.956

0.881 0.330 0.959 0.955

0.917 0.499 0.958 0.954

0.781 0.209 0.950 0.946

0.811 0.250 0.949 0.945

0.787 0.257 0.940 0.937

0.655 0.167 0.932 0.928

0.774 0.323 0.921 0.917

0.353 0.085 0.915 0.912

0.545 0.154 0.911 0.907

0.635 0.250 0.893 0.889

0.514 0.176 0.890 0.886

0.361 0.122 0.883 0.880

* Sorted by balanced relative change.



TABLE 17

WASHINGTON



----------------------------------------------


(1) (2) (3) (4) (5) (6)





10 MONOLINE 01 RET.STRS-FOOD/DRG $14,355 $127,276 0.661 0.700 4 0.958

02 RET.STRS-NTFD/DRG 19,721 94,830 0.442 0.468 9 0.965

11 COMP. OPS. (LOW) 115,728 342,025 1.145 1.212 10 1.053

12 COMP. OPS. (MED) 3,162,831 9,686,345 1.553 1.644 239 1.037

13 COMP. OPS. (HGH) 146,374 406,657 0.184 0.195 3 0.969

TOTAL * $3,459,009 $10,657,133 1.471 265

34 MULT MERCANTILE 01 RET.STRS-FOOD/DRG $186,186 $749,875 1.777 1.881 74 1.001

02 RET.STRS-NTFD/DRG 168,688 656,744 0.880 0.931 12 1.009

12 COMP. OPS. (MED) 42,225 155,642 0.169 0.179 2 1.084

TOTAL * $397,099 $1,562,261 1.225 88

36 MULT SERVICES 01 RET.STRS-FOOD/DRG $17,013 $69,525 1.154 1.222 4 1.008

02 RET.STRS-NTFD/DRG 249,396 849,523 0.618 0.654 39 1.015

11 COMP. OPS. (LOW) 52,305 255,371 0.203 0.215 3 1.108

12 COMP. OPS. (MED) 71,112 410,064 0.196 0.208 4 1.091

13 COMP. OPS. (HGH) 39,267 271,893 3.171 3.357 9 1.019

TOTAL * $429,093 $1,856,376 0.752 59

37 MULT INDUST/PROC. 11 COMP. OPS. (LOW) $4,899 $25,599 0.000 0.000 0 1.067

12 COMP. OPS. (MED) 72,091 293,298 0.798 0.845 5 1.050

TOTAL * $76,990 $318,897 0.748 5

38 MULT CONTRACTORS 11 COMP. OPS. (LOW) $279,176 $1,509,085 0.706 0.747 14 1.053

12 COMP. OPS. (MED) 4,725,480 26,835,905 0.812 0.860 286 1.036

13 COMP. OPS. (HGH) 336,027 1,498,285 0.386 0.409 8 0.968

TOTAL * $5,340,683 $29,843,275 0.780 308

TOTAL ALL TOP 01 RET.STRS-FOOD/DRG $217,554 $946,676 1.655 82

02 RET.STRS-NTFD/DRG 437,805 1,601,097 0.711 60

11 COMP. OPS. (LOW) 452,108 2,132,080 0.752 27

12 COMP. OPS. (MED) 8,073,739 37,381,254 1.093 536

13 COMP. OPS. (HGH) 521,668 2,176,835 0.539 20

TOTAL * $9,702,874 $44,237,942 1.043 725




TABLE 18

MULTISTATE



----------------------------------------------


(1) (2) (3) (4) (5) (6)





10 MONOLINE 01 RET.STRS-FOOD/DRG $3,804,932 $14,529,929 0.631 739

02 RET.STRS-NTFD/DRG 3,497,865 18,088,088 0.888 560

11 COMP. OPS. (LOW) 3,897,760 20,827,151 1.001 410

12 COMP. OPS. (MED) 90,710,799 466,256,266 0.960 7,796

13 COMP. OPS. (HGH) 12,058,603 57,404,696 0.795 406

TOTAL * $113,969,959 $577,106,130 0.931 9,911

34 MULT MERCANTILE 01 RET.STRS-FOOD/DRG $11,940,248 $58,340,065 0.946 4,526

02 RET.STRS-NTFD/DRG 7,876,553 36,951,036 0.843 957

12 COMP. OPS. (MED) 2,515,191 11,690,630 1.042 142

TOTAL * $22,331,992 $106,981,731 0.920 5,625

36 MULT SERVICES 01 RET.STRS-FOOD/DRG $986,259 $4,910,241 1.215 264

02 RET.STRS-NTFD/DRG 11,411,740 51,425,867 0.962 2,928

11 COMP. OPS. (LOW) 3,536,713 15,019,960 1.240 544

12 COMP. OPS. (MED) 4,287,563 20,362,765 0.826 750

13 COMP. OPS. (HGH) 1,525,237 7,889,930 0.775 114

TOTAL * $21,747,512 $99,608,763 0.979 4,600

37 MULT INDUST/PROC. 01 RET.STRS-FOOD/DRG $22,403 $127,585 0.093 1

11 COMP. OPS. (LOW) 201,804 1,028,555 0.499 23

12 COMP. OPS. (MED) 5,023,478 24,379,484 0.983 403

13 COMP. OPS. (HGH) 272,632 1,173,352 1.580 1

TOTAL * $5,520,317 $26,708,976 0.991 428

38 MULT CONTRACTORS 11 COMP. OPS. (LOW) $10,340,054 $49,406,265 1.042 837

12 COMP. OPS. (MED) 199,324,480 951,879,368 0.959 16,883

13 COMP. OPS. (HGH) 19,712,420 91,154,990 0.802 920

TOTAL * $229,376,954 $1,092,440,623 0.949 18,640

TOTAL ALL TOP 01 RET.STRS-FOOD/DRG $16,753,842 $77,907,820 0.889 5,530

02 RET.STRS-NTFD/DRG 22,786,158 106,464,991 0.910 4,445

11 COMP. OPS. (LOW) 17,976,331 86,281,931 1.066 1,814

12 COMP. OPS. (MED) 301,861,511 1,474,568,513 0.959 25,974

13 COMP. OPS. (HGH) 33,568,892 157,622,968 0.805 1,441

TOTAL * $392,946,734 $1,902,846,223 0.945 39,204




EXPLANATORY NOTES TO GENERAL LIABILITY

RELATIVITY ANALYSIS - TABLES 10 THROUGH 18.

OBJECTIVES The objectives of this procedure are to:

1) determine monoline loss cost level needs for the appropriate rating variables;

2) determine indicated changes to the eight liability Commercial Package Policy

(CPP) Package Modification Factors (PMFs) based on Premises/Operations and

Products/Completed Operations data.

EXPERIENCE

BASE

The experience used in this relativity analysis is the latest five (5) years of accident

year data, as reported under the Commercial Statistical Plan with aggregate loss costs

adjusted to current loss cost level (multiline aggregate loss costs adjusted additionally

by the current Implicit Package Modification Factors). Losses have been trended and

developed in the Relativity Analysis. ALCCL have been trended.

SIMULTANEOUS

DETERMINATION

OF RATING

VARIABLE

RELATIVITIES

Once the aggregate loss costs at current level and incurred losses used in the analysis

have been appropriately adjusted, the 5-year experience ratios are calculated for each

combination of the appropriate rating variables. From these ratios, relativities to the

statewide 5-year experience ratio are calculated. These relativities are then used in a

minimum bias iterative review procedure, which simultaneously determines the

relativities for each rating variable.

The purpose of a simultaneous review procedure is to arrive at a set of relativities for

each rating variable that best represent the experience. For example, the type of

policy relativities will serve to derive the relationship of CPP policies relative to

monoline policies, via the PMF, while the class group and territory (if applicable)

relativities will serve to derive the relationship of the various classification and

territories relative to one another. An iterative technique is used to derive relativities

for each rating variable. This procedure is in contrast to a one-way type of review,

wherein relativities for each rating variable would each be reviewed separately.

Such one-way types of review do not take into account differing percentages of

experience of each rating variable within the other rating variables. The simultaneous

review procedure accounts for these different distributions in generating relativities

for each rating variable.

RATING

VARIABLES

USED

For Premises/Operations and Products/Completed Operations, the rating variables

used in the relativity analysis are as follows:

Manufacturers and Contractors -

Owners, Landlords and Tenants -

Products -

Local Products/Completed Operations-

type of policy and class group

type of policy, territory and class group

type of policy and class group

type of policy, state and class group





ITERATIVE

PROCEDURE

The iterative technique referred to in the previous paragraph solves for a set of

relativities for each rating variable based on the experience for the cells; that is,

based on the experience ratio and latest year adjusted aggregate loss cost volume

for each combination of rating variables relative to the experience ratio and

adjusted aggregate loss cost volume for all combinations of rating variables

combined. Specifically, the iterative procedure uses the following formulas:

For Owners, Landlords and Tenants:

TOP

W r

W CG TERi

ijk ijk

kj

ijk j k

kj

where 1 i m

CG

W r

W TOPTERj

ijk ijk

ki

ijk i k

ki

where 1 j n

TER

W r

W TOPCGk

ijk ijk

ji

ijk i j

ji

where 1 k p

TOPi is the relative change for the ith type of policy;

CGj is the relative change for the jth class group;

TERk is the relative change for the kth territory;

Wijk is the aggregate loss costs at current level for the ith

type of policy, jth class group and kth territory;

rijk is the relative change for the ith type of policy,

jth class group and kth territory;

m is the number of types of policy in the analysis;

n is the number of class groups in the analysis;

p is the number of territories in the analysis;





For Manufacturers and Contractors, and Products:

TOP

W r

W CGi

ij ij

j

ij j

j

where 1 i m

CG

W r

W TOPj

ij ij

i

ij i

i

where 1 j n



Wij is the aggregate loss costs at current level for the ith

type of policy and jth class group;

rij is the relative change for the ith type of policy

and jth class group;







For Local Products/Completed Operations:

TOP

W r

W CG STi

ijk ijk

kj

ijk j k

kj

where 1 i m

CG

W r

W TOPSTj

ijk ijk

ki

ijk i k

ki

where 1 j n

ST

W r

W TOPCGk

ijk ijk

ji

ijk i j

ji

where 1 k p



STk is the relative change for the kth state;

Wijk is the aggregate loss costs at current level for the ith

type of policy, jth class group and kth state;

rijk is the relative change for the ith type of policy,

jth class group and kth state;



p is the number of states in the analysis;





ITERATIVE

PROCEDURE

(Cont'd)

For example, for Owners, Landlords and Tenants, the procedure starts by inserting

the actual relativities for type of policy and class group into the third formula to

get a territory relativity. This result is then used with the class group relativity in

the first formula to get a new type of policy relativity, which in turn is substituted

along with the territory relativity into the second formula to get a new class group

relativity. The process continues on in that fashion until there is no appreciable

difference from one iteration to the next.

APPLICATION OF

CREDIBILITY

Consideration is then given to the credibility of the experience for each rating

variable. The credibility of each of these categories is based on the formula

Z =000,18

P for Owners, Landlords and Tenants, Z =000,18

P for

Manufacturers and Contractors and Z = 000,20

P for Products, where P is the 5

year occurrence total for a given class group, territory or type of policy. For Local

Products/Completed Operations, separate formulas are used to calculate the

credibility of the experience for each type of policy and class group versus the

credibility of the experience for each state, namely Z =000,15

P for type of

policy and class group, and Z = 500,5

P for state(in this case, P is the 5 year

occurrence total for a given state). Credibility-weighted relativities are then

calculated as follows:

W = RZ where:

Z is the class group, territory, state or type of policy credibility;

R is the class group, territory, state or type of policy relativity;

W is the credibility-weighted relativity.

The resulting credibility-weighted relativities are then balanced to assure that the

average relativity remains at unity.





MULTILINE

CONSIDERATIONS

The monoline relativities and the class group, territory (if applicable) and state

relativities which result from the aforementioned procedures are then used to

generate indicated monoline classification loss cost changes. The multiline

relativities are used to generate multiline indications that apply to the current

Implicit Package Modification Factors. The indicated IPMFs are calculated as

follows:

TOP y indicated IPMF= (TOP y current IPMF) x (TOP y relativity)

(monoline relativity )

For each CPP Type of Policy the indicated IPMF is subject to a minimum value of

0.50 and a maximum value of 1.50. If an indicated IPMF falls outside one of those

limits, it is capped at that amount, the aggregate loss costs for that Type of Policy

are adjusted to the capped IPMF level, and the entire relativity review as described

above is re-performed to take this into account.


© Insurance Services Office, Inc., 2015 Washington ML-2015-RLA1 C-1


TABLE OF CONTENTS

SECTION C - REVISED CLM DIVISION NINE

Commercial Package Policy Package Modification Factors (Revised MLCP-PMF-1) .................................. C-2


COMMERCIAL LINES MANUAL

DIVISION NINE – MULTIPLE LINE


PACKAGE MODIFICATION FACTORS

WASHINGTON (46)

© Insurance Services Office, Inc., 2015 Washington ML-2015-RLA1 C-2

PACKAGE MODIFICATION FACTORS

Premium From CLM Division

Package Modification Assignment

(PMA)

Two

Three, Four, Five, Eight

Property

Four, Six

Liability

All Other

Divisions

Apartment House .90 .98 .99 1.00 Contractors .90 .96 1.00 1.00 Industrial & Processing .90 .98 .88 1.00 Institutional .90 1.00 .98 1.00 Mercantile .90 .92 .89 1.00 Motel/Hotel .90 1.00 1.00 1.00 Office .90 .96 .86 1.00 Service .90 .95 1.00 1.00

Table 1. Package Modification Factors


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