This section of the New York Retrospective Rating Plan Manual contains additional information and examples that could be beneficial to the users' understanding of the preceding Plan rules.
B  Explanation of Differences Between Types of Excess Loss Factors
C  Retrospective Rating Plan Premium Formula
D  Retrospective Rating Plan Premium Calculation Examples
E  Development of Average State Hazard Group Factor
F  Cancellation of a Policy Under a Retrospective Rating Plan
G  Carrier Retrospective Rating Plan Filing Requirements
H  Notice of Election of Retro Rating Plan
I  Notification of Coverage Multi  State Retro Rating Plan
J  Notice of Election of Retro Rating Plan New York Large Risk Rating Option
A retrospective rating plan adjusts the premium for the insured's policy on the basis of losses incurred during the period covered by that policy term. 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. The application of the New York Retrospective Rating Plan (Plan) is optional and may be used only upon election by the insured and acceptance by the insurance carrier.
Refer to the Definitions in Rule 1 for an explanation of the terms used in the formula.
Refer to Rule 3 for an explanation of the operation of the plan.
 Types of Excess Loss Factors
Excess loss factors are used in retrospective rating when an insured elects to limit the amount of incurred losses to be included in the retrospective rating premium. The charge for this loss limitation is called excess loss premium. The excess loss factors for New York are located in Table E of the Tables of Retrospective Rating Values in this manual.
 Excess Loss Factors (ELF) are provided for states where NCCI files and publishes full rates. ELFs do not take into account the inclusion of Allocated Loss Adjustment Expense (ALAE) as part of incurred losses.
Excess loss factors represent the expected losses above a given limit (excess losses) relative to full standard premium (including expenses).Excess Losses ELF =
Standard Premium
Refer to the NCCI Retrospective Rating Plan Manual for the application of these factors.  Excess Loss and Allocated Loss Adjustment Expense Factors (ELAEF) apply when the definition of loss is redefined to include Allocated Loss Adjustment Expense. These factors are provided for states where NCCI files and publishes full rates.
Excess Loss and Allocated Loss Adjustment Expense Factors represent the expected amount of losses and allocated loss adjustment expenses above a given limit (excess losses including ALAE) relative to full standard premium (including expenses). These optional values are provided for some full rate states, but not all.Excess Losses and Allocated Loss Adjustment Expenses ELAEF =
Standard Premium
Refer to the NCCI Retrospective Rating Plan Manual for the application of these factors.
 Excess Loss Pure Premium Factors (ELPPF) are provided for New York in this manual. ELPPFs for states where NCCI publishes loss costs rather than full rates are provided in NCCI's Retrospective Rating Plan Manual. ELPPFs do not take into account the inclusion of ALAE as part of incurred losses. Carriers are required to convert Excess Loss Pure Premium Factors to Excess Loss Factors. Refer to Rule 1B2e for the formula used to convert ELPPFs to ELFs.
Excess Loss Pure Premium Factors represent the expected amount of losses above a given limit (excess losses) relative to the loss cost portion of the premium.Excess Losses ELPPF =
Loss Cost Premium
 Excess Loss and Allocated Loss Adjustment Expense Pure Premium Factors (ELAEPPF) are provided when the definition of loss is redefined to include Allocated Loss Adjustment Expense. These factors are provided for New York in this manual and in the NCCI Retrospective Rating Plan Manual for those states where NCCI publishes loss costs rather than full rates.
Excess Loss and Allocated Loss Adjustment Expense Pure Premium Factors represent the expected amount of losses and allocated loss adjustment expense above a given limit (excess losses including ALAE) relative to the loss cost portion of the premium.
Excess Losses and Allocated Loss Adjustment Expenses ELAEPPF =
Standard Premium
 Excess Loss Premium Calculation Example
In New York, NYCIRB 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, as applicable.
Term DefinitionExcess Loss Pure Premium Factor ELPPF
.360
Expected Loss Ratio ELR
.648 Loss Adjustment Expense LAE
.188 Excess Loss Factor ELF
.277
Conversion of ELPPF to ELF based on the formula below:
(ELPPF x ELR) x (1+ LAE**) (.360 x .648) x (1 + .188) (.233) x 1.188) ELF = .277
** The Loss Adjustment Expense % is obtained from the NYCIRB’s loss cost filing that is effective one year prior to the effective date of the ELPPFs. For example, you would use the 10/1/10 ELPPFs in conjunction with an LAE % from the 10/1/09 loss cost filing. (This is necessary because it is the prior approved LAE % that is used in the calculation of the latest ELPPFs).

Retrospective Rating Plan Premium Formula without Elective Premium Elements
The formula used to calculate the retrospective rating premium, excluding the elective premium elements, is as follows:
Retrospective Rating Plan = (Basic Premium + Converted Losses*) x Tax Multiplier 
Retrospective Rating Plan Premium Formula with Elective Premium Elements
Retrospective Rating Plan Premium = [Basic Premium + Excess Loss Premium** + Retrospective Rating Development Premium** + Converted Losses*] x Tax Multiplier
These formulas produce a retrospective rating plan premium, which is subject to the Minimum Retrospective Premium and the Maximum Retrospective Premium.
* Losses may include allocated loss adjustment expenses if selected by the insured.
** Elective Premium Element
For these examples, assume the Retrospective Rating Plan Agreement provides:
Retrospective Rating Factors  
a.  Estimated Standard Premium  $500,000 
b.  Maximum Retrospective Premium Factor 
1.30

c.  Minimum Retrospective Premium Factor 
.60

d.  Loss Conversion Factor 
1.120

e.  Tax Multiplier 
1.070

f.  State Hazard Group Relativity 
0.750

g.  Excess Loss Factor ($50,000 Loss Limit) 
.36

h.  Expenses from Expense Ratio Table 
.201


Without Loss Limit 
With Loss Limit 

1st Adjustment  0.21  0.08  
2nd Adjustment 
0.18  0.06  
3rd Adjustment 
0.13  0.02 
Example 1:
Calculation of Retrospective Premium: First, Second and Third Adjustments
This example contains:
 No loss limits
 Retrospective Development Factors
Factors 
First Adjustment 
Second Adjustment 
Third Adjustment 

1. 
Standard Premium 
500,000 
500,000 
500,000 

2. 
Basic Premium Factor 
0.145 



3. 
Basic Premium (2 x 1) 
72,500 
72,500 
72,500 

4. 
Excess Loss Premium Factor 




5. 
Excess Loss Premium (4 x 1 x 7) 
0 
0 
0 

6. 
Ratable Losses 
150,000 
200,000 
275,000 

7. 
Loss Conversion Factor 
1.120 



8. 
Converted Losses (6 x 7) 
168,000 
224,000 
308,000 

9. 
Retrospective Development Factor 
0.210 
0.180 
0.130 

10. 
Retrospective Development Premium (9 x 1 x 7) 
117,600 
100,800 
72,800 

11. 
Subtotal (3 + 5 + 8 + 10) 
358,100 
397,300 
453,300 

12. 
Tax Multiplier 
1.070 



13. 
Indicated Retrospective Premium (11 x 12) 
383,167 
425,111 
485,031 

14. 
Maximum Premium (14 x 1) 
1.300 
650,000 
650,000 
650,000 
15. 
Minimum Premium (15 x 1) 
0.600 
300,000 
300,000 
300,000 
16. 
Retrospective Premium 
383,167 
425,111 
485,031 
Example 2:
Calculation of Retrospective Premium: First, Second and Third Adjustments
 No loss limits
 Retrospective Development Factors
Factors 
First Adjustment 
Second Adjustment 
Third Adjustment 

1. 
Standard Premium 
500,000 
500,000 
500,000 

2. 
Basic Premium Factor 
0.145 



3. 
Basic Premium (2 x 1) 
72,500 
72,500 
72,500 

4. 
Excess Loss Premium Factor 




5. 
Excess Loss Premium (4 x 1 x 7) 
0 
0 
0 

6. 
Ratable Losses 
150,000 
200,000 
275,000 

7. 
Loss Conversion Factor 
1.120 



8. 
Converted Losses (6 x 7) 
168,000 
224,000 
308,000 

9. 
Retrospective Development Factor 




10. 
Retrospective Development Premium (9 x 1 x 7) 
0 
0 
0 

11. 
Subtotal (3 + 5 + 8 + 10) 
240,500 
296,500 
380,500 

12. 
Tax Multiplier 
1.070 



13. 
Indicated Retrospective Premium (11 x 12) 
257,335 
317,255 
407,135 

14. 
Maximum Premium (14 x 1) 
1.300 
650,000 
650,000 
650,000 
15. 
Minimum Premium (15 x 1) 
0.600 
300,000 
300,000 
300,000 
16. 
Retrospective Premium 
300,000 * 
317,255 
407,135 
* Minimum of $300,000 would apply.
Example 3:
Calculation of Retrospective Premium: First, Second and Third Adjustments
 No loss limits
 Retrospective Development Factors
Factors 
First Adjustment 
Second Adjustment 
Third Adjustment 

1. 
Standard Premium 
500,000 
500,000 
500,000 

2. 
Basic Premium Factor 
0.145 



3. 
Basic Premium (2 x 1) 
72,500 
72,500 
72,500 

4. 
Excess Loss Premium Factor 
0.360 



5. 
Excess Loss Premium (4 x 1 x 7) 
201,600 
201,600 
201,600 

6. 
Ratable Losses 
150,000 
200,000 
275,000 

7. 
Loss Conversion Factor 
1.120 



8. 
Converted Losses (6 x 7) 
168,000 
224,000 
308,000 

9. 
Retrospective Development Factor 
0.080 
0.060 
0.020 

10. 
Retrospective Development Premium (9 x 1 x 7) 
44,800 
33,600 
11,200 

11. 
Subtotal (3 + 5 + 8 + 10) 
486,900 
531,700 
593,300 

12. 
Tax Multiplier 
1.070 



13. 
Indicated Retrospective Premium (11 x 12) 
520,983 
568,919 
643,831 

14. 
Maximum Premium (14 x 1) 
1.300 
650,000 
650,000 
650,000 
15. 
Minimum Premium (15 x 1) 
0.600 
300,000 
300,000 
300,000 
16. 
Retrospective Premium 
520,983 
568,919 
634,831 
Example 4:
Calculation of the Basic Premium Factor
The key to establishing the Basic Premium Factor for a retrospective rating plan is the Table of Insurance Charges filed with state insurance departments. By expected loss groups, this table indicates the factors used to establish the premium charge that is vital to the determination of the Basic Premium Factor.
1. 
Estimated Standard Premium 
$500,000 
2. 
Expected Losses (1) x (3) 
$306,500 
3. 
Expected Loss Ratio 
.613 
4. 
Expected Limited Loss Ratio (3) – (g) 
.253 
5. 
Expense (Excluding Taxes) (1) x (h) 
$100,500 
6. 
Expected Loss plus Expense Ratio [(2) + (5)] ÷ (1) 
.814 
7. 
Loss and Expense in Converted Losses (3) x (d) 
.687 
8. 
Pure Expense for Basic Premium, Excluding Loss and Expense (6) – (7) 
.127 
9. 
Minimum Retrospective Premium Excluding Taxes [(c) ÷ (e)] 
.561 
10. 
Maximum Retrospective Premium Excluding Taxes [(b) ÷ (e)] 
1.215 
11. 
Table of Insurance Charges Value Difference [(6) – (9)] ÷ [(d) x (4)] 
.894 
12. 
Table of Insurance Charges Entry Difference [(10) – (9)] ÷ [(d) x (4)] 
2.31 
13. 
Ratio of Losses for Minimum Retro Premium to Expected Limited Losses 
.04 
14. 
Ratio of Losses for Maximum Retro Premium to Expected Limited Losses 
2.35 
15. 
Table of Insurance Charges  Premium Charge for (14) 
.065 
16. 
Table of Insurance Charges  Premium Saving for (13) 
.000 
17.  Net Insurance Charge [(15)  (16)] x (4)  .016 
18.  Basic Premium Factor [(17) x (d)] + (8)  .145 
The use of the Table of Insurance Charges is accounted for in the following explanations and illustrations of how to determine the factors and other elements needed for the operation of the Plan.
Note:  The procedures described here are designed exclusively for workers compensation and employers liability insurance. Rules for the application of a retrospective rating plan to a combination of workers compensation and employers liability insurance and other lines of casualty insurance are in the Retrospective Rating Plan Manual issued by the Insurance Services Office (ISO). 
Note:  The above calculations are based on the 1998 Table of Insurance Charges, using Expected Loss Group 52. 
The procedure for establishing the values and factors in the above examples follows:
Line 1. Estimated Standard Premium: This is the annual standard premium. Refer to the Rule 1.3.1.f. for the definition of standard premium. For threeyear retrospective rating plans, multiply the annual standard premium by three (3).
Line 2. Expected Losses: The expected losses equal the estimated standard premium multiplied by the expected loss ratio. Refer to Table A in the Table of Retrospective Rating Values for the Table of Expected Loss Size Ranges.
For an interstate risk, the expected losses equal the sum of the products of the estimated standard premium for each state and the corresponding expected loss ratio for each state. For the purpose of this example, it has been assumed that the risk is intrastate with an expected loss ratio of .613, which produces expected losses of $306,500 ($500,000 x .613).
Line 3. Total Expected Loss Ratio: This is the loss ratio for the risk obtained by dividing the total expected losses for all states covered by the retrospective rating plan by the total standard premium.
Line 4. Expected Limited Loss Ratio: This ratio is determined by subtracting the excess loss factor from the expected loss ratio.
Line 5. Expense and Profit or Contingency  Excluding Taxes: The expense and profit or contingency (excluding taxes) is determined by multiplying the standard premium by the applicable expense ratio.
Note:  For New York, these are carrier expense ratios; the NYCIRB does not publish Tables of Expense Ratios. 
For a threeyear plan, values are determined similarly for each of the years based on each annual estimated standard premium, and the sum of these values is the provision for expense and profit or contingency. The value for expenses shown in this example is equal to $100,500 ($500.000 x .201).
Line 6. Expected Loss and Expense Ratio: This ratio is obtained by dividing the expected losses plus the expenses and profit or contingency (excluding taxes) by the standard premium.
Line 7. Loss and Expense in Converted Losses: This factor, which expresses the ratio of expected losses and loss expense to estimated standard premium, is the product of the expected loss ratio and the loss conversion factor.
Line 8. Expense and Profit or Contingency in Basic Premium: The difference between the factor in Line 6, representing the total net premium provision for the insured under the retrospective rating plan, and the factor in Line 7, representing expected losses and loss adjustment expense insuring the risk, is the expense and contingency amount, and must be included in the basic premium.
Line 9. Minimum Premium Retrospective Factor  Excluding Taxes
Line 10. Maximum Premium Retrospective Factor  Excluding Taxes
Line 11. Table of Insurance Charges  Value Difference
Line 12. Table of Insurance Charges  Entry Difference
Lines 9 through Line 12 are determined in a way designed to facilitate the testing process by which the basic premium factor is established. The factors entered for these items are obtained as indicated in the example.
Line 11, Table of Insurance Charges  Value Difference equals the difference between the table charge for the entry ratio from which the savings is taken and the table charge for the entry ratio from which the charge is taken.
Line 12, Table of Insurance Charges  Entry Difference equals the difference between the entry ratios that determine the savings factor and the charge for the maximum premium.
To use the Table of Insurance Charges, find the loss group in the Expected Loss Ranges in the table containing the adjusted expected loss value. The adjusted expected loss value:
Line 2 x State and Hazard Group Differential x Loss Group Adjustment Factor
The Loss Group Adjustment Factor (F) applies when an individual loss limit is selected. The factor is:
F  = 
1 + ((.8)(LER)) 
, 
1  LER 
where the LER = ELF ÷ Item (3) = .36 ÷ .613 = .587
F  = 
1 + ((.8)(.587)) 
= 3.558 
1  (.587) 
S/H Differential = .750
The loss group is 52 (group that contains 229,875 (306,500 x .750)).
Then, choose two entry ratios from the Expected Loss Group in the table with a difference equal to Line 12. Make this choice so that the difference in the charges for the Expected Loss Group and for the selected entries most closely approximates Line 11.
To illustrate this testing procedure, several entry ratios and their corresponding charges in Group 52 have been reproduced from the Table:
Entry Ratio

Charges (Group 52)

Savings

.03

.970

.000

.04

.960

.000

.05

.950

.000




Entry Ratio

Charges (Group 52)


2.34

.065


2.35

.065


2.36

0.64


Choose and list pairs of entry ratios with a difference equal to Line 12, in this case 2.31, and note the respective difference in these charges:
(.03, 2.34)(.970  .065) = .905
(.04, 2.35)(.960  .065) = .895
(.05, 2.36)(.950  .065) = .886
The pair of entry ratios whose charge difference most closely approximates Line 11 is recorded under Lines 13 and 14.
Line 13. Ratio of Losses Producing Maximum Retrospective Premium to Expected Losses
Line 14. Ratio of Losses Producing Minimum Retrospective Premium to Expected Losses
Lines 13 and 14 are the pair of table entry ratio values determined by the process outlined previously.
Line 15. Premium Charge for (14): Given the loss group adjustment factor 16, this is the premium charge for losses in excess of those provided by the maximum retrospective premium. It is obtained by reading from the table as shown in Line 12.
Line 16. Premium Savings for (13): This is the premium saving for losses less than those that would produce the minimum retrospective premium. The values for premium savings are listed directly beneath the charge values in the Table of Insurance Charges. In this example, the savings of .
This table shows the procedures for carriers to develop an average expected loss ratio and state hazard group factor for multistate policies.
State

State Standard
Premium (A) 
Expected Loss Ratio
(B) 
Expected Losses 
State Hazard
Differential Factor (D) 
Development of
Average SHG (C x D) 
1

20,0000

0.627

125,400

1.030

129,162  
2

150,000

0.627

94,050

0.930

87,467  
3

10,000

0.635

6,350

1.200

7,620  
Totals

360,000

0.627

225.80

0.993

224,249

Example of a Short Rate Calculation of Maximum Retrospective Premium
Assume:  
Policy in effect  185 days 
Authorized Rate (per $100 payroll)  $5.00 
Actual payroll for 185 days  $555,000 
Experience Rating Modification  1.10 
Maximum Retrospective Premium Factor  1.60 
(a) Payroll extended to an annual basis:
$555,000  x 
365 days

= $1,095,000 
185 days 
(b) Annual Standard Premium = $1,095,000 x 5.00 (per $100) = $54,750
(c) Modified Premium = $54,750 x 1.10 = $60,225
(d) Maximum Retrospective Premium: $60,225 x 1.60 = $96,360
Information regarding each insured's election to participate in a retrospective rating plan must be submitted to the NYCIRB no later than 60 days after the Plan effective date:

Notification of Coverage

New York (Intrastate) Plans
A copy of a duly signed Notice of Election of Retrospective Rating Plan (Form RR50 [2010]) must be submitted to the NYCIRB for each intrastate retrospective rating plan that includes only the State of New York. 
MultiState Plans That Include New York
A copy of a duly signed Notification of Coverage (Form RR1 [2010]) must be submitted to the NYCIRB for each multistate retrospective rating plan that includes the State of New York. 
Large Risk Rating Option
A copy of a duly signed Notice of ElectionNew York Large Risk Rating Option (Form NYLR1 [2010]) must be submitted to the NYCIRB for each Large Risk Rating Option retrospective rating plan that includes the State of New York.

New York (Intrastate) Plans

Where to Submit Retrospective Rating Plan Forms
Submit all required forms for the reporting of retrospective rating plan information to:
 New York Compensation Insurance Rating Board
Attention: Rating Services
733 Third Avenue
New York, New York 10017
 New York Compensation Insurance Rating Board