W. C. Circular Letter No. 686
Retrospective Rating Article No. 179
Announcement of Residual Market Factors
For 1991, 1992, 1993 & 1994
Notice is hereby given that the Commissioner of Insurance has entered Commissioner's Order No. 97-0689 dated July 11, 1997, that amends Part One Section I. A. 13 and Part Two Section I. E. and F. of the Texas Retrospective Rating Plan Manual - Workers' Compensation and Employers' Liability Insurance (Manual). These changes are necessary in order to establish the only allowable method for calculating the Residual Market Premium (RMP). The effective date of these rules is August 6, 1997, which is the 15th day after notice of this action is published in the Texas Register.
The Residual Market Factor (RMF) for accident year 1991 includes the operating results of the Texas Workers' Compensation Insurance Facility (Facility) as of December 31, 1993. The RMF's for accident years 1992, 1993 and 1994 include the operating results of the Facility through December 31, 1995, plus the 1997 final assessment. The RMF's for 1992, 1993 and 1994 may change if there are changes in the operating results of the Facility in the future.
The rebate to the members of the Facility for the 1991 accident year based on the Facility's operating results as of December 31, 1993 was $248,550,000. The voluntary premium writings as calculated by the Facility for 1991 were $2,815,960,382, resulting in an RMF of .0883 for the 1991 calendar year. The rebate to retrospectively rated policyholders with policies effective on and after May 1, 1991 through December 31, 1991 that elected to pay the RMP as an additional elective element to the retrospective premium shall be calculated as follows:
RMF factor of .0883 shall be applied to the retrospective premium developed on the latest (as of August 6, 1997 the effective date of these rules) premium computation in accordance with the rules set forth in the Manual . The RMF shall apply to the maximum or minimum if either applies.
The net rebate to the members of the Facility for the 1992 accident year based on the Facility's operating results as of December 31, 1995 was $315,044,000, less the final assessment of $36,687,000. The voluntary premium writings as calculated by the Facility were $1,561,483,924, resulting in an RMF of .1783 for the 1992 calendar year. The net rebate to the members of the Facility for the 1993 accident year based on the Facility's operating results as of December 31, 1995 was $132,418,000, less the final assessment of $4,624,000. The voluntary premium writings as calculated by the Facility were $1,407,689,040, resulting in an RMF of .0908 for the 1993 calendar year. The net rebate to the Members of the Facility for the 1994 accident year based on the operating results as of December 31, 1995 was $17,158,000, less the final assessment of $773,000. The voluntary premium writings as calculated by the Facility were $1,254,673,292, resulting in an RMF of .0131 for the 1994 calendar year.
The rebate to retrospectively rated policyholders effective during calendar years 1992, 1993 and/or 1994 shall be calculated as follows:
- for policies effective during the 1992 calendar year, the RMF of .1783 shall be applied to the retrospective premium developed on the latest (as of August 6, 1997 the effective date of these rules) premium computation in accordance with the rules set forth in the Manual. The RMF shall apply to the maximum or minimum if either applies.
- for policies effective during the 1993 calendar year, the RMF of .0908 shall be applied to the retrospective premium developed on the latest (as of August 6, 1997 the effective date of these rules) premium computation in accordance with the rules set forth in the Manual. The RMF shall apply to the maximum or minimum if either applies.
- for policies effective during the 1994 calendar year, the RMF of .0131 shall be applied to the retrospective premium developed on the latest (as of the August 6, 1997 the effective date of these rules) premium computation in accordance with the rules set forth in the Manual. The RMF shall apply to the maximum or minimum if either applies.
Each insurer shall calculate and return the appropriate RMP to each retrospectively rated policyholder affected by these rules no later than 180 days after the effective date of Commissioner's Order No. 97-0689. Each insurer is required to file a report with Nancy Moore, Deputy Commissioner Workers' Compensation of the Texas Department of Insurance indicating the names of all retrospectively rated risks entitled to a proportionate share of the surplus for the period of May 1, 1991 through December 31, 1991, and all 1992, 1993 and 1994 retrospectively rated risks, the amount of surplus rebate each received and the date the surplus rebate was sent to each policyholder. If no workers' compensation policy was written on a retrospectively rated basis during May 1, 1991 through December 31, 1991 and during the 1992, 1993 and 1994 calendar years, then each insurer is required to so advise Ms. Moore.
Sincerely,
Nancy Moore
Deputy Commissioner
Workers' Compensation
Mail Code 105-2A