1. Workers Compensation Reinsurance Pricing Considerations Robert Blanco, FCAS, MAAA, CPCU, ARe SCOR Reinsurance Corp.

2. 2 WC – Reinsurance Pricing Issues: Experience Rating

3. 3 Quality of Loss Data Rate Changes Loss Trends Excess Loss Development Factors Other Considerations Experience Rating Issues

4. 4 Reporting Threshold – is ½ the retention low enough? Are the losses discounted vs. undiscounted? Are the losses on an occurrence (vs. individual claimant) basis? Is indemnity vs. medical detail available for individual claims? Quality of Loss Data

5. 5 Reliable, client-specific changes available? “Discretionary” rate changes – the devil is in the detail. Changes in average experience mod – to use or not to use? Rate Changes

6. 6 By state vs. countrywide Frequency trends – ground-up vs. large loss, working layers vs. higher layers Severity trends – ground-up vs. large loss, working layers vs. higher layers Indemnity vs. Medical severity Loss Trends

7. 7 Lack of industry benchmarks How important are state-specific differences on patterns? Working layers vs. higher layers Indemnity vs. Medical Client-specific LDFs and claims practices – how to reflect in pricing? Excess Loss Development Factors

8. 8 Has the mix of states shifted over the experience period? Has the hazard group mix changed over the experience period? Have company underwriting and claims philosophies changed? Does the portfolio include non-standard policies (Large Ded, XS, Retros)? Other Considerations

9. 9 WC – Reinsurance Pricing Issues: Exposure Rating

10. 10 Ground-Up Loss Ratio State / Hazard Group Other Considerations Exposure Rating Issues

11. 11 Critical to establish expected TOTAL losses before splitting into layers. Many of the same experience rating considerations apply (rate changes, loss trends, loss development) Loading for Unused Capacity? Ground-Up Loss Ratio

12. 12 Premium vs. Payroll HG split State-specific vs. combined HG split New vs. old NCCI HG definitions California-specific HG definitions NCCI vs. Non-NCCI exposure curves State / Hazard Group

13. 13 Do the existing industry HG mappings adequately reflect differences in exposure between portfolios? Impact of non-standard policies (Large Ded, XS, Retros) on exposure curves. How to reflect impact of MAOL (Maximum Any One Life) treaty provision? Other Considerations

14. 14 WC – Reinsurance Pricing Issues: Beyond Experience and Exposure Rating

15. 15 Years of data for experience Volume of claims vs. “credit” for loss- free experience Stability of portfolio over experience period Unused exposure in experience period Confidence in exposure curves Blending Experience and Exposure

16. 16 Federal Exposures Re-Underwriting of Portfolios Significant law changes/reforms, and their varying impacts by claim type Proportional Treaties WC Cat Treaties Other Considerations