Contact: Nancy Ojeda, Supervisor Rating Services Ext. 163,

Transcription

1 U L L T I N 200 ast orty-second Street New York, New York Tel: (212) August 3, 2010 ontact: Nancy Ojeda, Supervisor Rating Services xt. 163, nojeda@nycirb.org R To the Members of the oard Re: New York Workers ompensation Retrospective Rating Plan Manual 2010 dition The New York State Insurance epartment has approved a new version of the New York Workers ompensation Retrospective Rating Plan Manual, effective August 1, The 2010 dition of the Manual has been reformatted and designed to be more user friendly and explicit than the current manual in its statements of rating plan rules and usage, and is consistent with the manual used in most other jurisdictions. However, the new Manual does not change the retrospective rating formula, currently approved rating values, or any of the calculations used to calculate retrospective premium. An explanatory memorandum is attached for your information and sets forth the major changes that have been incorporated into the new Manual. The complete 2010 dition of the New York Retrospective Rating Plan is attached. An on-line version of the new Manual will be posted on the Rating oard s website as soon as it is available. Very truly yours, Monte Almer President MH/ab ncl.

2 New York ompensation Insurance Rating oard 2010 New York Retrospective Rating Plan Manual xplanatory Memorandum The current version of the New York Retrospective Rating Plan Manual (manual) was published in its entirety in Since that time, new and modern language has been introduced in many states over the years and the latest NI version of its Retrospective Rating Plan Manual has been filed effective January 1, 2010 in most of its jurisdictions. At this time, the New York Manual is being completely revised to incorporate modern language and usage, to provide improved organization of its contents for its many users, and to be more consistent with retrospective rating plan manuals in other jurisdictions. It should be especially noted that despite the changes to the manual itself, all of the current formulas and retrospective rating calculations are not changing and will remain the same as set forth in the current Manual. When comparing the current New York Retrospective Rating Plan Manual to the 2010 version, the following specific items should be noted: 1. eneral Reorganization The structure of the Manual has been reorganized as follows: urrent Manual Part One escription of the Plan Part Two Operation of the Plan Part Three Administration of the Plan Part our Premium omputation Tables Part ive ndorsements Appendix 2. eneral Rules and efinitions 2010 Manual Rule 1 eneral xplanation Rule 2 ligibility of the Plan Rule 3 Operation of the Plan Rule 4 Administration of the Plan Tables of Retrospective Rating Values Appendix ndorsements The rules in the 2010 Manual, including the Appendix, retain information and instructions that are similar to the information found in the current manual. efinitions of terms have been expanded to include more details regarding retrospective rating elements and some previously shown information has less, or no, detail with respect to commonly understand insurance terms and usage. 3. ndorsements The retrospective rating endorsements have been revised and are identical to the 2009 NI endorsements that have recently been introduced in other states. These include a new Large Risk Rating Option ndorsement W These also include the change in name of ndorsement from Long-Term to Wrap-Up onstruction Projects. 4. hange in arrier Reporting Requirements One noteworthy change that is being made in the Plan administration is the elimination of the requirement for carriers to file retrospective rating values with the Rating oard for approval. With the advent of loss costs in 2008, each carrier must utilize its own expense ratio, including a tax provision, in setting its rates, as well as expense tables in determining retrospective rating premiums. onsequently, the Rating oard can no longer verify these rating values for approval and form RR- 1, Application for Approval of Proposed Retrospective Rating Values, has been eliminated.

3 Although RR-1 is no longer required, the revised Manual contains clearer carrier filing requirements for the reporting of all retrospective rating plans as follows, for submission to the NYIR within 60 days of the effective date of the Plan: Notice of lection: orm RR-50 Notification of overage: orm RR-1 Notice of lection, LRRO: orm NYLR-1 New York Only insureds Interstate insureds Large Risk Rating Option insureds All retrospective reporting forms will require the signatures of both the employer and the carrier, or their designated representatives. 5. limination of Premium ligibility Limits for xcess Loss actors As a practical matter, carriers do not use the lower loss limits as specified in the current manual, nor do they apply excess loss factors to risks that do not have the capacity to absorb large claims. urthermore, with much of a retrospective rating plan being subject to negotiation between the insured and the carrier, the need for restrictions on the use of excess loss factors is unnecessary and is being eliminated. 6. Paid Loss Retrospective Rating Plan With the current rules for a paid loss retrospective rating plan having been specified by the New York State Insurance epartment, the current rule is being retained, with one small change to item 10 of this rule. Item 10 has been expanded to explain that, once converted to an incurred loss plan, subsequent adjustments are made in the same manner as the conventional plan and that a final adjustment may be made based on an agreed upon ultimate loss calculation.

4 NW YORK RTROSPTIV RATIN PLAN MANUAL for WORKRS OMPNSATION and MPLOYRS LIAILITY INSURAN 2010 dition NW YORK OMPNSATION INSURAN RATIN OAR 200 AST ORTY-SON STRT NW YORK, NY (212)

5 NW YORK RTROSPTIV RATIN PLAN MANUAL for WORKRS OMPNSATION and MPLOYRS LIAILITY INSURAN 2010 dition NW YORK OMPNSATION INSURAN RATIN OAR 200 AST ORTY-SON STRT NW YORK, NY (212)

6 New York ompensation Insurance Rating oard The pages herein may include copyright material of the National ouncil on ompensation Insurance opyright (2009, et seq.), used with its permission.

7 NW YORK RTROSPTIV RATIN PLAN MANUAL Original Printing ffective August 1, 2010 PRA PRA A. ORANIZATION O TH NW YORK RTROSPTIV RATIN PLAN This manual contains rules and rating values that have been approved by the New York State Insurance epartment pursuant to Article 23 of the New York Insurance Law. The manual is organized according to the following topics: Rule 1 eneral xplanation Rule 2 ligibility for the Plan Rule 3 Operation of the Plan Rule 4 Administration of the Plan Tables of Retrospective Rating Values Appendix ndorsements Required for Use of the Plan. JURISITIONS WHIH MAY OMIN WITH NW YORK ON INTRSTAT RTROSPTIV RATIN PLANS Alabama Kentucky Oklahoma Alaska Louisiana Oregon Arizona Maine Pennsylvania Arkansas Maryland Rhode Island olorado Massachusetts South arolina onnecticut Minnesota South akota elaware Mississippi Tennessee istrict of olumbia Missouri Texas lorida Montana Utah eorgia Nebraska Vermont Hawaii Nevada Virginia Idaho New Hampshire Washington * Illinois New Mexico West Virginia Indiana North arolina Wisconsin Iowa North akota * Wyoming * Kansas Ohio * * or interstate retrospective rating plans, this Plan applies to employers liability only.. INTROUTION The rules contained in this manual apply only to workers compensation and employers liability insurance, whether written alone or in combination with other commercial casualty insurance. A retrospective rating plan is based on a mutual agreement between the insured and the carrier. Refer to the Retrospective Rating Plan issued by the Insurance Services Office for rules that govern other commercial casualty lines of insurance. Premium under a retrospective rating plan is the direct result of incurred losses. A retrospective rating plan reflects the cost of losses plus the insurance carrier s expenses in providing this insurance.

8 NW YORK RTROSPTIV RATIN PLAN MANUAL TO 1 Original Printing ffective August 1, 2010 TAL O ONTNTS TAL O ONTNTS RUL 1 NRAL XPLANATION Page A. Object of the Plan... R 1. efinitions... R 1 1. eneral efinitions... R 1 a. Allocated Loss Adjustment xpense... R 1 b. Increased Limits for overage... R 1 c. Incurred Losses... R 1 d. Large Risk Rating Option... R 1 e. Loss Limitation... R 2 f. Standard Premium... R 2 g. Unallocated Loss Adjustment xpense... R 2 2. lements of the Retrospective Rating ormula... R 2 a. Retrospective Rating Premium... R 2 b. asic Premium... R 2 c. onverted Losses... R 3 d. Loss onversion actor... R 3 e. xcess Loss Premium... R 3 f. Retrospective evelopment Premium... R 4 g. Tax Multiplier... R 5 h. Maximum Retrospective Premium... R 5 i. Minimum Retrospective Premium... R 5. Application of Policy Premium lements... R 5. Insureds Operating in More Than One State... R 5. xclusion of Statutory Medical enefits... R 5. eductible Programs... R 5. Aircraft lassifications... R 6 H. Anniversary Rating ate... R 6 I. Long-Term onstruction Projects... R 6 J. Wrap-Up onstruction Projects... R 6 RUL 2 LIIILITY OR TH PLAN A. ombination of Multiple Workers ompensation Policies... R 7. ombination of Insurances... R 7. One Year Plan... R 7. Three Year Plan... R 7. Large Risk Rating Option... R 7. Wrap Up onstruction Projects... R 8. arrier eviations rom Rules and actors in This Manual... R 8

9 TO 2 NW YORK RTROSPTIV RATIN PLAN MANUAL TAL O ONTNTS ffective August 1, 2010 Original Printing RUL 3 OPRATION O TH PLAN Page A. Purpose... R 9. xplanation of Tables in Appendix... R 9. Retrospective Rating Premium Without lective lements... R 9. Retrospective Rating Premium With lective lements... R 10. alculation of Retrospective Rating Premium... R irst alculation of Retrospective Rating Premium... R Subsequent alculations of Retrospective Rating Premium... R inal alculation of Retrospective Rating Premium... R 10. ancellation of a Policy Under a Retrospective Rating Plan... R Reasons and Premium etermination... R ancellation for Non-Payment of Premium... R 11. Paid Loss Retrospective Rating Plan... R 12 RUL 4 AMINISTRATION O TH PLAN A. Retrospective Rating ndorsements... R 13. Reports of Premiums and Losses Under The Plan... R 13. arrier iling Requirements... R 13 TALS O RTROSPTIV RATIN VALUS Table of xpected Loss Ranges... A Table of Insurance harges... Table of xpense Ratios... Table of lassifications by Hazard roup... Tables of xcess Loss Pure Premium actors... State Hazard roup ifferentials... 1 Retrospective Rating Pure Premium evelopment actors... 2 Table of xcess Loss actors for ederal lassifications... Table of Loss Limitations for x-medical Policies...

10 NW YORK RTROSPTIV RATIN PLAN MANUAL TO 3 Original Printing ffective August 1, 2010 TAL O ONTNTS APPNIX A. eneral xplanation... A 1. ifferences etween Types of xcess Loss actors... A 1 1. Types of xcess Loss factors... A 1 2. xcess Loss Premium alculation... A 1. Retrospective Rating Plan Premium ormula... A 3 1. ormula without lective Premium lements... A 3 2. ormula with lective Premium lements... A 3. Retrospective Rating Premium alculation xamples... A 3. evelopment of an Average State Hazard roup actor... A 9. ancellation of a Policy Under a Retrospective Rating Plan... A 9. arrier iling Requirements... A Notification of overage... A 10 a. New York (Intrastate) Plans... A 10 b. Multi-State Plans That Include New York... A 10 c. Large Risk Rating Option... A Where to Submit Retrospective Rating orms... A 10 Notice of lection (Intrastate) orm RR-50 (2010)... A 11 Notification of overage (Multi-State) orm RR-1 (2010)... A 12 Notice of lection (Large Risk Rating Option) orm NYLR-1... A 13 NORSMNTS Retrospective Rating Premium ndorsements... W to W INX Index Pages... i to v

11 NW YORK RTROSPTIV RATIN PLAN MANUAL R 1 Original Printing ffective August 1, 2010 RUL 1 A. OJT O TH PLAN RUL 1 NRAL XPLANATION The application of this Plan is optional and may be used only upon election by the insured and acceptance by the insurance carrier. A retrospective rating plan adjusts the premium for the insured s policy on the basis of losses incurred during the term of that policy. The intent is to charge premium that reflects the actual experience of the insured based on the insured s individual loss history during the policy term. A retrospective rating plan uses the losses incurred during the term of the policy to establish the cost of insurance, and it includes provisions for all expenses and taxes on premium.. INITIONS 1. eneral efinitions a. Allocated Loss Adjustment xpense (ALA) Allocated loss adjustment expense for workers compensation and employers liability insurance, as defined in the New York Workers ompensation Statistical Plan, may also be included as part of incurred losses under a retrospective rating plan if agreed upon by the insured and carrier. This will be called the Allocated Loss Adjustment xpense Option (ALA Option). b. Increased Limits for overage If the policy provides for increased limits for employers liability coverage, the losses may be subject to the retrospective rating loss limitation. The premium for employers liability increased limits is based on the percentages provided in the New York Workers ompensation and mployers Liability Manual. c. Incurred Losses Incurred losses for workers compensation and employers liability insurance are defined in the New York Workers ompensation Statistical Plan. Incurred losses include paid and outstanding losses. If the ALA Option is elected, then incurred losses will include ALA. Refer to Rule 1--1-a of this manual for the definition of Allocated Loss Adjustment xpense (ALA) when including ALA as part of incurred losses. Note: The rating formula for incurred losses will not include a loss resulting from: Non-ratable element codes Passenger seat surcharge under lassification ode 7421 Occupational disease for employers subject to the ederal oal Mine Safety and Health Act Terrorism, natural disasters and catastrophic industrial accidents d. Large Risk Rating Option (LRRO) The New York Large Risk Rating Option is a flexible retrospective rating plan that is mutually agreed to by the insured and carrier. It is an available option for insureds with an estimated annual standard premium of at least $500,000 individually or in any combination with any commercial casualty insurance line (general liability, commercial automobile, hospital professional liability, crime, glass) and/or workers compensation and employers liability insurance.

12 R 2 NW YORK RTROSPTIV RATIN PLAN MANUAL RUL 1 ffective August 1, 2010 Original Printing e. Loss Limitation A loss limitation is the limit placed on a claim dollar amount that is to be included in the retrospective rating plan calculation. This is an elective element agreed upon by the insured and carrier; there is an additional charge associated with a loss limitation f. Standard Premium (SP) or purposes of the retrospective rating plan, standard premium is determined on the basis of authorized rates, any experience rating modification, and minimum premiums. etermination of standard premium excludes: (1) Premium discount (2) xpense constant (3) Premium resulting from the non-ratable element codes (4) Premium developed by the passenger seat surcharge under lassification ode 7421 (5) Premium developed by the occupational disease rates for employers subject to the ederal oal Mine Safety and Health Act (6) Premium developed by the provisions for terrorism, natural disasters and catastrophic industrial accidents g. Unallocated Loss Adjustment xpense (ULA) Unallocated loss adjustment expense for workers compensation and employers liability insurance is defined in the New York Workers ompensation Statistical Plan. Unallocated loss adjustment expense includes the general overhead of a carrier s claim operations. 2. lements of the Retrospective Rating Plan ormula The following formula includes all of the elective elements available under a retrospective rating plan. See Rule 3 of this manual for other variations of the retrospective rating formula. Retrospective Rating Premium = (asic Premium + xcess Loss Premium + Retrospective Rating evelopment Premium + onverted Losses) x Tax Multiplier. a. Retrospective Rating Premium (RRP) Retrospective rating premium is the premium based on the application of retrospective rating plan elements as a result of a mutual agreement between the insured and carrier. b. asic Premium (P) asic premium is a percentage of standard premium. It is determined by multiplying the standard premium by a basic premium factor. The basic premium factor is developed by the carrier and includes: eneral administration costs of the carrier Related loss control service cost Insurance charges

13 NW YORK RTROSPTIV RATIN PLAN MANUAL R 3 Original Printing ffective August 1, 2010 RUL 1 The basic premium factor does not cover premium taxes or claims adjustment expenses. Those elements are usually provided for in the tax multiplier and the loss conversion factor. c. onverted Losses onverted losses are based on the incurred losses of the insured for the policy or policies to which a retrospective rating plan applies. A loss conversion factor is applied to incurred losses to produce the converted incurred losses. (Losses x L). d. Loss onversion actor (L) The loss conversion factor covers the cost of the carrier s claim services (e.g., investigation of claims and filing claim reports). The loss conversion factor is established by negotiation between the insured and carrier. If the ALA option is elected as part of incurred losses, the loss conversion factor must be adjusted to exclude ALA. e. xcess Loss Premium (LP) xcess loss premium is a charge for the election of a loss limitation. The excess loss premium factor is applied after the basic premium in the retrospective rating plan formula. (xcess Loss Premium = xcess Loss actor x Standard Premium x Loss onversion actor) In New York, the New York ompensation Insurance Rating oard (NYIR) files excess loss pure premium factors. The excess loss pure premium factors must be converted to excess loss factors using the carrier s expense provisions that have been approved for use in New York. The conversion formula is: xcess Loss Premium actor = [(xcess Loss Pure Premium actor x xpected Loss Ratio) x (1 + Loss Adjustment xpense %)]. The xcess Loss Pure Premium actor and LA % are NYIR-provided values. The carrier determines the xpected Loss Ratio (LR). LR is a ratio of pure losses (no LA) to premium. Refer to the Tables of Retrospective Rating Values in this manual for the excess loss pure premium factors. Refer to the latest approved New York loss cost filing for the LA %, which can be found on the NYIR website, The Table of lassifications by Hazard roup is used to determine the excess loss factor. This factor is determined based on the selected loss limitation and the hazard group assignment shown in the Table for the classification producing the largest amount of estimated workers compensation standard premium for each state included in the plan. Refer to the Tables of Retrospective Rating Values in this manual for the New York Table of lassifications by Hazard roup.

14 R 4 NW YORK RTROSPTIV RATIN PLAN MANUAL RUL 1 ffective August 1, 2010 Original Printing or insureds having USL&HW coverage for non--classification codes, the applicable hazard group to use for the determination of an excess loss factor (L) is the New York classification code hazard group, increased two levels. When the classification hazard group is already at the highest level hazard group, use that highest level hazard group. New York lassification Hazard roup A USL&HW for Non--lassification odes Hazard roups or the classification codes that include federal coverages (-classification codes), use the hazard group assigned to that code. f. Retrospective evelopment Premium (RP) Retrospective development premium is an elective element that varies by state. The RP stabilizes premium adjustments for an insured written under a retrospective rating plan by anticipating future increases in loss costs. The RP is calculated using the following formula: Retrospective evelopment Premium = Standard Premium x Retrospective evelopment Premium actor x Loss onversion actor. The retrospective development premium factor anticipates a pattern of increasing valuation of losses after the policy is expired. The retrospective development premium factor may be included in the first three calculations of the retrospective premium. In New York, NYIR files retrospective development pure premium factors. The retrospective development pure premium factors must be converted to retrospective development premium factors using the carrier s approved expense provisions. Refer to the Tables of Retrospective Rating Values of this manual for retrospective development pure premium factors. The conversion formula is: Retrospective evelopment Premium actor = Retrospective Pure Premium evelopment actor x xpected Loss Ratio x (1 + Loss Adjustment xpense %). The Retrospective Pure Premium evelopment actor and LA% are NYIR provided values. Refer to the Tables of Retrospective Rating Values in this manual for the retrospective pure premium development factors. Refer to the latest approved New York loss cost filing for the LA %. The carrier determines the xpected Loss Ratio (LR). LR is a ratio of pure losses (no LA) to premium.

15 NW YORK RTROSPTIV RATIN PLAN MANUAL R 5 Original Printing ffective August 1, 2010 RUL 1 g. Tax Multiplier (TM) Tax multipliers vary by state and generally cover licenses, fees, assessments, and taxes that the carrier must pay on the premium collected in an individual state. or New York where NYIR files loss costs, you may refer to NI s Tax and Assessment irectory for state tax Information. h. Maximum Retrospective Premium Maximum retrospective premium is a percentage of the standard premium determined by the application of a maximum retrospective rating plan premium factor. It is the greatest amount of premium payable by an insured subject to the retrospective rating plan. Maximum retrospective premium places a limit on the impact of incurred losses on a retrospective rating plan premium. It is established by an agreement between the insured and carrier. i. Minimum Retrospective Premium Minimum retrospective premium is a percentage of the standard premium determined by the application of a minimum retrospective premium factor. It is the least amount of premium payable by an insured subject to the retrospective rating plan. A minimum retrospective premium factor is established by an agreement between the insured and carrier.. APPLIATION O POLIY PRMIUM LMNTS Refer to the New York premium algorithm in the appendix of NYIR s Workers ompensation and mployers Liability Manual for information on the application of the policy premium elements.. INSURS OPRATIN IN MOR THAN ON STAT A retrospective rating plan may be applied on an intrastate or interstate basis. or an interstate insured, an average of the specified state tax multipliers weighted by the state standard premiums is used to calculate the tax multiplier used in the determination of the retrospective rating premium.. XLUSION O STATUTORY MIAL NITS X-MIAL OVRA 1. A policy on an ex-medical basis requires an application to be filed with the NYIR advising that authorization was obtained from the Workers ompensation oard. Approval is not required if the insured is a hospital. Refer to Rule IX of the New York Workers ompensation and mployers Liability Insurance Manual. 2. If an approved ex-medical policy is subject to a retrospective rating plan, the Notice of lection to apply retrospective rating shall indicate the ex-medical status, loss limitations and other factors which have been selected. Refer to the Table of Loss Limitations for x-medical Policies in this manual.. UTIL PRORAMS The rating values developed to determine premium under a retrospective rating plan do not contemplate deductibles and are designed to be used with losses that are gross of the deductible amount. When a deductible program applies, the use of such program, in conjunction with retrospective rating, requires the agreement of both the insured and the carrier.

16 R 6 NW YORK RTROSPTIV RATIN PLAN MANUAL RUL 1 ffective August 1, 2010 Original Printing. AIRRAT LASSIIATIONS If the insurance subject to the Plan includes any of the aircraft classifications, the premium and losses for such classifications may be excluded from the Plan by agreement in advance between the insured and the carrier. H. ANNIVRSARY RATIN AT 1. Single Policy Risk The anniversary rating date for application of this Plan is the effective month and day of the policy in effect. 2. Multiple Policy Risk If the risk subject to the Plan includes more than on policy with different effective dates, the anniversary rating date shall be determined by the rating organization. Note: The Plan applies for the period of the policy or policies subject to the Plan. I. LON-TRM ONSTRUTION PROJT A long-term construction project is a construction or erection project expected to require more than 1 year for completion and let under one contract, or more than one concurrent or consecutive contracts. Such a project may be insured under a 1 year policy or policies issued for any period not longer than 3 years. J. WRAP-UP ONSTRUTION PROJT A wrap-up construction project is a large construction, erection or demolition project for which policies have been issued by one or more insurance carriers under the same management to insure two or more legal entities engaged in such a project. The entities insured shall be limited to the general contractor (including any owner or principal acting as a general contractor) and subcontractors performing work under contracts let on an ex-insurance basis. If the contract between the owner or principal and such general contractor is on an ex-insurance basis, the owner or principal is an eligible entity for the combination. The project must be confined to operations at a single location. In connection with the building of roadways, tunnels, waterways, surface or underground conduits, or New York ity school construction work specifically authorized by hapter 738, Laws of 1988, the entire job, or sections of the job, is considered a single location if the construction is performed by a single general contractor for a single owner or principal. The project must be of definite duration involving work to be performed continuously to completion.

17 NW YORK RTROSPTIV RATIN PLAN MANUAL R 7 Original Printing ffective August 1, 2010 RUL 2 RUL 2 LIIILITY OR TH PLAN A. OMINATION O MULTIPL WORKRS OMPNSATION POLIIS Insureds with two or more workers compensation and employers liability insurance policies may be combined for the application of a retrospective rating plan, providing there is common majority ownership as defined in the New York xperience Rating Plan Manual.. OMINATION O INSURANS When a retrospective rating plan includes workers compensation and employers liability insurance and other commercial casualty insurance, the total retrospective rating premium, including the minimum and maximum retrospective premium, is determined on the basis of premium for all lines of insurance in a retrospective rating plan. Retrospective rating may be applied to any of the following types of insurance alone or any combination of such insurance: Workers compensation and employers liability insurance Any other commercial casualty line(s) of insurance or illustrations and examples of combinations, refer to the Retrospective Rating Plan Manual issued by the Insurance Services Office.. ON-YAR PLAN An insured is eligible for a one-year plan if the estimated standard premium is at least $25,000.. THR-YAR PLAN An insured is eligible for a three-year plan if the estimated standard premium for three years is at least $75,000.. LAR RISK RATIN OPTION (LRRO) The New York Large Risk Rating Option provides the carrier and insured the option of negotiating the retrospective rating factors used to calculate premium. An insured is eligible for the LRRO if the estimated standard premium individually or in any combination with any other commercial casualty lines of insurance (general liability, commercial automobile, hospital professional liability, crime, glass) exceeds an annual standard premium eligibility threshold of $500,000 for the term of a retrospective rating plan.

18 R 8 NW YORK RTROSPTIV RATIN PLAN MANUAL RUL 2 ffective August 1, 2010 Original Printing. WRAP-UP ONSTRUTION PROJTS Two or more policies on a wrap-up construction project may be combined for the purpose of retrospective rating in accordance with the rules of the New York Workers ompensation and mployers Liability Manual. Wrap-up construction projects may be written on a single or multi-state basis. Steps to be followed in order to determine whether a wrap-up construction project may be eligible to be retrospectively rated: 1. etermine the sum of all wrap-up construction project standard premium for all states 2. Of the states standard premiums included in (1), determine which state s wrap-up construction project retrospective rating premium eligibility threshold is greatest. Refer to NI s Retrospective Rating Plan Manual for premium eligibility in states other than New York. 3. An insured may be retrospectively rated if the sum of the states included in (1) meet the wrap-up construction project retrospective rating premium eligibility threshold for the state determined in (2). ARRIR VIATIONS ROM RULS AN ATORS ONTAIN IN THIS MANUAL Any carrier deviations from the rules and rating factors contained in this manual must be filed for approval with the New York State Insurance epartment.

19 NW YORK RTROSPTIV RATIN PLAN MANUAL R 9 Original Printing ffective August 1, 2010 RUL 3 A. PURPOS RUL 3 OPRATION O TH PLAN The negotiating process between the insured and carrier is the basis on which a retrospective rating plan provides flexibility in order to meet the needs and characteristics of an insured. As a result of this negotiation, factors for a retrospective rating plan are determined for each insured by agreement between the insured and carrier. A completed Notice of lection of Retrospective Rating Plan form signed by the insured outlines the parameters for a retrospective rating plan. Refer to Appendix for appropriate New York forms. When a retrospective rating plan includes workers compensation and employers liability insurance and other commercial casualty lines of insurance, the total retrospective rating premium, including the minimum and maximum retrospective rating premium, is determined on the basis of all insurance policies in the retrospective rating plan.. XPLANATION O TALS IN APPNIX The following is an explanation of the tables used in the calculation of retrospective rating premium: Table of xpected Loss Ranges Table Appendix Purpose Table of Insurance harges Tables of xpense Ratios Table of lassifications by Hazard roup Tables of xcess Loss Pure Premium actors Table of xcess Loss actors for ederal lassifications Table of Loss Limitations for x-medical Policies A Used to determine the expected loss group in the Table of Insurance harges. Used to determine the insurance charge to be included in the basic premium factor. Used in the calculation of basic premium. These tables are developed by individual carriers in New York. Used in the determination of excess loss factors. Used to determine excess loss factors. Used to determine excess loss premium for federal classes. Used to determine accident limitation amount on ex-med policies.. TH RTROSPTIV RATIN PRMIUM WITHOUT LTIV PRMIUM LMNTS The premium for an insured subject to a retrospective rating plan is determined by the following retrospective rating premium formula: Retrospective Rating Premium = [asic Premium + onverted Losses] x Tax Multiplier The retrospective rating premium will not be less than the minimum retrospective rating premium or more than the maximum retrospective rating premium selected for a retrospective rating plan. If the insured for which a retrospective rating plan is applied includes more than one legal entity, a single retrospective rating premium is calculated on the basis of the combined entities.

20 R 10 NW YORK RTROSPTIV RATIN PLAN MANUAL RUL 3 ffective August 1, 2010 Original Printing Note: Insureds with an estimated annual standard premium of a specified premium eligibility threshold, individually or in any combination with commercial casualty lines of insurance, may be rated under the Large Risk Rating Option. That option provides that such insureds may be retrospectively rated as mutually agreed upon by the insured and carrier. Refer to Rule 2-.. TH RTROSPTIV RATIN PRMIUM ORMULA WITH AITIONAL LTIV PRMIUM LMNTS The premium for a retrospective rating plan with elective premium elements is determined by the following retrospective premium formula. The elective elements used in the formula will depend on whether the elective premium elements are included in a retrospective rating plan agreement. Retrospective Rating Premium = [asic Premium + xcess Loss Premium + Retrospective evelopment Premium + onverted Losses] x Tax Multiplier. The result of the above calculation is a retrospective rating premium when the insured has elected one or more of the elective premium elements. A retrospective rating premium will not be less than the minimum retrospective rating premium or more than the maximum retrospective rating premium selected for a retrospective rating plan. Refer to Appendix for examples.. ALULATION O RTROSPTIV RATIN PRMIUM Under these rules, retrospective rating premiums are always calculated by the carrier, using premium and loss data that has been reported according to the workers compensation statistical plan. The number of subsequent calculations is determined as part of the agreement between the insured and carrier. 1. irst alculation of Retrospective Rating Premium Under these rules, retrospective rating premium is calculated by the carrier, as soon as practicable. The calculation will include the premium and loss data valued in the sixth month after the expiration date of the rating plan period and annually thereafter, in accordance with the New Y ork Workers ompensation Statistical Plan. The carrier will notify the insured and return premium if the retrospective rating premium is less than premium previously paid, or the insured will pay any premium greater than premium previously paid, subject to the maximum and minimum retrospective premiums. Note: In certain situations, the carrier may make an early calculation of retrospective premium. Such situations may include when the insured has filed for, or is in, bankruptcy, liquidation, reorganization, receivership, assignment for benefit or creditors, or other similar situations. 2. Subsequent alculations of Retrospective Rating Premium If subsequent calculations are to be completed as part of a retrospective rating plan agreement, then the calculations will be made by the carrier 12 months after the initial calculation and then in 12-month intervals thereafter. The procedures for the subsequent calculations are the same as described in Rule 3--1.

21 NW YORK RTROSPTIV RATIN PLAN MANUAL R 11 Original Printing ffective August 1, 2010 RUL 3 3. inal alculation of Retrospective Rating Premium Subsequent calculations of retrospective rating premium will be issued by the carrier in accordance with Rule until both the insured and carrier agree that the latest calculation will be the final retrospective rating premium under a Plan. After the final retrospective premium calculation, a revision of that premium adjustment is permitted in accordance with the New York Workers ompensation Statistical Plan. Refer to Appendix for examples.. ANLLATION O A POLIY UNR A RTROSPTIV RATIN PLAN The cancellation conditions of the standard policy permit cancellation by the insured or carrier. The premium determination for a cancelled policy is outlined in the New York Workers ompensation and mployers Liability Manual. 1. Reasons for ancellation and Retrospective Rating Premium etermination ancellation Provisions Table 1 If... Then... The policy is cancelled by the insurance carrier, except for nonpayment of premium 1. The standard premium for the cancelled policy is calculated on a pro-rated basis as outlined in the New York W&L Manual. 2. asic premium and, if applicable, excess loss premium and retrospective development premium is calculated by using the pro-rata standard premium calculated in 1. ancellation Provisions Table 2 If... Then... The policy is cancelled by the insured when retiring from business such that: All the work covered by the policy has been completed, or All interest in any business covered by the policy has been sold, or The insured has retired from all business covered by the policy 1. The standard premium for the cancelled policy is calculated on a pro-rated basis as outlined in the New York W&L Manual. 2. asic premium and, if applicable, excess loss premium and retrospective development premium is calculated by using the pro-rata standard premium calculated in 1. ancellation Provisions Table 3 If... Then... The policy is cancelled by the insured, except when retiring from the business 1. The standard premium for the cancelled policy is calculated on a short rate basis as outlined in the New York W&L Manual. 2. asic premium and, if applicable, excess loss premium and retrospective development premium is calculated by using the short rate standard premium calculated in Minimum retrospective rating premium is the short rate standard premium cancellation. 4. Maximum retrospective rating premium is based on standard premium. It is calculated by using the actual payroll for the period the policy was in effect, extending that payroll pro-rata to an annual basis, and then multiplying such extended payroll by the authorized rates and experience rating modification.

22 R 12 NW YORK RTROSPTIV RATIN PLAN MANUAL RUL 3 ffective August 1, 2010 Original Printing 2. ancellation for Nonpayment of Premium If the cancellation by the carrier is because of nonpayment of premium by the insured, the maximum retrospective rating premium is based on the calculated standard premium for the cancelled policy. Refer to the Appendix for an example.. PAI LOSS RTROSPTIV RATIN PLAN Upon agreement between the carrier and the insured, and in conjunction with a retrospective rating plan, the carrier may enter into a financial arrangement with the insured in which the full deposit premium is not paid to the insurance carrier at policy inception. Under this arrangement, the insured is able to retain the use of its funds until losses are actually paid by the carrier. A paid loss retrospective rating plan is subject to the following conditions: 1. ligibility for this Plan requires an estimated annual standard premium of no less than $500,000. All states and policies referred to in the filing may be included in determining eligibility. 2. ollection at policy inception of a charge equal to no less than one-quarter of expected losses. This amount should be increased by the Loss onversion actor to cover claim adjustment expenses. 3. ollection at policy inception of a pro-rated asic Premium harge. The asic Premium harge is derived by multiplying the asic Premium actor in the Plan by the standard premium. 4. ollection over the policy term of a charge equal to the xcess Loss Premium (when a loss limitation is chosen). xcess Loss Premium is equal to the xcess Loss actor multiplied by the standard premium. 5. ollection of a charge to cover premium tax derived by applying the Tax Multiplier to the standard premium. 6. A charge for the loss of the use of funds may also be applied by the carrier. However, use of this charge must be clearly stated in each Plan. 7. hanges in any of the amounts referred to in items 2. through 6. above are to be billed or returned at the time of the first retrospective rating adjustment. 8. A letter of credit meeting the requirements of New York State Insurance epartment Regulation 133 is required to secure the balance of the standard premium due when the program is established. This is subject to modification as payments are made in subsequent periods. At the option of the carrier, a demand note may be required to accompany the letter of credit. 9. At the time of the first retrospective rating adjustment, the premium due, but not as yet paid, is the difference between the retrospective premium and the amount collected thus far under the paid loss plan. 10. Upon agreement between the carrier and the insured, at the time of a specified retrospective rating adjustment, the paid loss retrospective rating program will revert to a conventional retrospective rating plan. enerally, this will occur at the time of the fourth or fifth adjustment. Subsequent adjustments are made in the same manner as the conventional plan, or one final adjustment may be made based on an agreed upon ultimate loss calculation. 11. In the event of cancellation of coverage at the insured's request or the insurance company's request, as a result of non-payment, the accountings and all subsequent payments will be adjusted in accordance with the cancellation rules contained in Rule 3.. of this Plan. Note: The insured is required to replenish the deposit loss fund periodically throughout the program to maintain the initial loss fund deposit. If the paid loss plan is terminated prior to the calculation of the first retrospective rating adjustment and the actual paid losses exceed the amounts in the loss fund, the insured will be required to contribute any and all amounts due the carrier.

23 NW YORK RTROSPTIV RATIN PLAN MANUAL R 13 Original Printing ffective August 1, 2010 RUL 4 A. RTROSPTIV RATIN NORSMNTS RUL 4 AMINISTRATION O TH PLAN All NYIR s approved retrospective rating plan endorsements are located in the ndorsement Section of this manual.. RPORTS O PRMIUMS AN LOSSS UNR TH PLAN The standard premiums and losses incurred under a retrospective rating plan policy(s) must be reported in accordance with the New York Workers ompensation Statistical Plan. Any New York additional or return premium under the retrospective rating program must be reported to NYIR through the New York inancial all Information System (NYIS ) as part of the annual financial call reporting requirements.. ARRIR ILIN RQUIRMNTS In New York, carriers are required to submit Notice of lection or Notification of overage forms to the NYIR for each insured written under a retrospective rating plan. Refer to the Appendix for specific filing requirements.

24 NW YORK RTROSPTIV RATIN PLAN MANUAL ffective August 1, 2010 Original Printing TALS O RTROSPTIV RATIN PLAN VALUS A Table of xpected Loss Ranges Table of Insurance harges Tables of xpense Ratios Table of lassifications y Hazard roup Tables of xcess Loss Pure Premium actors 1. xcess Loss Pure Premium actors 2. State Hazard roup ifferentials 3. xcess Loss and Allocated xpense Pure Premium actors 4. Retrospective Rating Pure Premium evelopment actors Table of xcess Loss actors for ederal lassifications Table of Loss Limitations for x-medical Policies

25 NW YORK RTROSPTIV RATIN PLAN MANUAL TAL A Original Printing ffective January 1, 2008 (Issued August 1, 2010) TAL O XPT LOSS RANS xpected Loss roup Range Rounded Values xpected Loss roup Range Rounded Values xpected Loss roup Range Rounded Values , ,577-89, ,029,916-1,156, ,538-2, ,188-96, ,156,360-1,298, ,277-3, , , ,298,330-1,480, ,007-3, , , ,480,489-1,701, ,975-5, , , ,701,727-1,956, ,170-6, , , ,956,029-2,248, ,244-7, , , ,248,334-2,672, ,536-8, , , ,672,626-3,195, ,748-10, , , ,195,878-3,821, ,154-11, , , ,821,581-4,711, ,778-13, , , ,711,216-5,995, ,320-15, , , ,995,159-7,629, ,058-17, , , ,629,015-9,748, ,006-18, , , ,748,540-12,474, ,922-21, , , ,474,180-15,961, ,053-23, , , ,961,894-20,424, ,420-26, , , ,424,754-26,135, ,057-28, , , ,135,403-35,850, ,753-31, , , ,850,103-53,022, ,655-34, , , ,022,013-78,419, ,854-38, , , ,419, ,981, ,301-41, , , ,981, ,535, ,932-45, , , ,535, ,699, ,907-50, , , ,699, ,136, ,265-54, , , ,136, ,429, ,867-59, , , ,429, ,426, ,849-65, , , ,426,546 - & over 68 65,278-70, , , ,776-76, , , ,449-82, ,293-1,029,915

26 NW YORK RTROSPTIV RATIN PLAN MANUAL TAL Original Printing ffective July 1, 1999 (Issued August 1, 2010) TAL O INSURAN HARS The Table of Insurance harges is not contained in this manual, but is on file with the New York State Insurance epartment. It is available for use by the Rating oard s members in accordance with applicable licensing agreements with the National ouncil on ompensation Insurance.

27 NW YORK RTROSPTIV RATIN PLAN MANUAL TAL Original Printing ffective October 1, 2008 (Issued August 1, 2010) TALS O XPNS RATIOS Tables of xpense Ratios, both with and without allocated loss adjustment expense, as well as Premium iscount schedules, are no longer calculated and published by the Rating oard, effective October 1, arriers are responsible for determining their own expense tables and schedules of premium discounts.

28 NW YORK RTROSPTIV RATIN PLAN MANUAL TAL Original Printing ffective January 1, 2008 (Issued August 1, 2010) PA 1 TAL O LASSIIATIONS Y HAZAR ROUP This table is to be used in the determination of the excess loss factor. This factor is determined based on the selected loss limitation and the hazard group assignment shown below for the classification producing the largest amount of estimated New York workers compensation standard premium included in the Plan. LASS O HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP A A

29 TAL NW YORK RTROSPTIV RATIN PLAN MANUAL PA 2 ffective January 1, 2008 (Issued August 1, 2010) Original Printing TAL O LASSIIATIONS Y HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP A A (a) A A (a) Submit to the Rating oard for determination of xcess Loss actor

30 NW YORK RTROSPTIV RATIN PLAN MANUAL TAL Original Printing ffective January 1, 2010 (Issued August 1, 2010) PA 3 TAL O LASSIIATIONS Y HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP (a) (a) (a) Submit to the Rating oard for determination of xcess Loss actor

31 TAL NW YORK RTROSPTIV RATIN PLAN MANUAL PA 4 ffective January 1, 2008 (Issued August 1, 2010) Original Printing TAL O LASSIIATIONS Y HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP LASS O HAZAR ROUP A A A