CHWCA Financial Overview

2013 DIVIDEND CALCULATION CHWCA’s Financial Stability Plan provides for an ultra-conservative approach to the declaration of dividends. If CHWCA’s program as a whole is funded above the 90% confidence level, an additional $2.5 million (5 times CHWCA’s SIR) is subtracted to determine if funds are “available” for the issuance of dividends. Program years must be a full five years old to be “eligible” for the issuance of dividends, to conservatively allow for adequate claim development in more recent years. Dividends have been declared:  In April 2007 in the amount of $2.26 million,  In April 2010 in the amount of $2.33 million,  In April 2011 in the amount of $2.25 million, and  In August 2011 in the amount of $1.25 million (to fund the mid- layer pool).

Historical Highlights: A Conservative Approach to Pooling  Financial Stability Plan ~ Adoption and Revision  Continual increases in Confidence Level Funding  Responsiveness to external influences  Discount Factors  Excess insurance market  Protection of Assets  Return of Equity ~ Net $5.5 million returned since inception  Creative approaches  Mid Layer Pool  Ex Mod Calculations  Strong Financial Position ~ Equity Position well above 90%

FAQ’s  How can I reconcile my actual workers’ compensation costs during the year to the premiums I pay CHWCA?  Is my cafeteria plan payroll subject to workers’ compensation premium? Severance? Medical benefits? Other? Is there somewhere I can go to get these questions answered?  CHWCA’s equity is lower this year than in the past few years. Should I be concerned about that?  If my loss development was favorable last year, why did my experience modification factor (ex-mod) go up?

Experience Modification Factors  Ex Mods adjust premiums based on loss experience.  CHWCA uses the WCIRB for the calculation of its ex mods.  The WCIRB provides ex mods for most commercially-insured entities and SCIF participants; so  The process compares each CHWCA member’s loss experience with all entities described above who have payroll within the same classification codes.  CHWCA has revised the calculation for the 2013 program year:  Maximum ex mod of 2.0 for all members  Maximum.25 increase from prior year  This is the first step toward an internally-rated ex mod calculation.

Experience Modification Factors: The WCIRB Methodology  Range of program years used in the calculation  The most current complete three year period.  The 2013 ex mod calculation used the 2009–2011 years.  A claim that occurs today will affect your HA’s ex mod from 2015–2017.  The calculation is a ratio factoring “expected” with “actual” losses  “Expected” losses  “Actual” losses: Greater emphasis on Frequency than Severity  Current CHWCA ex mods range from 0.80 to 2.00  Last year’s range was from 0.77 to 2.41

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