Florida Workers’ Compensation Joint Underwriting Association Rates and Forms Committee Report: August 31
Sep 9, 2009
On August 31, 2009, the Florida Workers’ Compensation Joint Underwriting Association (“FWCJUA”) Rates and Forms Committee (“Committee”) met via teleconference. The agenda included a review of rates, rating plans and policy forms.
Meeting materials are attached for review.
Confirmation of Actuary
On June 11, 2008, the FWCJUA had executed a two-year actuarial services agreement with Milliman, Inc. Contracted services included ratemaking and reserve analysis, deficit elimination plans, loss ratio selection, loss payout patterns, reinsurance proposals and premium dividend proposals. Based on a positive performance review, the Committee voted unanimously to reaffirm Milliman’s contract for 2010.
Loss Ratios
The Committee confirmed the booking of 2009 FWCJUA loss reserves based on 2009 rates and 2008 loss experience. At Milliman’s recommendation, this formula was adopted in 2008 to estimate the FWCJUA’s 2008 net loss ratios by rating tier. A letter prepared by Milliman (pages 13-16 of the meeting materials) outlines the methodology used to produce the 2009 loss ratios.
Milliman’s analysis utilized the updated information in the July 1, 2009 NCCI rate rollback, along with the loss ratios indicated from the loss experience evaluated as of December 31, 2008. This methodology produces the following updated 2009 net loss ratios:
FWCJUA Projected Net Loss Ratios for 2009
Tier 1 27.1 percent
Tier 2 34 percent
Tier 3 34.3 percent
It should be noted that Milliman did not recommend any changes to the FWCJUA’s current formula for booking the current year’s loss reserves.
The Committee unanimously confirmed the booking of 2009 loss reserves by utilizing the latest 2009 filed rate changes, along with the 2008 loss ratios. It also unanimously approved the aforementioned projected net loss ratios for 2009.
Premium Decrease
The Committee voted to recommend a premium level decrease of 9.4 percent that would be effective January 1, 2010 for new and renewal business and would be adjusted to reflect any approved voluntary market rate level and class relativity changes that may become effective January 1, 2010. The recommendation will be presented to the FWCJUA Board of Governors (“Board”) at its September 9 meeting.
After hearing a Milliman presentation that analyzed scenarios under which the Tier 3 indications were occasionally lower than the Tier 2 indications, the Committee also voted to recommend the adoption of a policy that that the Tier 3 surcharge should never be less than the Tier 2 surcharge.
Policyholder Dividend Policy
The Committee recommended that the FWCJUA Policyholder Dividend Policy should be revised to clarify how a dividend distribution will be handled for policyholders with outstanding final audits. It was agreed that a policyholder should forever forfeit its dividend distribution if the policyholder does not fully resolve all of its outstanding final audits from other policy years within 12 months from notification of the dividend.
Finally, the Committee voted to recommend that the Board should authorize a gross policyholder dividend amount for the 2002 policy year of $2,791,922.00, while retaining a five percent underwriting gain, thereby resulting in a net policyholder dividend amount (after expenses) of $2,746,321.99.
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