CAS Exam 5 Spring 2018, Question 15
Study guide: Exam 5
Given the following for a workers compensation policyholder:
| Policy Year | Actual Primary Losses ($) | Actual Excess Losses ($) | Payroll ($) |
|---|---|---|---|
| 2015 | 10,000 | 120,000 | 2,000,000 |
| 2016 | 10,000 | 80,000 | 2,100,000 |
| 2017 | 10,000 | 60,000 | 2,205,000 |
| Total | 30,000 | 260,000 | 6,305,000 |
| 3.25 | Expected loss rate per $100 of payroll |
| 0.20 | D-Ratio |
| 40,000 | Ballast value |
| 0.30 | Weighting value |
| 0.70 | Minimum retrospective premium ratio |
| 1.30 | Maximum retrospective premium ratio |
| 1.10 | Loss conversion factor |
| 100,000 | Per accident loss limitation |
| 0.25 | Expense allowance (excludes tax multiplier) |
| 0.70 | Expected loss ratio |
| 1.05 | Tax multiplier |
| 800,000 | Standard premium |
| 0.40 | Insurance charge for maximum premium |
| 0.05 | Insurance savings for minimum premium |
| 200,000 | Limited reported losses |
Part a (1.25 points)
Calculate the experience rating modification factor.
Part b (1.5 points)
Calculate the retrospective premium.
Answer this question and see the worked solution