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NOTICE OF MEETING
GOVERNING COMMITTEE
A meeting of the Governing Committee will be held at the offices of Commonwealth Automobile
Reinsurers, 225 Franklin Street, Boston, on
WEDNESDAY, APRIL 20, 2011 AT 10:00 A.M.
MEMBERS OF THE COMMITTEE
Mr. William J. Cahill, Jr. – Chairman
The Hanover Insurance Company
Mr. Andrew J. Carpentier Quincy Mutual Fire Insurance Company
Mr. David H. Cochrane The Commerce Insurance Company
Mr. Sumner D. Gilman Economy Insurance Agency, Inc.
Ms. Paula W. Gold Plymouth Rock Assurance Corporation
Mr. Joseph P. Leahy, Jr. Leahy and Brown Insurance and Realty
Mr. Raymond A. Lukas Chase, Clarke, Stewart & Fontana
Mr. Richard P. Jones Leslie S. Ray Insurance Agency, Inc.
Mr. James M. MacPhee Liberty Mutual Group
Mr. Robert P. Suglia Amica Mutual Insurance Company
Ms. Marie-Armel Theodat R. Theodat Insurance Agency, Inc.
Mr. Joseph A. Vargas Vargas & Vargas Insurance
AGENDA
GC
11.01 Records of Previous Meeting
The Records of the Governing Committee meeting of February 16, 2011 should be read and
approved.
GC
11.03 President’s Report
Commonwealth Automobile Reinsurers’ President will report on matters affecting CAR.
Notice of Meeting -2- April 20, 2011
Governing Committee
GC
11.04 Counsel’s Report
Commonwealth Automobile Reinsurers’ outside counsel will report on matters affecting pending
litigation and CAR Rule changes.
GC
11.12 Repayment Amendment for Guaranty Fund Certificates Issued by Arbella Mutual
Insurance Company
Arbella Mutual Insurance Company has requested an amendment to the Repayment Agreement
for Guaranty Fund Certificates Issued by Arbella Mutual Insurance Company to reduce its premium to
surplus ratio. Commissioner Murphy is seeking a recommendation from the Governing Committee as to
whether such agreement is consistent with the best interests of the Massachusetts residual market for
motor vehicle insurance. (Docket #GC11.12, Exhibit #2)
GC
11.05 Loss Reserving Committee
The Chairman of the Loss Reserving Committee will report on the meeting of March 2, 2011.
The Records of the Loss Reserving Committee meeting of March 2, 2011 are attached. (Docket
#GC11.05, Exhibit #2)
The Records of the Loss Reserving Committee meeting of March 2, 2011 have been distributed
and are on file with CAR’s Secretary.
GC
11.09 Compliance Audit Committee
The Chairman of the Compliance Audit Committee will report on the meeting of April 11, 2011.
The Records of the Compliance Audit Committee meeting of April 11, 2011 will be distributed as
additional information prior to the meeting
GC
11.13 Actuarial Committee
The Chairman of the Actuarial Committee will report on the meeting of April 6, 2011.
The Records of the Actuarial Committee meeting of April 6, 2011 will be distributed as
additional information prior to the meeting.
Notice of Meeting -3- April 20, 2011
Governing Committee
GC
11.14 MAIP Steering Committee
The Chairman of the MAIP Steering Committee will report on the meeting of April 14, 2011.
The Records of the MAIP Steering Committee meeting of April 14, 2011 will be distributed as
additional information prior to the meeting.
Other Business
To transact any other business that may properly come before this Committee.
Executive Session
The Governing Committee may convene in Executive Session in accordance with the provisions
of G.L. c. 30A, § 11A1/2.
RALPH A. IANNACO
President
Attachments
Boston, Massachusetts
April 8, 2011
CAR DOCKET #GC11.12
EXHIBIT #2
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April 20, 2011
PROPOSED AMENDMENTS
REPAYMENT AGREEMENT FOR GUARANTY FUND CERTIFICATES ISSUED BY
ARBELLA MUTUAL INSURANCE COMPANY
DOCUMENTATION
• CAR Counsel’s correspondence to Commissioner Murphy (03/15/11)
• Commissioner Murphy Correspondence – Proposal to Amend Repayment Agreement (02/11/11)
• Legal Analysis - Morrison, Mahoney (03/11/11)
• Arbella’s Supporting Documentation – 2009 - 2010 Premium to Surplus Ratio Information
• Original Agreement (Kemper Companies/Arbella Mutual Insurance Company - 09/30/88)
PLEASE NOTE:
All Notices, Records, and Transcripts of Meetings containing pertinent information relative
to the history of the proposed amendments to the Repayment Agreement for Guaranty Fund
Certificates Issued by Arbella Mutual Insurance Company are available on CAR’s website.
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M ORRISON M AHONEY LLP
M E M O R A N D U M
TO: Governing Committee, Commonwealth Automobile Reinsurers
FROM: Lee Stephen MacPhee, Outside General Counsel
Request of Commissioner of Insurance regarding Proposed Amendments to
SUBJECT: Repay Agreement for Guaranty Fund Certificates Issued by Arbella Mutual
Insurance Company
DATE: March 11, 2011
The issue for consideration of the Governing Committee. In a letter of February 11,
2011, the Commissioner of Insurance (“Commissioner") has sought the recommendation of the
Governing Committee as to whether certain Proposed Amendments to the Repayment
Agreement for Guaranty Fund Certificates issued by Arbella Mutual Insurance Company are
consistent with the best interests of the Massachusetts residual market for motor vehicle
insurance. In our opinion, the Governing Committee has three options. It can:
1. Recommend to the Commissioner that Arbella’s proposed
amendments are consistent with the best interests of the
Massachusetts residual market for motor vehicle insurance; or
2. Recommend to the Commissioner that Arbella’s proposed
amendments are inconsistent with the best interests of the
Massachusetts residual market for motor vehicle insurance; or
3. Advise the Commissioner that it can make no recommendation.
The nature of the amendments sought by Arbella. Arbella is currently party to an
agreement with the Commissioner which details Arbella’s repayment obligations under certain
Guaranty Fund Certificates. This Agreement increases Arbella’s payment under the Certificates
when its ‘premium to surplus’ ratio1 (on either a consolidated or stand-alone basis calculated on
its applicable annual statement) is less than 1.5 to 1.” Arbella seeks to reduce this premium to
surplus ratio trigger to 1 to 1.
1
The “premium to surplus” ratio is commonly used by the property and casualty insurance industry and rating
agencies as a measure of financial strength or to indicate to what degree a particular insurance company is
leveraged. Some commentators have suggested that a low ratio can be a sign of financial strength, but may also
indicate insufficient loss reserves or premium growth.
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Page 2
March 11, 2011
Historical background. A brief review of the history regarding the proposal may be
helpful. In 1988, the Commissioner agreed to allow the Kemper companies2 to exit the
Massachusetts motor vehicle insurance business in consideration for funding the creation of a
new entity, to whom Kemper's Massachusetts motor vehicle business would be transferred.
Arbella Mutual Insurance Company ("Arbella") was created by special act of the Legislature in
1988 as a mutual company and was designated the transferee of Kemper's motor vehicle business
in Massachusetts. The creation of Arbella allowed for an orderly and non-disruptive transfer of
Kemper's automobile business upon Kemper's withdrawal from the Massachusetts motor vehicle
insurance market. That orderly transition was memorialized in an agreement with an effective
date of September 30, 1988 by and among the various Kemper Companies, Arbella, CAR and
the Commissioner ("1988 Agreement"). The 1988 Agreement confirmed the various elements of
the transition, including the initial capitalization of Arbella by Kemper through guaranty fund
certificates in a total amount of $119 million.
Kemper contributed $119 million to Arbella in exchange for three guaranty fund
certificates (the “Certificates"). The 1988 Agreement provided the following, with respect to the
Certificates:
No repayment of principal or interest on the Certificates for at least
eight years (until 1996). Section 13.01.
The agreement contemplates the ability of Arbella to purchase the
Certificates from the holder(s) thereof after eight years from the
execution of the Agreement. Section 15.01
Within 365 days from the effective date of the 1988 Agreement,
the Commissioner may request that Kemper transfer the
Certificates to the Commissioner. Section 14.01. This transfer may
only occur after the Commissioner has requested the
recommendation of the Governing Committee whether such
transfer is consistent with the best interests of the residual market
for motor vehicle insurance. Sections 12.01, 13.02. Such
recommendation must be made within 45 days of the
Commissioner's request. CAR may also provide no response.
In the event that the Commissioner requests Kemper to transfer the
Certificates to the Commissioner, the Commissioner shall use any
payment of principal or interest on the Certificates received by her
for the public purpose of controlling the losses and expenses of the
residual market. Section 14.01.
If any repayment of principal or interest is subsequently requested
by a holder of the Certificates, the Commissioner must request the
2
“The Kemper companies” were Lumbermens Mutual Casualty Company, American Motorists Insurance
Company, and American Manufacturers Mutual Insurance Company.
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March 11, 2011
recommendation of the Governing Committee whether such
payment is consistent with the best interests of the residual market
for motor vehicle insurance. Sections 12.01, 13.02. Such
recommendation must be made within 45 days of the
Commissioner's request. CAR may also provide no response.
The 1988 Agreement provided that in the event the Commissioner approved a request for
payment as provided in Section 13.02, and the Governing Committee advised the Commissioner
that such payment was not consistent with the best interests of the Massachusetts residual market
for motor vehicle insurance, the Commissioner's decision would be subject to de novo judicial
review in the Superior Court upon appeal of that decision by CAR, its successor or Arbella
within thirty days of the date of the decision.
In 1989, the Commissioner requested the transfer of the Certificates to herself; once this
transfer was accomplished, she became the "holder" of the Certificates. CAR's Governing
Committee received a request from the Commissioner for its recommendation and advised the
Commissioner that the transfer was in the best interest of the residual market for motor vehicle
insurance.
Originally, there was to be no payment of principal or interest on the Certificates for eight
years (i.e. before October 1, 1996). In the context of Internal Revenue Service concerns
surrounding the non-repayment of the Certificates and the forgiveness of interest accruing
thereon, Arbella and the Commissioner entered into a repayment agreement on November 12,
1993 (the “Repayment Agreement"). The Repayment Agreement clarified the standards that the
Commissioner would apply to the repayment of the Certificates and provided Arbella with a
schedule of payment terms to maintain Arbella's financial stability and permit it to continue as an
active participant in the Massachusetts motor vehicle insurance market. After the eight-year
period elapsed, payments under the Certificates could only be made if the Commissioner (as
regulator) had determined that, following any such payment, Arbella's surplus to its
policyholders was reasonable in relation to its outstanding liabilities and adequate to its financial
needs, including its liabilities to the residual market for motor vehicle insurance.
The terms of the Repayment Agreement provided that commencing on April 1, 1998 and
for a period of 48 years, Arbella would make an annual payment of $250,000 ("Annual
Payment”). With respect to Accrued Interest (interest earned from October 1, 1988 through
November 12, 1993) and Allocable Interest (interest earned from November 12, 1993 through
December 31, 1996, the end of the eight year repayment prohibition), the Repayment Agreement
provided that Arbella would be relieved of the obligation to repay either sum so long as Arbella
made the annual payment, maintained motor vehicle insurance writings in Massachusetts at
substantially the same level as the amount of business transferred from Kemper to Arbella, and
maintained a premium to surplus ratio greater than 2:1 (emphasis supplied). Arbella was
also required to make an additional annual payment of the amount required to retire the
outstanding principal balance and any accrued interest thereon, assuming 48 equal annual
payments commencing on April 1, 1998 and 7% interest on the outstanding principal balance
compounded annually (“Additional Annual Payment"). This Additional Annual Payment was not
due and was intended to be forgiven in its entirety so long as in each year Arbella made its
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Page 4
March 11, 2011
Annual Payment of $250,000, continued to write motor vehicle insurance as outlined in the
agreement, and maintained at least a 2:1 premium to surplus ratio.
Pursuant to Section 14.01 of the 1988 Agreement and Paragraph 10 of the Repayment
Agreement, the Commissioner as Certificate Holder directed that any payments (including the
Annual Payment of $250,000) be paid to the Insurance Fraud Bureau for the purpose of assisting
the Bureau in controlling the losses and expenses of the residual motor vehicle insurance market.
Eighteen years later, by letter dated November 2, 2007, the Commissioner informed the
Governing Committee by letter that Arbella sought to amend the Repayment Agreement. In that
letter, then, as now, the Commissioner sought the recommendation of the Governing Committee
as to whether such amendment was consistent with the best interests of the Massachusetts
residual market for motor vehicle insurance. The proposed amendment sought to revise the
premium to surplus ratio from 2:1 to 1.5:1. (emphasis supplied)
In 2007, in exchange for this revision, Arbella agreed to:
a.) change the amount of the Annual Payment currently
directed to the Fraud Bureau from $250,000 to $500,000, with the
potential for the Annual Payment to increase incrementally in
those years that Arbella's surplus increased by a prescribed
amount. Depending on Arbella's surplus increase, that Annual
Payment amount could range from the $500,000 minimum to
$1,000,000. This increased Annual Payment commenced on April
1, 2008.
b.) voluntarily write homeowners insurance in the territories of
Fall River, New Bedford, Barnstable, Plymouth and Bristol for the
years 2008, 2009 and 2010 in at least the same amount of
homeowners gross written premium as Arbella wrote in calendar
year 2006 in such territories. With respect to this obligation,
Arbella could petition the Commissioner to reduce the obligation if
its cost of reinsurance or its MPIUA obligation for these territories
in any of those years materially increased in relation to those costs
for 2006. Additionally, the Commissioner could increase the
amended premium to surplus ratio anywhere from 1.5:1 to 2:1 if
Arbella failed to renew at least 80% of the homeowner policies in
these territories.
The Governing Committee considered the request in an Open Meeting. Among other things, it
reviewed an analysis of the premium to surplus ratios of the top 15 motor vehicle insurance
writers in the Commonwealth performed by CAR’s auditors, PricewaterhouseCoopers LLP
("PwC"). The Governing Committee then wrote to the Commissioner to recommend that the
Proposed Amendments were consistent with the best interests of the Massachusetts residual
market for motor vehicle insurance.
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Page 5
March 11, 2011
In 2004, the Commissioner approved the Massachusetts Automobile Insurance Plan
(“MAIP”) and the transition to the MAIP began with eligible policies effective April 1, 2008.
While the MAIP brought about many significant changes in the private passenger automobile
insurance market, one significant change relevant to this discussion was that motor vehicle
insurance writers in the Commonwealth became free to price their automobile insurance product
offering competitively with one another.
Now, twenty-three (23) years from the date of the original Agreement between CAR, the
Commissioner and the Kemper companies, Arbella has sought certain amendments, the practical
effect of which would be to permit it to reduce its premium to surplus ratio before Additional
Annual Payments will be required to be made. It is about this request that the Commissioner
again has sought the recommendation of the Governing Committee as to whether the proposed
amendments are consistent with the best interests of the Massachusetts residual market for motor
vehicle insurance.
Distinctions between Arbella’s 2007 proposal and its current proposal. There but
one distinction between the 2007 proposal and the current proposal. In 2007, Arbella agreed to
change the amount of the Annual Payment currently directed to the Insurance Fraud Bureau from
$250,000 to $500,000, with the potential for the Annual Payment to increase incrementally in
those years that Arbella's surplus increased by a particular amount in any year. In the current
proposal, the Annual Payment stays the same. Arbella will renew its agreement to continue to
voluntarily write homeowners insurance in the territories of Fall River, New Bedford,
Barnstable, Plymouth and Bristol for five (5) additional years.
Arbella has again provided CAR counsel with industry data reflecting the premium to
surplus ratio of the top twenty Massachusetts private passenger automobile writers. This data
reflects an average premium to surplus ratio of 1.11 to 1 and a median premium to surplus ratio
of 1.04 to 1. Arbella also provided CAR counsel with premium to surplus ratio information for
various property and casualty composite groups as reported in AM Best’s 2010 Edition of U.S.
Property & Casualty Industry Guide.
Arbella’s proposal would result in Arbella accumulating additional surplus prior to being
required to make an Additional Annual Payment under the Guaranty Fund Certificates. The
resulting question is whether the accumulation of this additional surplus is in the best interests of
the Massachusetts residual market for motor vehicle insurance. Arbella maintains that building
its surplus to a level consistent with the surplus levels of Massachusetts private passenger
automobile market and consistent with A.M. Best peer composites will ensure that it is
sufficiently capitalized to cover all its risks, including those risks assigned to it by the MAIP.
Arbella also proposes that ensuring that it operates with appropriate capital before making
Additional Annual Payments under the Guaranty Fund Certificates can only benefit the residual
market, given its significant market share.
Are there anti-trust implications for the Governing Committee? Since the
implementation of the MAIP, the insurance company members of the MAIP compete with one
another on an additional level, price. It has been suggested that, unlike the circumstances of the
1293568v1
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March 11, 2011
Governing Committee’s 2007 consideration of Arbella’s proposed amendments, it could be
argued that the insurance company members of the Governing Committee are being asked,
among other things, to pass judgment on the financial condition of a competitor. If such is the
case, does the Governing Committee’s consideration, deliberation and decision somehow violate
some anti-trust3 provisions? In our opinion, the answer to the question depends entirely upon the
information available for the Governing Committee’s consideration.
Were the insurance company members of the Governing Committee asked to consider
private information about the financial condition of a competitor, there exists the potential that
“inside” knowledge of such private information could provide some nature of competitive
advantage to the insurance company members of the Governing Committee and, therefore, raise
the specter of the potential for a violation of some anti-trust provision in the law. Here, however,
the Governing Committee has been provided with information on file with the Commissioner
and, therefore, available to the general public. In short, the insurance company members of the
Governing Committee have no confidential or proprietary information, but only that available to,
among others, the mass media. In our opinion, consideration of the Commissioner’s request for
a recommendation runs no significant risk of rising to the level of a violation of anti-trust
provisions.
The Governing Committee’s options. As noted above, in our opinion, the Governing
Committee has three options. It can:
1. Recommend to the Commissioner that Arbella’s proposed
amendments are consistent with the best interests of the
Massachusetts residual market for motor vehicle insurance; or
2. Recommend to the Commissioner that Arbella’s proposed
amendments are inconsistent with the best interests of the
Massachusetts residual market for motor vehicle insurance; or
3. Advise the Commissioner that it can make no recommendation.
The narrow question the Governing Committee must decide is whether the
Massachusetts residual market for motor vehicle insurance is well-served by the proposed
amendments that would allow Arbella to build its surplus prior to making Additional Annual
Payments under the Guaranty Fund Certificates.
3
Anti-trust law is a very broad body of state and federal law prohibiting anti-competitive behavior and unfair
business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws
make illegal certain practices deemed to hurt businesses or consumers or both, or generally to violate standards of
ethical behavior.
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# Code Company 39 Surplus as regards policyholders - 35 Total U/W & inv premiums earned -
1 Current year {2009} 1 Net premiums written {2009} RATIO
1 P0816 Commerce Group* 1,412,790,642 1,676,182,490 1.19
2 P0188 Safety Group* 556,575,175 532,628,933 0.96
3 P0111 Liberty Mutual Insurance Group* 14,703,585,177 20,630,465,770 1.40
4 P0586 Arbella Insurance Group* 468,191,430 618,205,102 1.32
5 P0415 Plymouth Rock Insurance Group* 162,421,253 248,331,211 1.53
6 P3548 Travelers Group* 22,537,881,673 20,306,473,531 0.90
7 P0241 Metropolitan Group* 1,817,212,889 2,915,717,705 1.60
8 P0088 Hanover Insurance Group* 1,741,552,480 2,616,796,177 1.50
9 P0028 Amica Mutual Group* 2,234,116,799 1,374,205,068 0.62
10 P0155 Progressive Group* 4,953,443,653 14,006,899,839 2.83
11 P1129 White Mountain Group* 2,633,080,363 2,321,204,547 0.88
12 P0200 USAA Group* 14,545,675,369 9,992,816,132 0.69
13 P1275 Quincy Mutual Group* 710,020,666 261,973,301 0.37
14 P0008 Allstate Insurance Group* 15,151,891,940 25,158,383,223 1.66
15 P0311 Main Street America Group* 691,974,306 815,500,119 1.18
16 P0144 Norfolk & Dedham Group* 214,221,839 133,473,457 0.62
17 P0031 Berkshire Hathaway Ins. Group* 64,145,611,083 21,362,173,987 0.33
18 P0234 Vermont Mutual Group* 211,089,867 236,631,624 1.12
19 P0225 IAT Reinsurance Group* 406,770,773 282,763,486 0.70
20 P0176 State Farm IL Group* 58,103,286,554 49,582,885,052 0.85
Total 207,401,393,931 175,073,710,754 0.84
AVERAGE 1.11
MEDIAN 1.04
NOTES:
Company data displayed 'as reported'.
* Highline Data - Calculated.
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Premium-to-Surplus Ratio Information
Per AM Best’s 2010 Edition of U.S. Property & Casualty Industry
COMPOSITE RATIO
U.S. P&C Industry (2,392 companies) 0.8 to 1
U.S. P&C Mutual Companies (311 cos.) 0.8 to 1
Commercial Lines Segment (1,371 cos.) 0.7 to 1
Personal Lines Segment (954 cos.) 1.07 to 1
Private Passenger Auto Composite (240 cos.) 0.8 to 1
Private Passenger Auto & Homeowners Composite (290 cos.) 1.1 to 1
Commercial Auto Composite (26 cos.) 0.8 to 1
Commercial Casualty Composite (545 cos.) 0.7 to 1
Commercial Property Composite (118 cos.) 0.5 to 1
Other Relevant Metrics related to premium-to-surplus ratio:
• Of the largest 45 U.S. P&C insurance groups as ranked by surplus,
o 85% have a premium to surplus ratio of less than 1.0 to 1
o 91% have a ratio of less than 1.5 to 1
• The largest 25 insurance groups rated A by AM Best have an average premium-
to-surplus ratio of 1-to-11
o Liberty Mutual
o Hartford Insurance Group
o CNA Insurance Companies
o Swiss Reinsurance Group
o Farmers Insurance Group
o Transatlantic
o American Family Insurance Group
o W.R. Berkley Group
o XL America Group
o Great American P&C Group
o Bank of America Group
o QBE Americas Group
o Metlife Auto & Home Group
o Hanover Insurance
o Auto Club Group
o Alleghany Insurance
o Assurant Insurance Group
o Markel Corporation
o ProAssurance Group
o Shelter Insurance Companies
o Westfield Group
o Harleysville Insurance
o Zenith National Insurance Group
o North Carolina Insurance Group
o Allied World Assurance Group
1
Calculated by adding each company’s ratio and dividing by 25
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SUMMARY OF MEETING
LOSS RESERVING COMMITTEE – MARCH 2, 2011
Members Present
Mr. Michael A. DeConti – Chairman Travelers Insurance
Mr. Kevin D. Burns The Hanover Insurance Company
Mr. Joseph F. Cofield Metropolitan P & C Insurance Company
Mr. Glenn R. Hiltpold* Safety Insurance Company
Substituted for:
Mr. Christopher J. Morkunas*
Not in Attendance:
Mr. Warren S. Ehrlich, The Commerce Insurance Company
Ms. Lynellen Ramirez, Arbella Insurance Group
Ms. Meredith M. Woodcock, Liberty Mutual Group
10.01 Records of Previous Meeting
The Committee unanimously voted to approve the Records of the Loss Reserving Committee
meeting of December 8, 2010. The Records have been distributed and are on file with CAR’s Secretary.
11.05 Policy Year Deficit and Loss Ratio Report
The Committee set loss and loss adjustment expense reserves, using data through December 31,
2010. The Committee estimated a policy year 2010 commercial deficit of $7.5 million with a loss ratio of
76.7%. The Committee projected a policy year 2009 private passenger ultimate deficit of $9.8 million
with a loss ratio of 108.2%, and a policy year 2009 commercial ultimate deficit of $4.9 million with a loss
ratio of 73.8%. Ultimate loss ratio and deficit projections for policy years 2010 and prior are detailed in
the attached exhibits.
10.07 Actuarial Standard of Practice 43
The Committee reviewed the Communication and Disclosure exhibit developed in compliance
with Actuarial Standard of Practice #43. The disclosure is intended to provide additional information to
the user of the Committee’s reserve estimates regarding the methods employed to develop the estimate
and its intended use. The Committee directed staff to distribute the document with the Settlement of
Balances to recipients of the Member Participation Reports.
SHANNON CHIU
Actuarial/Statistical Analyst
Boston, Massachusetts
April 8, 2011
CAR DOCKET #GC11.05
03/02/2011 REPORT OF THE LOSS RESERVING COMMITTEE EXHIBIT #2
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Quarter Ending December 31, 2010
Private Passenger LIABILITY PY 2010 PY 2009 PY 2008 PY 2007
@12 Mos @24 Mos
Written Premium 0 19,481 103,431 176,663
Written Premium Accrued 0 0 0 0
Unearned Premium Current 0 0 0 0
Total Earned Premium 0 19,481 103,431 176,663
Reported Losses 0 22,936 108,256 176,126
I.B.N.R. Reserve 0 (2,083) (468) (1,343)
Total Incurred Losses 0 20,853 107,788 174,783
Loss Ratio 0.000 1.070 1.042 0.989
Ceding Expenses & Commissions 0 6,226 33,495 57,572
Ceding Expenses Accrued 0 0 0 0
Rate Deviation 0 1,907 6,408 1,173
Rate Deviation Expense All. 0 608 2,069 384
Deferred Acquisition Costs 0 0 0 0
Expense Ratio to Earned Premium 0.000 0.320 0.324 0.326
C.A.R. Underwriting Deficit 0 (6,299) (33,513) (54,903)
Private Passenger PHYSICAL DAMAGE PY 2010 PY 2009 PY 2008 PY 2007
@12 Mos @24 Mos
Written Premium 0 9,323 48,954 80,260
Written Premium Accrued 0 0 0 0
Unearned Premium Current 0 0 0 0
Total Earned Premium 0 9,323 48,954 80,260
Reported Losses 0 9,555 52,404 81,656
I.B.N.R. Reserve 0 768 (474) (478)
Total Incurred Losses 0 10,323 51,930 81,178
Loss Ratio 0.000 1.107 1.061 1.011
Ceding Expenses & Commissions 0 3,049 16,396 27,445
Ceding Expenses Accrued 0 0 0 0
Rate Deviation 0 827 2,837 599
Rate Deviation Expense All. 0 269 951 206
Deferred Acquisition Costs 0 0 0 0
Expense Ratio to Earned Premium 0.000 0.327 0.335 0.342
C.A.R. Underwriting Deficit 0 (3,491) (17,486) (27,970)
Private Passenger - ALL PY 2010 PY 2009 PY 2008 PY 2007
@12 Mos @24 Mos
Written Premium 0 28,804 152,385 256,923
Written Premium Accrued 0 0 0 0
Unearned Premium Current 0 0 0 0
Total Earned Premium 0 28,804 152,385 256,923
Reported Losses 0 32,491 160,660 257,782
I.B.N.R. Reserve 0 (1,315) (942) (1,821)
Total Incurred Losses 0 31,176 159,718 255,961
Loss Ratio 0.000 1.082 1.048 0.996
Ceding Expenses & Commissions 0 9,275 49,891 85,017
Ceding Expenses Accrued 0 0 0 0
Rate Deviation 0 2,734 9,245 1,772
Rate Deviation Expense All. 0 877 3,020 590
Deferred Acquisition Costs 0 0 0 0
Expense Ratio to Earned Premium 0.000 0.322 0.327 0.331
C.A.R. Underwriting Deficit 0 (9,790) (50,999) (82,873)
11:24:22AM
CAR DOCKET #GC11.05
03/02/2011 REPORT OF THE LOSS RESERVING COMMITTEE EXHIBIT #2
PAGE 3 OF 16
Quarter Ending December 31, 2010
Private Passenger LIABILITY PY 2006 PY 2005 PY 2004 PY 2003
Written Premium 213,116 291,370 305,053 295,501
Written Premium Accrued 0 0 0 0
Unearned Premium Current 0 0 0 0
Total Earned Premium 213,116 291,370 305,053 295,501
Reported Losses 202,762 261,734 321,980 380,083
I.B.N.R. Reserve (933) (382) (210) (275)
Total Incurred Losses 201,829 261,352 321,770 379,808
Loss Ratio 0.947 0.897 1.055 1.285
Ceding Expenses & Commissions 65,753 86,637 87,834 84,793
Ceding Expenses Accrued 0 0 0 0
Rate Deviation 1,242 1,595 1,674 1,882
Rate Deviation Expense All. 388 475 476 519
Deferred Acquisition Costs 0 0 0 0
Expense Ratio to Earned Premium 0.309 0.297 0.288 0.287
C.A.R. Underwriting Deficit (53,612) (55,499) (103,353) (167,737)
Private Passenger PHYSICAL DAMAGE PY 2006 PY 2005 PY 2004 PY 2003
Written Premium 93,448 121,540 135,482 135,262
Written Premium Accrued 0 0 0 0
Unearned Premium Current 0 0 0 0
Total Earned Premium 93,448 121,540 135,482 135,262
Reported Losses 90,545 113,865 136,245 162,236
I.B.N.R. Reserve (60) (19) 0 0
Total Incurred Losses 90,485 113,846 136,245 162,236
Loss Ratio 0.968 0.937 1.006 1.199
Ceding Expenses & Commissions 30,961 37,991 42,759 41,042
Ceding Expenses Accrued 0 0 0 0
Rate Deviation 648 718 817 935
Rate Deviation Expense All. 212 223 252 278
Deferred Acquisition Costs 0 0 0 0
Expense Ratio to Earned Premium 0.331 0.313 0.316 0.303
C.A.R. Underwriting Deficit (27,562) (29,802) (42,957) (67,359)
Private Passenger - ALL PY 2006 PY 2005 PY 2004 PY 2003
Written Premium 306,564 412,910 440,535 430,763
Written Premium Accrued 0 0 0 0
Unearned Premium Current 0 0 0 0
Total Earned Premium 306,564 412,910 440,535 430,763
Reported Losses 293,307 375,599 458,225 542,319
I.B.N.R. Reserve (993) (401) (210) (275)
Total Incurred Losses 292,314 375,198 458,015 542,044
Loss Ratio 0.954 0.909 1.040 1.258
Ceding Expenses & Commissions 96,714 124,628 130,593 125,835
Ceding Expenses Accrued 0 0 0 0
Rate Deviation 1,890 2,313 2,491 2,817
Rate Deviation Expense All. 600 698 728 797
Deferred Acquisition Costs 0 0 0 0
Expense Ratio to Earned Premium 0.315 0.302 0.296 0.292
C.A.R. Underwriting Deficit (81,174) (85,301) (146,310) (235,096)
11:24:22AM
CAR DOCKET #GC11.05
03/02/2011 REPORT OF THE LOSS RESERVING COMMITTEE EXHIBIT #2
PAGE 4 OF 16
Quarter Ending December 31, 2010
All Other LIABILITY PY 2010 PY 2009 PY 2008 PY 2007
@12 Mos @24 Mos
Written Premium 72,875 79,859 94,992 122,735
Written Premium Accrued 0 0 0 0
Unearned Premium Current 33,761 0 0 0
Total Earned Premium 39,114 79,859 94,992 122,735
Reported Losses 19,770 47,283 63,919 68,470
I.B.N.R. Reserve 10,364 13,827 2,375 3,832
Total Incurred Losses 30,134 61,110 66,294 72,302
Loss Ratio 0.770 0.765 0.698 0.589
Ceding Expenses & Commissions 22,167 24,202 27,532 34,683
Ceding Expenses Accrued 0 0 0 0
Deferred Acquisition Costs 10,269 0 0 0
Expense Ratio to Earned Premium 0.304 0.303 0.290 0.283
C.A.R. Underwriting Deficit (2,918) (5,453) 1,166 15,750
All Other PHYSICAL DAMAGE PY 2010 PY 2009 PY 2008 PY 2007
@12 Mos @24 Mos
Written Premium 19,247 23,310 29,251 37,480
Written Premium Accrued 0 0 0 0
Unearned Premium Current 8,981 0 0 0
Total Earned Premium 10,266 23,310 29,251 37,480
Reported Losses 7,316 15,307 17,615 20,655
I.B.N.R. Reserve 446 (312) 871 17
Total Incurred Losses 7,762 14,995 18,486 20,672
Loss Ratio 0.756 0.643 0.632 0.552
Ceding Expenses & Commissions 6,938 7,769 9,250 11,972
Ceding Expenses Accrued 0 0 0 0
Deferred Acquisition Costs 3,237 0 0 0
Expense Ratio to Earned Premium 0.361 0.333 0.316 0.319
C.A.R. Underwriting Deficit (1,197) 546 1,515 4,836
All Other - ALL PY 2010 PY 2009 PY 2008 PY 2007
@12 Mos @24 Mos
Written Premium 92,122 103,169 124,243 160,215
Written Premium Accrued 0 0 0 0
Unearned Premium Current 42,742 0 0 0
Total Earned Premium 49,380 103,169 124,243 160,215
Reported Losses 27,086 62,590 81,534 89,125
I.B.N.R. Reserve 10,810 13,515 3,246 3,849
Total Incurred Losses 37,896 76,105 84,780 92,974
Loss Ratio 0.767 0.738 0.682 0.580
Ceding Expenses & Commissions 29,105 31,971 36,782 46,655
Ceding Expenses Accrued 0 0 0 0
Deferred Acquisition Costs 13,506 0 0 0
Expense Ratio to Earned Premium 0.316 0.310 0.296 0.291
C.A.R. Underwriting Deficit (4,115) (4,907) 2,681 20,586
11:24:22AM
CAR DOCKET #GC11.05
03/02/2011 REPORT OF THE LOSS RESERVING COMMITTEE EXHIBIT #2
PAGE 5 OF 16
Quarter Ending December 31, 2010
All Other LIABILITY PY 2006 PY 2005 PY 2004 PY 2003
Written Premium 148,157 153,002 158,108 160,450
Written Premium Accrued 0 0 0 0
Unearned Premium Current 0 0 0 0
Total Earned Premium 148,157 153,002 158,108 160,450
Reported Losses 94,161 92,970 108,245 102,242
I.B.N.R. Reserve 1,070 (93) 137 0
Total Incurred Losses 95,231 92,877 108,382 102,242
Loss Ratio 0.643 0.607 0.685 0.637
Ceding Expenses & Commissions 43,414 40,971 42,185 43,400
Ceding Expenses Accrued 0 0 0 0
Deferred Acquisition Costs 0 0 0 0
Expense Ratio to Earned Premium 0.293 0.268 0.267 0.270
C.A.R. Underwriting Deficit 9,512 19,154 7,541 14,808
All Other PHYSICAL DAMAGE PY 2006 PY 2005 PY 2004 PY 2003
Written Premium 45,570 49,093 52,088 47,489
Written Premium Accrued 0 0 0 0
Unearned Premium Current 0 0 0 0
Total Earned Premium 45,570 49,093 52,088 47,489
Reported Losses 24,693 25,407 28,189 27,809
I.B.N.R. Reserve 35 13 0 0
Total Incurred Losses 24,728 25,420 28,189 27,809
Loss Ratio 0.543 0.518 0.541 0.586
Ceding Expenses & Commissions 13,465 14,081 14,856 13,808
Ceding Expenses Accrued 0 0 0 0
Deferred Acquisition Costs 0 0 0 0
Expense Ratio to Earned Premium 0.295 0.287 0.285 0.291
C.A.R. Underwriting Deficit 7,377 9,592 9,043 5,872
All Other - ALL PY 2006 PY 2005 PY 2004 PY 2003
Written Premium 193,727 202,095 210,196 207,939
Written Premium Accrued 0 0 0 0
Unearned Premium Current 0 0 0 0
Total Earned Premium 193,727 202,095 210,196 207,939
Reported Losses 118,854 118,377 136,434 130,051
I.B.N.R. Reserve 1,105 (80) 137 0
Total Incurred Losses 119,959 118,297 136,571 130,051
Loss Ratio 0.619 0.585 0.650 0.625
Ceding Expenses & Commissions 56,879 55,052 57,041 57,208
Ceding Expenses Accrued 0 0 0 0
Deferred Acquisition Costs 0 0 0 0
Expense Ratio to Earned Premium 0.294 0.272 0.271 0.275
C.A.R. Underwriting Deficit 16,889 28,746 16,584 20,680
11:24:22AM
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 6 OF 16
ALL PRIVATE PASSENGER
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010
2009 115.5% 113.8% 110.0% 108.4% 107.2% 109.4% 109.1% 108.2%
2008 113.7% 110.4% 107.4% 106.0% 105.3% 105.9% 105.2% 104.8%
2007 103.4% 101.9% 100.2% 99.8% 99.3% 99.7% 99.6% 99.6%
2006 95.8% 95.5% 95.5% 95.3% 95.3% 95.4% 95.5% 95.4%
2005 90.8% 90.8% 90.8% 90.8% 90.8% 90.8% 90.9% 90.9%
2004 103.7% 103.8% 103.8% 103.9% 103.9% 104.0% 103.9% 104.0%
2003 125.6% 125.6% 125.6% 125.7% 125.7% 125.8% 125.8% 125.8%
ALL OTHER THAN PRIVATE PASSENGER
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010 76.8% 75.9% 76.9% 76.7%
2009 74.9% 69.4% 70.2% 72.8% 74.4% 74.6% 73.8% 73.8%
2008 69.7% 69.4% 68.5% 69.2% 69.3% 68.4% 68.4% 68.2%
2007 61.7% 60.1% 60.0% 60.0% 60.1% 59.0% 58.2% 58.0%
2006 63.7% 63.6% 62.9% 62.9% 63.0% 62.7% 62.2% 61.9%
2005 60.4% 59.7% 59.7% 58.8% 58.6% 58.8% 58.8% 58.5%
2004 63.6% 64.2% 64.1% 64.5% 64.7% 64.8% 65.1% 65.0%
2003 63.0% 62.9% 62.9% 62.7% 62.7% 62.7% 62.7% 62.5%
03/02/2011 12:08:05PM
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 7 OF 16
P.P. BODILY INJURY & PIP
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010
2009 130.7% 129.1% 124.4% 124.3% 121.2% 124.2% 124.7% 123.3%
2008 135.2% 129.5% 124.5% 122.2% 119.6% 119.7% 118.6% 117.5%
2007 113.3% 111.2% 108.8% 108.5% 108.0% 108.5% 107.8% 107.8%
2006 103.3% 102.8% 102.4% 101.9% 101.9% 102.2% 102.3% 102.0%
2005 97.5% 97.2% 97.4% 97.4% 97.4% 97.3% 97.4% 97.4%
2004 118.0% 118.1% 118.3% 118.5% 118.4% 118.5% 118.5% 118.5%
2003 151.4% 151.3% 151.4% 151.4% 151.6% 151.8% 151.8% 151.8%
P.P. PROPERTY DAMAGE LIABILITY
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010
2009 96.4% 92.9% 88.2% 85.4% 85.4% 86.6% 86.0% 85.9%
2008 89.4% 86.4% 84.9% 84.9% 85.9% 87.0% 87.0% 87.2%
2007 91.6% 90.5% 89.5% 89.2% 87.5% 87.5% 87.5% 87.4%
2006 84.3% 84.2% 84.2% 84.2% 84.2% 84.1% 84.2% 84.2%
2005 78.0% 78.0% 78.0% 78.0% 78.0% 78.0% 78.1% 78.1%
2004 85.6% 85.6% 85.6% 85.6% 85.6% 85.6% 85.6% 85.6%
2003 92.7% 92.7% 92.7% 92.7% 92.7% 92.7% 92.7% 92.7%
PRIVATE PASSENGER LIABILITY
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010
2009 115.8% 113.3% 108.6% 107.4% 105.7% 107.8% 107.9% 107.0%
2008 115.1% 110.6% 107.1% 105.8% 104.8% 105.3% 104.7% 104.2%
2007 103.9% 102.2% 100.4% 100.2% 99.1% 99.4% 99.0% 98.9%
2006 95.6% 95.2% 95.0% 94.7% 94.7% 94.8% 94.9% 94.7%
2005 89.7% 89.6% 89.7% 89.7% 89.7% 89.6% 89.7% 89.7%
2004 105.2% 105.2% 105.3% 105.4% 105.4% 105.5% 105.4% 105.5%
2003 128.2% 128.2% 128.2% 128.3% 128.4% 128.5% 128.5% 128.5%
03/02/2011 12:08:05PM
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 8 OF 16
ALL OTHER BODILY INJURY & PIP
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010 79.3% 79.2% 79.2% 78.6%
2009 70.9% 70.1% 72.2% 77.1% 79.0% 80.7% 79.4% 78.5%
2008 68.2% 68.4% 67.3% 69.2% 69.3% 69.3% 69.2% 68.8%
2007 62.7% 61.0% 60.8% 60.8% 61.1% 59.2% 57.7% 57.7%
2006 66.3% 66.2% 65.2% 65.1% 65.3% 65.0% 64.0% 63.5%
2005 62.7% 61.5% 61.5% 59.6% 59.1% 59.5% 59.7% 59.2%
2004 66.0% 67.0% 66.7% 67.6% 67.8% 67.8% 68.2% 67.9%
2003 59.7% 59.5% 59.6% 59.1% 59.1% 59.1% 59.1% 58.8%
ALL OTHER PROPERTY DAMAGE LIABILITY
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010 78.9% 71.1% 74.5% 73.5%
2009 78.9% 72.7% 72.7% 72.8% 74.8% 71.4% 71.2% 72.1%
2008 77.1% 76.7% 76.0% 74.6% 74.6% 71.4% 71.4% 71.9%
2007 64.9% 62.2% 62.5% 62.6% 62.5% 62.3% 62.3% 61.6%
2006 67.0% 67.0% 66.6% 66.4% 66.3% 66.0% 66.0% 66.0%
2005 64.2% 64.2% 64.2% 64.5% 64.4% 64.7% 64.4% 64.3%
2004 69.0% 69.1% 69.1% 69.2% 69.2% 69.9% 70.2% 70.1%
2003 76.3% 76.3% 76.2% 76.3% 76.3% 76.4% 76.4% 76.4%
ALL OTHER LIABILITY
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010 79.2% 76.7% 77.8% 77.0%
2009 73.5% 70.9% 72.4% 75.7% 77.7% 77.8% 76.8% 76.5%
2008 71.1% 71.1% 70.1% 71.0% 71.0% 70.0% 69.9% 69.8%
2007 63.4% 61.4% 61.4% 61.4% 61.5% 60.2% 59.1% 58.9%
2006 66.5% 66.5% 65.6% 65.5% 65.6% 65.3% 64.6% 64.3%
2005 63.2% 62.3% 62.3% 61.1% 60.7% 61.0% 61.1% 60.7%
2004 66.9% 67.6% 67.4% 68.0% 68.2% 68.4% 68.8% 68.5%
2003 64.3% 64.2% 64.2% 63.9% 63.9% 64.0% 63.9% 63.7%
03/02/2011 12:08:05PM
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 9 OF 16
P.P. COLLISION
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010
2009 115.7% 116.1% 114.4% 111.5% 111.5% 113.6% 112.9% 111.6%
2008 106.8% 106.0% 103.6% 102.1% 101.3% 102.3% 102.3% 102.3%
2007 101.3% 99.6% 97.7% 97.1% 97.7% 98.4% 98.4% 98.4%
2006 93.9% 93.9% 94.9% 94.9% 94.9% 94.9% 94.9% 94.9%
2005 90.9% 90.9% 90.8% 90.9% 90.9% 90.9% 90.9% 90.9%
2004 99.4% 99.4% 99.4% 99.5% 99.5% 99.5% 99.5% 99.5%
2003 119.1% 119.0% 119.0% 119.0% 119.0% 119.0% 119.0% 119.0%
P.P. COMPREHENSIVE
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010
2009 112.4% 111.9% 108.8% 108.2% 107.8% 110.4% 108.8% 108.3%
2008 122.5% 122.2% 120.4% 119.4% 120.5% 122.0% 117.2% 117.1%
2007 105.7% 105.5% 105.5% 105.5% 105.7% 106.7% 109.9% 110.0%
2006 104.0% 102.6% 102.7% 102.7% 102.7% 102.7% 102.7% 102.7%
2005 100.8% 101.0% 101.0% 101.2% 101.2% 101.2% 101.1% 101.2%
2004 103.3% 103.3% 103.3% 103.3% 103.3% 103.3% 103.3% 103.3%
2003 122.0% 122.0% 122.0% 122.0% 122.0% 122.0% 122.0% 122.0%
P.P. PHYSICAL DAMAGE
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010
2009 114.8% 114.9% 112.9% 110.6% 110.5% 112.7% 111.8% 110.7%
2008 110.8% 110.1% 107.9% 106.5% 106.2% 107.3% 106.1% 106.1%
2007 102.4% 101.0% 99.6% 99.1% 99.6% 100.4% 101.1% 101.1%
2006 96.4% 96.1% 96.8% 96.8% 96.8% 96.8% 96.8% 96.8%
2005 93.5% 93.6% 93.6% 93.6% 93.7% 93.7% 93.6% 93.7%
2004 100.5% 100.5% 100.5% 100.6% 100.6% 100.6% 100.6% 100.6%
2003 120.0% 119.9% 119.9% 119.9% 120.0% 119.9% 119.9% 119.9%
03/02/2011 12:08:05PM
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 10 OF 16
ALL OTHER COLLISION
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010 75.2% 81.4% 81.6% 86.8%
2009 96.1% 71.4% 69.3% 69.4% 69.4% 69.3% 68.4% 69.8%
2008 73.5% 71.2% 70.6% 71.2% 71.1% 71.6% 71.5% 71.5%
2007 58.2% 57.9% 58.0% 58.1% 58.6% 58.4% 58.4% 58.4%
2006 57.4% 57.2% 57.2% 57.4% 57.5% 57.4% 57.4% 57.4%
2005 53.2% 53.2% 53.3% 53.4% 53.3% 53.3% 53.3% 53.3%
2004 57.0% 57.0% 57.2% 57.2% 57.2% 57.2% 57.2% 57.2%
2003 59.9% 59.9% 60.0% 59.9% 59.9% 59.9% 59.9% 59.9%
ALL OTHER COMPREHENSIVE
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010 55.9% 58.9% 60.7% 58.7%
2009 53.7% 53.6% 53.4% 53.5% 53.7% 55.3% 55.8% 55.7%
2008 52.1% 51.8% 51.2% 50.8% 51.0% 50.1% 50.3% 49.6%
2007 52.2% 52.3% 50.7% 50.3% 49.7% 49.6% 49.6% 49.5%
2006 48.9% 48.8% 48.8% 48.8% 48.8% 48.8% 48.7% 48.7%
2005 49.2% 49.2% 49.2% 49.2% 49.2% 49.1% 49.1% 49.1%
2004 47.7% 48.1% 48.1% 48.1% 48.1% 48.1% 48.1% 48.7%
2003 56.1% 56.0% 56.0% 56.0% 56.0% 56.0% 56.0% 56.0%
ALL OTHER PHYSICAL DAMAGE
Policy Yr 03-09 06-09 09-09 12-09 03-10 06-10 09-10 12-10
2010 67.6% 72.5% 73.3% 75.6%
2009 79.6% 64.6% 63.2% 63.2% 63.3% 63.9% 63.5% 64.3%
2008 65.4% 63.8% 63.2% 63.4% 63.5% 63.5% 63.4% 63.2%
2007 56.1% 55.9% 55.3% 55.3% 55.3% 55.2% 55.2% 55.2%
2006 54.3% 54.2% 54.2% 54.3% 54.4% 54.3% 54.3% 54.3%
2005 51.8% 51.8% 51.8% 51.8% 51.8% 51.8% 51.8% 51.8%
2004 53.6% 53.8% 53.9% 53.9% 53.9% 53.9% 53.9% 54.1%
2003 58.6% 58.6% 58.6% 58.6% 58.6% 58.6% 58.6% 58.6%
03/02/2011 12:08:05PM
CAR DOCKET #GC11.05
ULTIMATE POLICY YEAR DEFICIT PROJECTIONS EXHIBIT #2
PAGE 11 OF 16
BASED ON DATA REPORTED THROUGH QUARTER ENDING 12/10
(000's OMITTED)
SUMMARY EXHIBIT
Policy Year 2008 Policy Year 2009 Policy Year 2010
Dollars % Prem Dollars % Prem Dollars % Prem
PRIVATE PASSENGER
Premium 152,380 100.0% 28,790 100.0%
Losses Incurred and ALAE 159,694 104.8% 31,151 108.2%
Underwriting Expenses 49,889 32.7% 9,270 32.2%
Rate Deviation 9,245 6.07% 2,733 9.49%
Rate Deviation Expense All. 3,020 32.7% 877 32.1%
Underwriting Result (50,978) -33.5% (9,775) -34.0%
OTHER THAN PRIVATE PASSENGER
Premium 124,240 100.0% 103,050 100.0% 89,100 100.0%
Losses Incurred and ALAE 84,780 68.2% 76,051 73.8% 68,340 76.7%
Underwriting Expenses 36,781 29.6% 31,934 31.0% 28,245 31.7%
Underwriting Result 2,679 2.2% (4,935) -4.8% (7,485) -8.4%
ALL CLASSES COMBINED
Premium 276,620 100.0% 131,840 100.0% 89,100 100.0%
Losses Incurred and ALAE 244,474 88.4% 107,202 81.3% 68,340 76.7%
Underwriting Expenses 86,670 31.3% 41,204 31.3% 28,245 31.7%
Rate Deviation 9,245 3.3% 2,733 2.1%
Rate Deviation Expense All. 3,020 32.7% 877 32.1%
Underwriting Result (48,299) -17.5% (14,710) -11.2% (7,485) -8.4%
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 12 OF 16
COMPARISON OF ULTIMATE POLICY YEAR DEFICIT PROJECTIONS
PRIOR AND CURRENT QUARTER ESTIMATES
Policy Year 2010
Prior Qtr Estimate Current Qtr Estimate Variance
Dollars % Prem Dollars % Prem Dollars Percent
PRIVATE PASSENGER
Premium
Losses Incurred and ALAE
Underwriting Expenses
Rate Deviation
Rate Deviation Expense All.
Underwriting Result
OTHER THAN PRIVATE PASSENGER
Premium 88,750 100.0% 89,100 100.0% 350 0.4%
Losses Incurred and ALAE 68,249 76.9% 68,340 76.7% 91 0.1%
Underwriting Expenses 28,134 31.7% 28,245 31.7% 111 0.4%
Underwriting Result (7,633) -8.6% (7,485) -8.4% 148 -1.9%
ALL CLASSES COMBINED
Premium 88,750 100.0% 89,100 100.0% 350 0.4%
Losses Incurred and ALAE 68,249 76.9% 68,340 76.7% 91 0.1%
Underwriting Expenses 28,134 31.7% 28,245 31.7% 111 0.4%
Underwriting Result (7,633) -8.6% (7,485) -8.4% 148 -1.9%
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 13 OF 16
COMPARISON OF ULTIMATE POLICY YEAR DEFICIT PROJECTIONS
PRIOR AND CURRENT QUARTER ESTIMATES
Policy Year 2009
Prior Qtr Estimate Current Qtr Estimate Variance
Dollars % Prem Dollars % Prem Dollars Percent
PRIVATE PASSENGER
Premium 28,770 100.0% 28,790 100.0% 20 0.1%
Losses Incurred and ALAE 31,388 109.1% 31,151 108.2% (237) -0.8%
Underwriting Expenses 9,264 32.2% 9,270 32.2% 6 0.1%
Rate Deviation 2,738 9.52% 2,733 9.49% (6) -0.2%
Rate Deviation Expense All. 878 32.1% 877 32.1% (1) -0.1%
Underwriting Result (10,021) -34.8% (9,775) -34.0% 246 -2.5%
OTHER THAN PRIVATE PASSENGER
Premium 102,980 100.0% 103,050 100.0% 70 0.1%
Losses Incurred and ALAE 75,999 73.8% 76,051 73.8% 52 0.1%
Underwriting Expenses 31,924 31.0% 31,934 31.0% 10 0.0%
Underwriting Result (4,943) -4.8% (4,935) -4.8% 8 -0.2%
ALL CLASSES COMBINED
Premium 131,750 100.0% 131,840 100.0% 90 0.1%
Losses Incurred and ALAE 107,387 81.5% 107,202 81.3% (185) -0.2%
Underwriting Expenses 41,188 31.3% 41,204 31.3% 16 0.0%
Rate Deviation 2,738 2.1% 2,733 2.1% (6) -0.2%
Rate Deviation Expense All. 878 32.1% 877 32.1% (1) -0.1%
Underwriting Result (14,964) -11.4% (14,710) -11.2% 254 -1.7%
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 14 OF 16
COMPARISON OF ULTIMATE POLICY YEAR DEFICIT PROJECTIONS
PRIOR AND CURRENT QUARTER ESTIMATES
Policy Year 2008
Prior Qtr Estimate Current Qtr Estimate Variance
Dollars % Prem Dollars % Prem Dollars Percent
PRIVATE PASSENGER
Premium 152,390 100.0% 152,380 100.0% (10) 0.0%
Losses Incurred and ALAE 160,314 105.2% 159,694 104.8% (620) -0.4%
Underwriting Expenses 49,893 32.7% 49,889 32.7% (4) 0.0%
Rate Deviation 9,246 6.07% 9,245 6.07% (1) 0.0%
Rate Deviation Expense All. 3,021 32.7% 3,020 32.7% (1) 0.0%
Underwriting Result (51,592) -33.9% (50,978) -33.5% 614 -1.2%
OTHER THAN PRIVATE PASSENGER
Premium 124,240 100.0% 124,240 100.0% 0 0.0%
Losses Incurred and ALAE 84,980 68.4% 84,780 68.2% (200) -0.2%
Underwriting Expenses 36,775 29.6% 36,781 29.6% 6 0.0%
Underwriting Result 2,485 2.0% 2,679 2.2% 194 7.8%
ALL CLASSES COMBINED
Premium 276,630 100.0% 276,620 100.0% (10) 0.0%
Losses Incurred and ALAE 245,294 88.7% 244,474 88.4% (820) -0.3%
Underwriting Expenses 86,668 31.3% 86,670 31.3% 2 0.0%
Rate Deviation 9,246 3.3% 9,245 3.3% (1) 0.0%
Rate Deviation Expense All. 3,021 32.7% 3,020 32.7% (1) 0.0%
Underwriting Result (49,107) -17.8% (48,299) -17.5% 808 -1.6%
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 15 OF 16
CAR Loss Reserving Committee Estimation of Unpaid Losses and LAE
Actuarial Standard of Practice (ASOP) #43
Communications and Disclosures
CAR’s Loss Reserving Committee (the Committee) meets on a quarterly basis to
review ceded exposure, premium, loss, and allocated loss adjustment expense data to
estimate loss and allocated loss adjustment expenses for unpaid claims of the
Massachusetts Private Passenger and Commercial Automobile Reinsurance Facilities.
Effective 4/1/2009, no new private passenger exposures will be ceded to the Private
Passenger Reinsurance Facility. Instead, private passenger residual market exposures will
be randomly allocated to servicing carriers utilizing the Massachusetts Automobile
Insurance Plan (“MAIP”). Because each servicing carrier bears the financial
responsibility of those policies it is assigned, the Committee does not estimate loss and
allocated loss adjustment expenses for the MAIP. This statement identifies the intended
purpose or use of the Committee’s estimates, including limitations and scope. For further
information regarding methods, relevant dates, significant events, assumptions, and other
disclosures, the user of the Committee’s estimates should refer to the Notice and Records
of its meetings. CAR also seeks and obtains an independent Statement of Actuarial
Opinion. The Opinion is provided for CAR members and for regulatory examination by
state authorities for their evaluation of the loss reserves.
Purpose:
The Committee reviews loss development data for private passenger and commercial
ceded risks in order to determine the IBNR loss reserves of the Reinsurance Facilities.
The reserve estimates are incorporated into the Member Participation reports to notify
CAR Members of their assumed share of the Financial Underwriting results of the
Facility.
Distribution and Use:
The Committee’s loss and allocated loss adjustment expense estimates are distributed to
CAR Members. In addition, the Members’ assumed shares are calculated by CAR
Finance Department and distributed to assist Members’ in meeting with their accounting
and financial reporting requirements. The results are used by CAR management, and the
CAR Governing Committee for its financial reporting requirements and ad hoc analyses.
Scope:
The actuarial central estimate represents an expected value over a range of reasonable
possible outcomes. The estimate reflects a certain degree of uncertainty resulting from
the review of multiple actuarial techniques and the use of ceded data reported to CAR by
Member Companies. Member company data is subject to internal review and company
audits by CAR staff. Staff contacts any member company with data concerns arising from
the internal review. Multiple actuarial techniques are used to project the ultimate losses
and allocated loss adjustment expenses. These techniques include historical loss
development data as well as an assessment of the reasonability of the resulting loss ratio
(considering recent rate changes and residual market volume. Unpaid claim estimates are
net of salvage and subrogation. CAR has no direct rights to salvage and subrogation.
CAR DOCKET #GC11.05
EXHIBIT #2
PAGE 16 OF 16
CAR reserves do not include a provision for additional salvage and subrogation. The
provision of allocated loss adjustment expense reflects expenses as defined in the
Massachusetts Private Passenger and Commercial Statistical Plans. Unallocated loss
adjustment expenses are included as a component of the servicing carrier expense
allowance. Estimates make no provision for extraordinary future emergence of new
classes of losses or types of loss not significantly represented in CAR’s historical
database or which are not quantifiable. The estimates make no provision for the impact
of possible changes in legal interpretation or statutory rules applied on a retrospective
basis. More information regarding measures for the unpaid claim estimate is included in
the Committee Meeting Notices and Records.
