Fundamentals of IRR(II) and NCCI RRP for WC & EL

[USTC]

Many questions:-?

1.All 10 manual Page172- Vol 2: what is the difference b/t

a) E'=E-F, and

b) E*(1+0.8*LER)/(1-LER)

I think E' is the limited expected loss, but the manual says, at the almost end of this page, "For a selected loss limit, expected losses are adjusted by multiplying expected losses by an adjustment factor". Doesn't it also mean b) is another kind of limited expected loss?

2.Question 46-1995(on page 237 of All 10 Vol.2)
ELPF is chosen fro the group with the highest payroll. Is this a stated rule or only a subjective assumption?

3. What is the "net (coverted, I guess it can be omitted) insurance charge"? There are at least 2 versions of it

a) c*(Xg-Sh)*E', where E'=E-F, and
b) (Xg-Sh)*E'

a) is used in the solution to Q35-2002(page 242 of All 10 Vol.2) , and both Xg and Sh are carrying a hat(^).
While,
b) is used in the solution to Q30-1996(page 239 of All 10 Vol.2), not only the loss conversion factor, c , is omitted, but also Xg-Sh are using the Table M factor. This means neither of Xg and Sh has a hat(^), right?

Q31-2005 even make it more confusing. Basically, CAS accepted either a) or a) without c, the loss conversion factor.

Many thanks.

[3tac]

Many questions:-?

1.All 10 manual Page172- Vol 2: what is the difference b/t

a) E'=E-F, and

b) E*(1+0.8*LER)/(1-LER)

I think E' is the limited expected loss, but the manual says, at the almost end of this page, "For a selected loss limit, expected losses are adjusted by multiplying expected losses by an adjustment factor". Doesn't it also mean b) is another kind of limited expected loss?

E' = E - F where F = E*(LER) or more simply E' = E*(1-LER)

2.Question 46-1995(on page 237 of All 10 Vol.2)
ELPF is chosen fro the group with the highest payroll. Is this a stated rule or only a subjective assumption?

I believe this is a stated rule, but I can't seem to find the reference now.


3. What is the "net (coverted, I guess it can be omitted) insurance charge"? There are at least 2 versions of it

a) c*(Xg-Sh)*E', where E'=E-F, and
b) (Xg-Sh)*E'

a) is used in the solution to Q35-2002(page 242 of All 10 Vol.2) , and both Xg and Sh are carrying a hat(^).
While,
b) is used in the solution to Q30-1996(page 239 of All 10 Vol.2), not only the loss conversion factor, c , is omitted, but also Xg-Sh are using the Table M factor. This means neither of Xg and Sh has a hat(^), right?
I believe Q30-1996 should have a hat (^) on the Xg and Sh, b/c the hat denotes that you are using the ICRLL procedure to shift the table M to reflect the loss limitation.

[USTC]

First, thanks for your reply.

Maybe I didn't explain myself well. With regard to my first questions, I understand E'=E-F, F=ELF, and LER=F/E so E'=E*(1-LER). My question was "what E*(1+0.8*LER)/(1-LER) means, and what it is used for?" I do see we use SP*ELR*m(S/H)*the above expression to determine the loss group. But what "For a selected loss limit, expected losses are adjusted by multiplying expected losses by an adjustment factor" implies?


With regard to your reply to my 3rd question, do you mean All 10 simply missed the hat? Correct me if I'm wrong, but to my understanding, any Xg ,extracted directly from a Table M shouldn't have a hat.

By the way, could anybody confirm the followings? It seems we can omit the "converted" in formula a) freely, but not in b).

a) c*(Xg-Sh)*E, converted insurance charge, or simply insurance charge.

b) c*[Xg(hat)-Sh(hat)]*E', net converted insurance charge

c) [Xg(hat)-Sh(hat)]*E', net insurance charge

d) [Xg(hat)-Sh(hat)], net insurance charge factor

[frank_exams]

First, thanks for your reply.

Maybe I didn't explain myself well. With regard to my first questions, I understand E'=E-F, F=ELF, and LER=F/E so E'=E*(1-LER). My question was "what E*(1+0.8*LER)/(1-LER) means, and what it is used for?" I do see we use SP*ELR*m(S/H)*the above expression to determine the loss group. But what "For a selected loss limit, expected losses are adjusted by multiplying expected losses by an adjustment factor" implies?

I don't know the exact origin of all the numbers, but the idea is loss limitation makes experience more stable. The adjustment is greater than 1, so it will put you in a higher loss group to simulate the increased stability.


With regard to your reply to my 3rd question, do you mean All 10 simply missed the hat? Correct me if I'm wrong, but to my understanding, any Xg ,extracted directly from a Table M shouldn't have a hat.

By the way, could anybody confirm the followings? It seems we can omit the "converted" in formula a) freely, but not in b).

a) c*(Xg-Sh)*E, converted insurance charge, or simply insurance charge.

b) c*[Xg(hat)-Sh(hat)]*E', net converted insurance charge

c) [Xg(hat)-Sh(hat)]*E', net insurance charge

d) [Xg(hat)-Sh(hat)], net insurance charge factor

I wouldn't worry about the notation in All10. The 1996 #30 solution even has an extra (wrong) sentence calculating Excess Loss Premium; they forgot to subtract out the ELAA to get rid of overlap. As 3tac mentioned, use hat when you're using ICRLL and Table M. Otherwise, forget the hat. Conversion is unnecessary if they don't give you the factor.

Frank