The Workplace Safety & Insurance Board of Ontario

Transcription

1 The Workplace Safety & Insurance Board of Ontario Actuarial Report on the Valuation of the Benefit Liabilities of the Schedule 1 Insurance Fund of the Workplace Safety & Insurance Board of Ontario as of December 31, 2009 Prepared and submitted by: W. Robert Hinrichs, FCIA April 7, 2010

2 TABLE OF CONTENTS Table of Contents... i Executive Summary... 1 Change in Benefit Liabilities... 1 Major Actuarial Assumptions... 2 Sensitivity of Actuarial Assumptions... 3 Conformance with Professional Standards... 4 Actuarial Opinion... 5 Principles of Valuation... 6 Data... 7 Valuation Definitions and Methods... 8 Definitions... 8 Acronyms... 9 Valuation Methods Valuation Assumptions General Assumptions Assumptions Specific to Inforce Benefit Liabilities Bill 99 - Loss of Earnings Assumptions Specific to Future Award Benefit Liabilities Future Economic Loss, Bill 162 and Bill 99 Non-Economic Loss Valuation Details by Benefit Type Loss of Earnings Loss of Earnings 43 Wage Loss Loss of Retirement Income Loss of Earnings Total Labour Market Re-Entry Rehabilitation s52 & s Rehabilitation 37(2)(b) Temporary Supplement 147(2) Future Economic Loss Supplement 43(9) Labour Market Re-entry Total Short & Long Term Disability Worker Pension 45(1) Permanent Supplements 147(4) & 45(7) Bill 165 $200 Supplements 147(14) Future Economic Loss 43(1) Loss of Retirement Income 44(1) Non-Economic Loss 42(1) Temporary Compensation 37(1) & 37(2) Short and Long Term Disability Total i 2009 Actuarial Report

3 Health Care Health Care 50 & Independent Living Allowance 32(h) Health Care Total Survivor Benefits Survivor Pension Survivor Benefits Total Future Claim Administration Cost Benefit Liabilities Summary Appendix A: Summary of Main Benefit Provisions Workplace Safety and Insurance Act, 1997 as of December 31, Net Average Earnings Benefits I Short Term Earnings Loss II Health Care III Benefits Directed at Return to Work IV Long-Term Earnings Loss V Non-Economic Loss (NEL) VI Benefits for Loss of Retirement Income VII Dependent Benefits VIII Bill IX Bill X Bill Appendix B: The ROAD TO ZERO Appendix C: Selection of Discount and Inflation Rate Assumptions Discount Rate Inflation Rate Appendix D: Changes in Actuarial Assumptions Indexation Assumption for Partially Disabled Injured Workers Loss of Earnings Termination Rates Assumption Appendix E: Miscellaneous Provisions Personal Income Tax Changes Extension of Indexation under Bill 187 to Partially Disabled Injured Workers Extension of Occ Disease Coverage under Bill 221 to Volunteer Firefighters Injured Worker Retirement Fund (IWRF) Top-Up Appendix F: Change in Unfunded Appendix G: Mortality Tables Appendix H: Average Awards Tables Appendix I: Loss of Earnings Termination Rates Appendix J: Future Economic Loss Termination Rates ii 2009 Actuarial Report

4 EXECUTIVE SUMMARY The purpose of this report is to provide the Workplace Safety & Insurance Board (WSIB) with details of the data, assumptions and methods which were used in the valuation of the Schedule 1 Insurance Fund benefit liabilities as of December 31, In the actuarial opinion, which also appears in the WSIB s 2009 annual report, it is stated that the amount of benefit liabilities makes appropriate provision for all Schedule 1 Insurance Fund obligations and the consolidated financial statements fairly present the results of the valuation. The total benefit liabilities as shown in the table below were $23,250 million as of December 31, Loss of Benefit Liabilities 2009 ($ millions) Labour Market Re-entry Income External Short & Health Survivor Claim Admin Earnings Support Providers Term Care Benefits Cost Total Beginning of Year 6, ,107 3,194 1, ,340 End of Year 7, ,820 3,298 1, ,250 Change 903 (4) 18 (287) Change in Benefit Liabilities Long The WSIB s benefit liabilities are actuarially-determined provisions for future benefit costs related to claims that occurred on or before December 31, As of December 31, 2009, the benefit liabilities were $23,250 million, a $910 million increase from the December 31, 2008 value of $22,340 million. Changes in actuarial assumptions resulted in a $343 million increase in benefit liabilities. Liabilities increased by $564 million primarily due to an increase in the duration assumption for loss of earnings claims. This amount was offset by a decrease in liabilities of $221 million due to a reduction in the indexation rate for 2010 income benefits payable to fully disabled injured workers and survivors from 2.5 per cent to 0.4 per cent per annum. Benefit liabilities increased by $382 million due to legislative changes. $130 million of the increase was the result of the reductions in federal and provincial personal income taxes which increased the amount of net income benefits payable to injured workers. $134 million of the increase was the result of increasing the benefit indexation rate to 0.5% for partially disabled injured workers under Bill 187. Finally, $118 million was the result of extending occupational disease coverage to volunteer firefighters under Bill 221, similar to the coverage already in effect for full time firefighters. In addition, benefit liabilities increased by $185 million due to the growth of new claims outpacing the natural reductions of benefit liabilities and closures of older claims. The changes in claim inventories include the following increases: Actuarial Report

5 $370 million increase due to net growth in loss of earnings claims inventory; $107 million increase in health care liabilities due to continued growth in inventory; $50 million increase due to net growth in survivor benefit claims inventory; and $30 million net increase due to net growth in labour market re-entry and future claims administration costs. These were offset by the following decreases: $246 million decrease due to natural reductions and closures of worker pensions and supplemental payments to injured workers covered under pre-1990 legislation; and $126 million decrease due to natural reductions and closures of future economic loss benefits, their supplemental payments and temporary compensation benefits, and a decrease in non economic loss benefits. The overall increase in benefit liabilities of $910 million was $330 million greater than the 2008 increase of $580 million. The $330 million increase was primarily due to the following: $382 million increase due to reductions in federal and provincial personal income taxes and extensions of Bills 187 and 221 in 2009; $662 million increase due to changes in actuarial assumption, resulting from a greater reduction in the indexation assumption in 2008 than 2009 of $217 million, and a greater increase in the assumption for loss of earnings claim durations in 2009 of $445 million; and offset by a $714 million decrease in claim inventories. Major Actuarial Assumptions The major actuarial assumptions affecting the valuation were as follows: Discount rate: 7% per annum; Benefit indexation rates: 0.4% for fully indexed benefits for 2010 and 2.5% thereafter and 0.5% for partially indexed benefits. The rate for partially indexed benefits was increased from 0.3% to 0.5% for all years as a result of a subsequent increase for indexation under Bill 187 for 2010 benefits. Health Care Cost Escalation: 6.5% per annum; Mortality: the mortality assumption for injured workers was based on WSIB experience from the years , adjusted for mortality improvements to For surviving spouses, the mortality assumption was based on the Ontario Life Table prepared by Statistics Canada, adjusted for mortality improvements to 2009; Loss of Earnings Termination Rates: In 2009, the claim duration assumption was updated to reflect more recent experience as well as future expectations that claim terminations would improve under the WSIB s Road to Zero strategic initiative. Termination rates were based on expected durations of loss of earnings claims that vary by injury year (the rates are shown in Appendix I); and Future Claims Administration Cost: 4.0% of benefit liabilities Actuarial Report

6 Sensitivity of Actuarial Assumptions The benefit liabilities were calculated based on actuarial assumptions. Changes in some assumptions can cause significant changes in the benefit liabilities. The sensitivities are illustrated as follows: The actuarial assumption that is most sensitive to change was the assumed discount rate of 7.0% per annum. The approximate impact of a 1.0% decrease in the discount rate would increase benefit liabilities by approximately $1,555 million (2008: $1,516 million). A 1.0% increase in benefit indexation rate would increase benefit liabilities by approximately $1,280 million (2008: $1,237 million). Health care benefit liabilities were calculated assuming a future rate of escalation of health care costs of 6.5% per annum. A 1.0% increase in the escalation factors used for future health care costs would increase benefit liabilities by approximately $255 million (2008: $247 million). The calculation of benefit liabilities for the loss of earnings benefit used WSIB injured workers claim termination experience. A flat reduction of 1.0% in termination rates would increase benefit liabilities by approximately $43 million (2008: $46 million). The calculation of benefit liabilities was based on WSIB injured worker mortality experience. A flat reduction of 1.0% in these mortality rates would increase benefit liabilities by approximately $23 million (2008: $21 million). A 1.0% increase in the number of lost time injuries in the current year would increase benefit liabilities by approximately $12 million (2008: $11 million) Actuarial Report

7 CONFORMANCE WITH PROFESSIONAL STANDARDS The Canadian Institute of Actuaries has standards of practice which include a specific standard governing the work of actuaries practicing in the field of workers compensation. The standard that applies to the valuation of the Schedule 1 benefit liabilities of the WSIB as of December 31, 2009 is the standard for Public Personal Injury Compensation Plans. The standard is under review by the Actuarial Standards Board, but the review does not affect the valuation of benefit liabilities for It is confirmed with respect to the valuation that: The data on which the valuation is based are sufficient and reliable for the purpose of the valuation; The assumptions are appropriate for the purposes of the valuation; The methods employed are consistent with sound actuarial principles; and This report has been prepared in compliance with the applicable professional standards of the Canadian Institute of Actuaries Actuarial Report

8 ACTUARIAL OPINION I have valued the benefit liabilities of the Workplace Safety and Insurance Board of Ontario for its consolidated balance sheet as of December 31, 2009 and its change in the consolidated statement of operations for the year then ended in accordance with actuarial practice generally accepted in Canada, including the selection of appropriate assumptions and methods. In my opinion, the amount of benefit liabilities makes appropriate provision for all Schedule 1 Insurance Fund obligations and the consolidated financial statements fairly present the results of the valuation. W. Robert Hinrichs Fellow, Canadian Institute of Actuaries April 7, Actuarial Report

9 PRINCIPLES OF VALUATION The valuation was based on the following principles: Provision was made for all future payments of loss of earnings, labour market re-entry, short- and long-term disability, health care, survivor benefits, retirement income benefits and future claims administration costs under Schedule 1 on account of workplace injuries (including illnesses and fatalities) that occurred on or before the valuation date. (The benefit provisions are summarized in Appendix A of this report.) The valuation included occupational diseases that occurred on or before the valuation date. No provision was made for future payments for injured workers of Schedule 2 employers. Schedule 2 employers are self-insured employers in Ontario that are assumed to be fully responsible for the payment of their own injured worker claims, including administration costs payable to the WSIB. The valuation took into account the benefit provisions as described in current legislation and the legislation when the injury occurred, and the adjudication practices in effect as of the valuation date. The valuation was based on claim inventories and supporting experience data that were appropriate as of the valuation date. The assumptions used in the valuation were based on best estimates and did not make any deliberate attempt to underestimate or overestimate the present value of future payments. In this regard, no margins for adverse deviation were included in the valuation as it was assumed that any adverse claims experience arising in future years could be passed-through to employers in setting future premium rates as provided the Workplace Safety & Insurance Act Actuarial Report

10 DATA The principal data items used in the valuation were as follows: Historical Schedule-1 lost time injuries by injury year for each of the last 28 years; Amounts of benefit awards for each type of Schedule-1 benefit for each of the last three years, by year of injury; and For worker pensions, economic loss awards (future economic loss and non-economic loss benefits), loss of earnings benefits and survivor benefits, the amount and type of benefit, percentage of disability or wage loss, and the age and gender of the recipient. We have relied on the audit by KPMG LLP of claims and asset data, and have confirmed that the data used in the valuation were consistent with the data in WSIB's financial statements. We have conducted checks as to the completeness, internal consistency and general reasonableness of the data, and concluded that the data were sufficiently complete and accurate for the purposes of the valuation Actuarial Report

11 VALUATION DEFINITIONS AND METHODS Definitions Pre-1985 Act Workers Compensation Act as it read on March 31, Post-1985 Act Disability Benefits Disability and wage-loss benefits payable under all Acts after March 31, Pre-1989 Act Workers Compensation Act as it read on July 26, Transitional Provisions Effective July 26, 1989, leading up to Bill 162. Pre-Bill 162 Legislation in effect prior to January 2, Bill 162 (or Post-Bill 162) Legislation effective January 2, Bill 165 Legislation effective January 1, Pre-1997 Act Workers Compensation Act as it read on December 31, Bill 99 (or 1997 Act ) General Indexing Factor Alternate Indexing Factor Legislation effective January 1, 1998 the current Workplace Safety and Insurance Act, Until 2007, partial wage-loss and worker pension benefits were indexed according to the Modified Friedland formula, which was 50% of the change in CPI less 1%, subject to a minimum of 0% and a maximum of 4%. In 2007 and again in 2009, the General Indexing Factor was superseded by Bill 187 which provided 2.5% indexing for each of and 0.5% indexing for 2010 benefits. Full wage-loss and worker pension benefits and survivor benefits are indexed by the change in CPI%, subject to a minimum of 0%. Bill 179 Legislation effective November 26, Bill 187 (Extension 2009) Bill 221 (Extension 2009) Bill 119 Legislation effective July 1, 2007 and extended on December 3, 2009 temporarily modified the General Indexing Factor for 2010 benefit payments to partially disabled injured workers. Legislation for occupational disease claims for firefighters was passed on May 4, 2007 with retroactive effective date to January 1, On November 4, 2009, Bill 221 was extended to voluntary firefighters. Legislation passed on November 27, 2008 with effective date January 1, 2012, provides coverage to independent operators and executives working in the construction sector Actuarial Report

12 Injuries The use of the word injuries should be read to include workplace injuries, illnesses and fatalities. References to "pre-1990 injuries" and "post-1989 injuries" refer to injuries which occurred before January 2, 1990, and on or after that date, respectively. "Pre-1998 injury" includes all injuries that occurred before January 1, injuries includes only those injuries which occurred between January 2, 1990 and December 31, 1997 (both inclusive). Acronyms ASD Actuarial Services Division CPI Consumer Price Index (Canada) CPP Canada Pension Plan EI Employment Insurance FEL Future economic loss HC Health care IBNR Incurred but not reported IF + FA Inforce and future awards ILA Independent living allowance Injury Year yyyy All injuries resulting in an LTI in calendar year yyyy LMR Labour market re-entry LOE Loss of earnings LTI Loss time injury LRI Loss of retirement income LTD Long-term disability NAE Net average earnings NEL Non-economic loss OAS Old age supplement PCA Personal care allowance RTW Return to work SB Survivor benefits STD Short-term disability WSIA Workplace Safety & Insurance Act, 1997 WSIB Workplace Safety and Insurance Board Valuation Methods Seriatim Inforce Benefits that are valued on a seriatim basis have a separate liability factor attached to each claim based on the characteristics of the claim. The seriatim valuation is used for income replacement benefit types, such as worker pensions, FEL, LOE and survivor benefits. Inforce data is extracted from the worker benefit system which is then loaded into the AXIS actuarial software. Future payments are projected for each claim using indexing factors and decrements, and discounted to the valuation date Actuarial Report

13 Group Average Award Benefits that are valued on a group basis have data grouped by benefit type, normalized to the valuation date, projected into the future and then discounted to the valuation date. Benefits using the Group method include short duration LOE claims. Incurred but not reported (IBNR) claims are valued by using an expected ultimate (or matured) number of LTIs. Durational costs per LTI are developed from historical data using either the last two or three years worth of calendar year payments. Durational costs are projected into the future using assumed inflation, wage growth or indexing factors. Benefits using the Average Award method include HC claims. Incurred but not reported (IBNR) claims are valued by using an expected ultimate (or matured) number of LTIs Actuarial Report

14 General Assumptions 2009 VALUATION ASSUMPTIONS The general assumptions used in the valuation of the benefit liabilities of the Schedule 1 Insurance Fund as of December 31, 2009 were as follows: The provisions of the Workplace Safety and Insurance Act, 1997 as of December 31, 2009; Future occupational disease claims not currently prescribed by legislation were excluded; The provision for future claims administration costs was 4.0% of the benefit liabilities; The mortality of injured workers was assumed to be based on WSIB experience from the years , adjusted for mortality improvements to For surviving spouses, the mortality assumption was assumed to be based on the Ontario Life Table prepared by Statistics Canada, adjusted for mortality improvements to 2009; Discount rate of 7% per annum; Inflation rate of 2.5% per annum; and The matured number of lost time injuries for 2009 was assumed to be 55,800. Assumptions Specific to Inforce Benefit Liabilities The benefits that are subject to full indexing were indexed at the Alternate Indexing Factor of 0.4% for 2010 and 2.5% thereafter. The benefits that are partially indexed were indexed at 0.5% for 2010 under the 2009 extension of Bill 187 and due to the extension were assumed to continue to index at 0.5% per annum thereafter. Net average earnings which affect Post-1985 Act Disability Benefits were assumed to increase in 2010 to reflect enacted changes in personal income tax, CPP and EI deductions of employees. Bill 99 - Loss of Earnings In 2009, the claim persistency assumption was updated to reflect more recent experience as well as future expectations of claims terminations under the WSIB s Road to Zero strategic initiative. Termination rates were developed for expected durations of loss of earnings claims and vary by injury year. Further details are provided in Appendix D, and the termination rates are shown in Appendix I. It was assumed that the claim-dollar mix of partially indexed and fully indexed benefits at claim duration 6 years is 25% and 75% respectively. Assumptions Specific to Future Award Benefit Liabilities For the benefits subject to full indexation, claim payments were assumed to increase at the Alternate Indexing Factor of 0.4% for 2010 and 2.5% per annum thereafter. For benefits that Actuarial Report

15 were partially indexed under Bill 187 (and its 2009 extension), claim payments were assumed to increase by 0.5% per annum for 2010 and each year thereafter. For the benefits subject to wage growth inflation, the assumption for future wage inflation was 1.4% for 2010 and 3.5% per annum thereafter. For health care benefits, the assumption for future health care cost escalation was 6.5% per annum for all years. Future Economic Loss, Bill 162 and Bill 99 Non-Economic Loss The assumptions for future economic loss and non-economic loss were as follows: (a) Future Economic Loss (Bill FEL) 6% of lost time injuries under Bill 162 were assumed to result in a FEL claim. Average wage loss was assumed to be 30%. The assumption for average renewal rates was 80% after 2 years (first review) and 60% after 5 years (second review) from the date of determination. (b) (c) FEL Supplements (Bill 162) Non-Economic Loss (Bill NEL and Bill 99 - NEL) It was assumed that future experience on FEL Supplement claims would follow WSIB actual FEL Supplement experience, extended to 28 durations. 12% of lost time injuries were assumed to result in a NEL claim. It was assumed that the degree of permanent impairment would be 14.5% Actuarial Report

16 VALUATION DETAILS BY BENEFIT TYPE Loss of Earnings - $7,776 M Loss of Earnings 43 Wage Loss Act: 1997 Act 43 Injury Years: Indexation: full and partial The benefit is 85% of the difference between net average earnings (NAE) before the injury and NAE after the injury. Payments continue until earliest of: i) when an injured worker s LOE benefits cease, ii) age 65, iii) 2 years if the injured worker was age 63 or older on the date of injury, or iv) after the injured worker is no longer impaired. Full disability benefits were indexed by the Alternate Indexing Factor of 0.4% for 2010 payments (long-term assumption is 2.5% per annum). Partial disability benefits were indexed for all years at 0.5% per annum, as specified under the extension of Bill 187 for 2010 claim payments. Inforce Method: Seriatim valuation of inforce for prior to 2008 injuries, and group valuation approach for 2008 and 2009 year injuries Mortality Table: WSIB projected to 2009 Termination Table: LOE experience reflecting Road To Zero targets (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon Ben ,612 37,600 70, ,383 8, , , ,543 42,550 81, ,950 11, , , ,401 44,839 86, ,289 5, , ,939 Comment: The liability is for benefits under the 1997 Act and also provides for expected unreported claims and recurrences. As the total count of LOE claims continued to grow in 2009, the liability is expected to continue to increase for a few more years before a steady state of claim inflows and outflows is reached. In 2009, the claim persistency assumption was updated to reflect more recent experience as well as future expectations of claims terminations under the WSIB s Road to Zero strategic initiative. The impact of the update in termination rates was an increase in liabilities of $542 million. In 2009, the long-term indexation assumption for fully indexed benefits was reduced from 2.5% to 0.4% for 2010 payments only. 2.5% per annum continued to be assumed for 2011 and beyond. For partially indexed benefits, the long-term indexation assumption was increased Actuarial Report

17 from 0.3% to 0.5% (according to the extension of Bill 187 for 2010 payments), and assumed to continue at 0.5% for all years after This resulted in a net decrease of benefit liability of $94 million. Loss of Retirement Income 45 Act: 1997 Act 45 Injury Years: Indexation: linked to LOE benefit Loss of retirement income benefits are payable to injured workers who have received LOE payments for 12 continuous months and were less than age 64 at the date of injury. The WSIB sets aside 5% for LRI benefits. Further, injured workers can make irrevocable elections to contribute an additional 5%. At age 65, injured workers receive a retirement benefit from contributions made plus investment income earned. (millions) Liab Comment: The liability was a direct function of the corresponding LOE liability and was expected to move in tandem with the LOE benefit. The impact of the update in termination rates was an increase in liabilities of $25 million. Method: Average award valuation of future awards Benefits Valued: New claims, recurrences, re-assessments and arrears (millions) Liab (1) (1) Comment: The methodology valued only re-assessments occurring after the 72 month lock-in due to Bill 179. Loss of Earnings Total (millions) Liab ,895 1, , , Actuarial Report

18 Labour Market Re-Entry - $542 M Rehabilitation s52 & s42 Act: Pre-1997 Act 52, 53, 1997 Act 108, 42 Injury Years: 1990 to 1997, Wage Growth: 1.4% (2010), 3.5% thereafter Section 52 provides for payments to external agencies that provide rehabilitation benefits such as training programs to aid injured workers to return to work and assist them in lessening or removing handicaps resulting from their injuries. Section 42 provides for the costs of a labour market re-entry (LMR) assessments and plans, in the case of injured workers not returning to work with their employer. In the 1997 Act, they are referred to as early and safe return to work (ESTRW) and labour market re-entry (LMR) programs. Method: Average award valuation of future awards Benefits Valued: Payments to external agencies (millions) Liab Comment: Benefits occur primarily during the early stages of the claim, and hence the majority of the liability results from the current and recent injury years. Being an ongoing benefit, the liability is expected to increase. The lower rate of increase in 2009 was primarily due to decline in the indexation rate for 2010 benefit payments (-$10 million) and the effect of fewer LTI s entering the system 55,800 for the 2009 injury year compared to 67,000 for the 2008 injury year Actuarial Report

19 Rehabilitation 37(2)(b) Act: Pre-1997 Act 37(2)(b) Injury Years: prior to 1998 Indexation: partial Temporary partial disability benefits are payable up to a rate of 90% of net average earnings to injured workers who do not return to work, provided the injured workers are available for suitable work and are participating in a medical rehabilitation program or LMR program. Method: Average award valuation of future awards Benefits Valued: Income replacement (millions) Liab (1) (0) Comment: As these claims are from injury years prior to 1998, rehabilitation efforts are mostly complete hence the liabilities are now at an insignificant level. Temporary Supplement 147(2) Act: Pre-1997 Act 147(2) Injury Years: prior to 1990 Indexation: partial Temporary supplements to permanent partial disability awards are payable where, in the opinion of the WSIB, an injured worker is likely to benefit from an LMR plan. The amount of an award is based on the difference in an injured worker's expected earnings capacity after completion of the plan to the injured worker's net average earnings before the injury. Method: Average award valuation future awards Benefits Valued: Income replacement (millions) Liab (1) (1) (1) Comment: Since the benefit is temporary and relates to injuries prior to 1990, the liability decreases as the number of claimants decreases Actuarial Report

20 Future Economic Loss Supplement 43(9) Act: Pre-1997 Act 43(9), 1997 Act 108 Injury Years: 1990 to 1997 Indexation: partial 43(9), as amended under 108(8) of the 1997 Act, provides compensation to injured workers who are co-operating in an approved medical rehabilitation program, an early and safe return to work program, or a labour market re-entry plan, and are receiving compensation for future economic loss. The amount of the supplement provides up to 90% of net pre-injury earnings. Method: Average award valuation of future awards Benefits Valued: Income replacement (millions) Liab (7) (3) Comment: The liability should continue to decline as the FEL claimants move through their final reviews. Labour Market Re-entry Total (millions) Liab Income Support External Providers Actuarial Report

21 Short & Long Term Disability - $8,820 M Worker Pension 45(1) Act: Pre-1989 Act 45(1) Injury Years: prior to 1990 Indexation: partial For claims incurred between April 1, 1985 and December 31, 1989, permanent partial disability benefits are payable (for life) as a percentage, not to exceed 90%, of net average earnings (NAE), and are based on degree of disability. For claims incurred prior to April 1, 1985, partial disability benefits are payable up to a maximum of 75% of gross earnings. Partially indexed worker pensions are a mature book of business with benefits payable for life. Method: Seriatim valuation of inforce Mortality Table: WSIB projected to 2009 Termination Table: none Benefits Valued: Income replacement (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon Ben , ,775 39, (3,047) , , ,955 40,199 (182) (2,820) , , ,886 40,303 (13) (3,069) , Comment: The liability continued to decrease in 2009, as deaths were the primary decrement. The decline was less than in 2008 mainly due to the impact of extension of Bill 187, which resulted in an increase in liability of $70 million Actuarial Report

22 Act: Pre-1989 Act 45(1) Injury Years: prior to 1990 Indexation: full These benefits are similar to partial benefits above, but are payable to injured workers with permanent disabilities receiving full benefits. Method: Seriatim valuation of inforce Mortality Table: WSIB projected to 2009 Termination Table: none Benefits Valued: Income replacement (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon ,158 2,710 (12) (52) (47) 315, , ,128 2,703 (21) (30) (7) 305, , ,084 2,679 (12) (44) (23) 306, ,472 Method: Average award valuation of future awards Benefits Valued: New claims, recurrences, re-assessments and arrears Ben (millions) Liab IF + FA Liab (6) 5, (33) 5,016 (236) (45) 4,946 (70) Comment: The liability continued to decrease in 2009, as deaths are the primary decrement. The accelerated decline for 2009 is due to the decrease in the indexation rate for 2010 benefits from 2.5% to 0.4% resulting in a decrease of $18 million in the liabilities Actuarial Report

23 Permanent Supplements 147(4) & 45(7) Act: Pre-1997 Act. 147(4) of the Pre-1997 Act replaced 45(7) of the Pre-1989 Act Injury Years: prior to 1990 Indexation: full Permanent supplements are payable in addition to permanent partial disability awards where, in the opinion of the WSIB, an injured worker is not likely to benefit from an LMR plan nor would the injured worker's earnings capacity, after completion of the plan, be increased to the extent described in 147(2). The supplement shall not exceed the OAS amount and is reviewed after 24 and 60 months. Otherwise, it is payable until the injured worker is eligible for OAS payments. Permanent supplements are a mature book of business and are payable to injured workers until they reach age 65. Method: Seriatim valuation of inforce Mortality Table: WSIB projected to 2009 Termination Table: none Benefits Valued: Income replacement (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon ,208 6,857 (6) (1,123) (369) 33, ,165 6,546 (16) (1,043) (311) 34, ,094 6,029 (55) (1,071) (517) 33, Method: Average award valuation of future awards Benefits Valued: New claims, recurrences, re-assessments and arrears Ben (millions) Liab IF + FA Liab (5) (1) 513 (17) (7) 451 (62) Comment: The liability continued to decrease in 2009, as deaths and claimants reaching age 65 are the primary decrements and no further reviews are expected. The liability decreased $9 million due to change in the indexation rate of 2010 benefits from 2.5% to 0.4% Actuarial Report

24 Bill 165 $200 Supplements 147(14) Act: Pre (14) Injury Years: prior to 1990 Indexation: partial 147(14) supplements are an additional lifetime pension of $ per month for 2009 (indexed each year by general indexation) payable to injured workers receiving a permanent partial disability pension. If the permanent partial disability pension has been commuted and if the injured worker is entitled (or would have been entitled if not for age constraints), a supplement is payable under 147(4). The payment of the additional $ monthly is limited such that the total award is not greater than 75% of gross average earnings or 90% of net average earnings, as the case may be. Pension supplements are a mature book of business with benefits payable for life. Method: Seriatim valuation of inforce Mortality Table: WSIB projected to 2009 Termination Table: none Benefits Valued: Income replacement (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon ,756 8, (871) 34 22, ,825 8,159 (39) (931) 17 22, ,095 8,214 (11) (730) 55 22, Method: Average award valuation of future awards Benefits Valued: New claims, recurrences, re-assessments and arrears Ben (millions) Liab IF + FA Liab (5) 875 (43) (5) 859 (16) Comment: The liability decreased slowly in 2009, as deaths are the primary decrement Actuarial Report

25 Future Economic Loss 43(1) Act: Pre-1997 Act 43, 1997 Act 44, 107, 108 Injury Years: 1990 to 1997 Indexation: partial Injured workers who suffer injuries resulting in permanent impairments or in temporary disability for 12 continuous months are entitled to compensation for future loss of earnings (FEL) arising from the injury. FEL compensation for future loss of earnings benefits ceases when an injured worker reaches 65 years of age, or dies. Subject to subsection 108(8), the amount of compensation payable to an injured worker is equal to 90% of the difference between (a) the injured worker's net average earnings before the injury, and (b) the net average earnings that the injured worker is likely to be able to earn after the injury for suitable and available employment. FEL compensation usually commences 12 months after date of injury. 108(8) of the 1997 Act allows an injured worker, who is age 55 or older and would not benefit from an LMR program, to choose the equivalent of a full monthly OAS pension with no further reviews until age (2) of the 1997 Act alters the timing of reviews to annually, or if a material change in circumstances occurs. At 60 months, the FEL amount is fixed until age 65. There are still a few new claimants from injury years 1997 and earlier, and some claims are still before their review dates where they may increase, decrease or terminate. Method: Seriatim valuation of inforce Mortality Table: WSIB projected to 2009 Termination Table: FEL Benefits Valued: Income replacement (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon Ben ,209 16,534 12, (642) (155) 73, ,133 15,877 12,204 (76) (657) (243) 71, ,055 15,189 11,950 (78) (688) (255) 69, Actuarial Report

26 Method: Group valuation of future awards Benefits Valued: New claims, recurrences, re-assessments and arrears (millions) Liab IF + FA Liab (6) 1, (16) 1,221 (92) (5) 1,138 (82) Comment: The liability for partially indexed claims has reached a plateau as most FEL claims have now moved through their final review, and some claims are terminating due to the injured worker reaching age 65 or dying. The liability would have decreased more in 2009 except for the increase in the indexation assumption after 2010 from 0.3% to 0.5% (due in part to the extension of Bill 187). This resulted in an increase of $12 million in the 2009 liability. Act: Pre-1997 Act 43, 1997 Act 44, 107, 108 Injury Years: 1990 to 1997 Indexation: full These benefits are similar to the partial benefits described above, but are for injured workers with permanent disabilities receiving full benefits. There are still a few new entrants from injury years 1997 and earlier. Method: Seriatim valuation of inforce Mortality Table: WSIB projected to 2009 Termination Table: FEL Benefits Valued: Income replacement (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon ,647 11,060 7 (16) , , ,532 11,124 (24) (115) , , ,334 11,028 (36) (198) (96) 168, ,068 Method: Group valuation of future awards Benefits Valued: New claims, recurrences, re-assessments and arrears Ben (millions) Liab IF + FA Liab (4) (1) 939 (25) (0) 902 (37) Comment: The liability for fully indexed claims has reached a plateau as most FEL claims have now moved through their final review and some claims are terminating due to the injured worker reaching age 65 or dying. The decrease in the indexation assumption from Actuarial Report

27 2.5% to 0.4% in the 2010 benefit payments resulted in a decrease of $20 million in the 2009 liability. Loss of Retirement Income 44(1) An extra 10% of FEL payments (including supplementary payments) are expected to be placed into investment accounts for injured workers. (millions) Liab IF + FA Liab (12) 212 (12) (5) 207 (5) Comment: This liability is a direct function of the corresponding FEL liabilities and moves in tandem with the FEL liability. The decrease in the indexation assumption from 2.5% to 0.4% in the 2009 valuation resulted in a decrease of $2 million in the 2009 liabilities. Non-Economic Loss 42(1) Act: Pre-1997 Act 42, 1997 Act 46 Injury Years: 1990 to 1997, Indexation: partial A worker who suffers permanent impairment as a result of an injury is entitled to receive compensation for non-economic loss (NEL) in addition to other benefits. The compensation for a injured worker's non-economic loss from an injury is determined by multiplying (a) the percentage of the injured worker's permanent impairment arising from the injury as determined by the WSIB; by (b) for 2009, $56, plus (or minus) $1, for each year (to a maximum of 20 years) by which the injured worker's age at the time of the injury was less (or greater) than 45. Amounts less than $12, are payable as a lump sum. Amounts greater than $12, are payable as a monthly annuity for the life of the injured worker unless the injured worker makes an irrevocable election to receive the benefit as a lump sum. Method: Seriatim valuation of inforce Mortality Table: WSIB projected to 2009 Termination Table: none Benefits Valued: Non-economic benefits (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon Ben , , , , , , Actuarial Report

28 Method: Group valuation of future awards Benefits Valued: Non-economic benefits (millions) Liab IF + FA Liab (17) 230 (4) (8) 223 (6) (13) 217 (7) Comment: The NEL benefit remained unchanged in the 1997 Act. The inforce liability increased slowly while the future awards portion declined, due to a declining number of new injuries in recent years. Extension of Bill 187 resulted in a $2 million increase in the liability. Temporary Compensation 37(1) & 37(2) Act: Pre-1997 Act 37(1) & 37(2)(a) Injury Years: pre-1998 Wage Growth: 1.4% (2010), 3.5% thereafter 37(1) temporary total disability benefits are payable at the rate of 90% of the injured worker's net average earnings if the injured worker is totally disabled. 37(2)(a) temporary partial disability benefits are payable to an injured worker who returns to work at the rate of 90% of the difference between the net average weekly earnings of the injured worker before injury and after returning to work. These temporary payments are payable to claimants from injury years 1997 and earlier, and are adjusted for wage inflation. Method: Average award valuation of future awards Benefits Valued: Income replacement (millions) Liab (27) (6) (9) Comment: The liability decreased in 2009 as expected. Due to wage-loss adjustments, the benefit was not impacted by Bill Actuarial Report

29 Short and Long Term Disability Total (millions) Liab , ,107 (439) ,820 (287) Actuarial Report

30 Health Care - $3,298 M Health Care 50 & 51 Act: Pre-1997 Act 50, 51, 1997 Act 32 Injury Years: all Escalation: 6.5% Health care covers professional services provided by health care practitioners, hospitals and health facilities, drugs, attendant services, home or vehicle modifications, assistive devices and prostheses, extraordinary transportation costs to obtain health care, including other measures to improve the quality of life (other than independent living allowance (ILA) income payments, described later). Method: Average award valuation of inforce and future awards Benefits Valued: All health care payments except ILA income payments (millions) Liab , , , Comment: The structure of HC benefits has not changed from previous years but the adjudication of HC benefits has improved as a result of the health care review which started in The liabilities continued to increase in 2009 due mainly to inflationary health care cost pressures. However, the annual increase slowed in 2007, 2008 and 2009, primarily due to greater substitutions of lower-priced generic drugs. In 2009, the slowing increase continued as increases in the services and costs per claim were mostly offset by reductions in the number of regular health care and drug claims. The 2008 HC liability contained a provision of $30 million for personal care allowances (PCA), which consisted of $12 million for outstanding retroactive payments and $18 million for future payments. In 2009, the provision was released as the backlog of retroactive payments was reduced to historical norms, and PCA future payments were included directly in the HC liability Actuarial Report

31 Independent Living Allowance 32(h) Act: 1997 Act 32(h) Injury Years: all Indexation: full Independent living allowances are periodic income payments paid annually at $3,560 per year and are fully indexed. The ILA benefit is payable to severely injured workers for the purpose of improving their quality of life. Method: Seriatim valuation of inforce Mortality Table: WSIB projected to 2009 Termination Table: none Benefits Valued: Non-economic benefits (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon , , , , ,607 1, , Method: Average award valuation of future awards Benefits Valued: New claims, recurrences, re-assessments and arrears Ben (millions) Liab IF + FA Liab (2) (4) Comment: The liability is fairly stable, as new entrants on benefit are offset by releases due to deaths. Health Care Total (millions) Liab , , , Actuarial Report

32 Survivor Benefits - $1,920 M Survivor Pension 35 Act: 1997 Act 48, Pre-1997 Act 35. Injury Years: all years Indexation: full If an injured worker dies traumatically in the workplace or as a result of an occupational disease, a monthly benefit is provided to the dependent spouse and/or dependent children if there is no surviving spouse. Benefits to spouses are payable for life and to dependent children until age 19 or completion of formal education. For valuation purposes, it is assumed that payments to children continue to age 23. Method: Seriatim valuation of inforce Mortality Table: Ontario Life Table projected to 2009 Termination Table: none Benefits Valued: Income replacement (millions) Count Mthly Ben Liab Count Ben Avg Res/ct Avg Res/ben Avg Mon ,493 7,661 10, , , ,474 7,719 11,123 (19) , , ,604 7,754 11, , ,491 Method: Average award valuation of future awards Benefits Valued: New claims, recurrences, re-assessments and arrears Ben (millions) Liab IF + FA Liab , (31) 1,779 (50) , Comment: The survivor liability continues to grow as more new entrants (survivors of injured workers who have died) are added than terminations through survivor deaths and benefit expiries. The extension of Bill 221 to volunteer firefighters in 2009 resulted in an increase in liability of $113 million. The backlog of retroactive claims under Bill 221 for full time firefighters was reduced to historical norms in 2009 and resulted in a decrease in liability of $30 million Actuarial Report

33 Survivor Benefits Total (millions) Liab , ,779 (50) , Actuarial Report

34 Future Claim Administration Cost - $894 M This provision covers the expected future cost of administering claims that are currently registered in WSIB claims inventories. Based on an updated claims administration review in 2009, the rate remains at 4.0% of benefit liabilities. (millions) Liab (22) Actuarial Report

35 Benefit Liabilities Summary The loss of earnings benefit liability growth continued in 2009 due to net growth in business, increase in claim durations (i.e. decrease in the termination assumption), and offset by the decrease in the 2010 indexation assumption. The short- and long-term disability benefit liabilities declined primarily due to the decrease in the indexation assumption and normal aging of the claims and claim closures from death or termination at age 65. Growth in health care liabilities moderated somewhat in 2008 and again in 2009 due to increases in the services and costs per claim being mostly offset by reductions in the number of regular health care and drug claims, and greater use of generic drug substitution. The survivor benefit liability continued to grow in 2009 mainly due to the extension of Bill 221. Loss of Benefit Liabilities 2009 ($ millions) Labour Market Re-entry Income External Short & Health Survivor Claim Admin Earnings Support Providers Term Care Benefits Cost Total Beginning of Year 6, ,107 3,194 1, ,340 End of Year 7, ,820 3,298 1, ,250 Change 903 (4) 18 (287) Long Actuarial Report

36 APPENDIX A: SUMMARY OF MAIN BENEFIT PROVISIONS Workplace Safety and Insurance Act, 1997 as of December 31, 2009 Enactment of the Workplace Safety and Insurance Act, 1997 (Bill 99) repealed the Workers Compensation Act, which is referred to here as the pre-1997 Act. Section 102 of the new Act, however, provides that the pre-1997 Act applies in most respects to the pre-1998 injuries Act or new Act refers to the Workplace Safety and Insurance Act, Board refers to the Workplace Safety and Insurance Board. Net Average Earnings Net average earnings are gross earnings less probable income tax, probable Canada Pension Plan contributions and probable Employment Insurance premiums. Gross earnings are subject to a maximum, which is based on the Average Industrial Wage of Ontario. For 2009, the maximum was $74,600. For 2010, the maximum is $77,600. Benefits Benefits in this summary include: 1) Pre-Bill 162 Act - legislation prior to January 2, 1990, 2) Post-Bill legislation effective January 2, 1990, 3) Transitional Provisions - effective July 26, 1989, 4) Bill legislation effective January 1, 1995, 5) Bill 99 - legislation effective January 1, 1998, 6) Bill 179 legislation effective November 26, 2002, 7) Bill 221 legislation effective May 4, 2007, and extended on November 4, 2009, 8) Bill 187 legislation effective May 17, 2007, and extension granted on December 3, 2009, 9) Bill 119 legislation effective November 27, 2008 References to "pre-1990 injuries" and "post-1989 injuries" in this report refer more precisely to injuries which occurred before January 2, 1990, or on or after that date respectively. "Pre-1998 injury" includes all injuries that occur before January 1, injuries are those which occurred between January 2, 1990 and December 31, 1997 (both inclusive). Each January, payments are indexed under 49 and 50 of the new Act to reflect changes in the Consumer Price Index (CPI). The benefits that are indexed to the full change in CPI are survivor and dependent benefits, and income benefits for full wage loss and 100% disability. Partial disability income benefits are indexed to 50% of the increase in CPI less 1%, subject to a maximum of 4% and a minimum of 0%. However, for these benefits, Bill 187 provided for indexing at 2.5% on each of the following dates: July 1, 2007, January 1, 2008 and January 1, Bill 187 also provided that the government may through regulation set an indexing factor that differs from that provided in 49 and 50. Indexing on January 1, 2010 was set under this regulation equal to 0.5% for benefits payable in 2010 to partially injured workers Actuarial Report