PIJRPOSE: Under the Missouri Insurance Code, rate filings made by individual insurers may include the experience of rating organizations. This experience includes the statistical data, prospective loss costs and supporting information as defined in this regulation. 20CSR500-4-INSURANCE

This rule sets forth rules and procedural requirements which the director deems necessary to carry out the prouisions of sections 379.321 and 379.888.2., RSMo, as to rate and supporting information filings of property and casualty insurers that refer to and incorporate in whole or in part filings made by rating organ& tions.

1. (1) Applicability and Scope. This rule applies to the types of insurance described in sections 379.316 and 379.882, RSMo and to insurers making filings under sections 379.321 and 379.8882, RSMo.

2. (2) Definitions,

   1. (A) Expenses means that portion of a rate attributable to acquisition, field supervision, collection expenses, general expenses, taxes, licenses and fees.
   2. (B) The term prospective loss costs means that portion of a rate that does not include provisions for expenses (other than loss adjustment expenses) or profit, and are based on historical aggregate losses and loss adjustment expenses adjusted through development to their ultimate value and projected through trending to a future point in time.
   3. (C) Rate means the cost of insurance per exposure unit, whether expressed as a single number or as prospective loss cost and an adjustment to account for the treatment of expenses, profit and variations in loss experience, prior to any application of individual risk variations based on loss or expense considerations, and does not include minimum premiums.
   4. (D) Rating organization is an organization licensed pursuant to sections 379.323 and 379.440, RSMo.
   5. (E) Supplementary rating information means any manual, minimum premium, rating schedule or plan of policy writing rules, rating rules, classification system, territory codes and descriptions, rating plans and any other similar information needed to determine the applicable premium for an insured. Supplementary rating information includes factors and relativities, such as increased limits factors classification relativities, deductible relat&ities or similar factors.
   6. (F) Supporting information means information, including supporting actuarial data, which includes: i) the experience and judgment of the insurer and the experience or data of other insurers or rating organizations relied upon by the insurer, ii) the interpretation of any statistical data relied upon by the insurer, iii) descriptions of methods used in making the rates and iv) actuarial, technical or other services made available by a rating organization, or other similar information required to be filed by the director.

3. (3) Rating Organization Reference Filings of Advisory Prospective Loss Costs.

   1. (A) Rating organizations may develop and make reference filings containing advisory prospective loss costs. These filings shall contain the statistical data and supporting information for any calculations or assumptions underlying those prospective loss costs. The reference filings shall be filed and made effective in accordance with the provisions of sections 379.321 and 379.888.2:, RSMo.
   2. (B) An insurer may satisfy its obligation to make rate filings by-i) becoming a participating insurer of a licensed rating organization which makes reference filings of advisory prospective loss costs, ii) filing with the director the information required in section (4) and iii) authorizing the director to accept the reference filing(s) on its behalf. The insurer’s rates shall be the prospective loss costs filed by the rating organization which have been put into effect in accordance with the provisions of subsection (3)(A),,combined with the loss cost adjustments whrch are filed in accordance with section (4) and arein effect for the insurer.
   3. (C) The insurer’s loss cost adjustment filing shall become effective in accordance with the provisions of sections 379.321 and 379.888.2, RSMo that apply to the filing and effective date of rates.

4. (4) Required Filing Documents. All insurer filings which refer to a rating organization prospective loss costs reference filing shall include, in the order listed, the following documents:

   1. (A) Reference Filing Adoption Form (Exhibit A);
   2. (B) Summary of Supporting Information Form (Exhibit B):
   3. (C) Expense Constant Supplement Form (Exhibit C, if needed); and
   4. (D) To the extent that an insurer’s final rates are determined solely by applying its loss cost adjustments, as presented in the Reference Filing Adoption Form, to the prospective loss costs contained in a rating organization’s reference filing and printed in the rating organization’sratingmanual, theinsurerneed not develop or file its final rate pages with the director. If an insurer chooses to print and distribute final rate pages for its own use, based solely upon the application of its filed loss cost adjustments to a rating organization’s prospective loss costs, the insurer need not file those pages with the director. If the rating organization does not print the loss costs in its rating manual, the insurer must submit its rates to the director.

5. (5) Rating Organization Filings of Advisory Supplementary Rating Information.

   1. (A) Rating organizations may develop and make filings of supplementary rating information. These filings shall be made in accordance with sections 379.321 and 379.888.2., RSMo.
   2. (B) Any insurer may satisfy its obligations to make filings of supplementary rating information by becoming a participating insurer of a licensed rating organization and by authorizing the director to accept these filings on its behalf. The insurer’s supplementary rating information shall be that filed by the rating organization, subject to any mod%- cations filed by the insurer.
6. (6) Existing Rates and Deviations Remain in Effect Until Disapproved, Replaced and Modified. Nothing in these procedures shall be construed to require rating organizations or their participating insurers to immediately refile rates in effect. Any participating insurer of a rating organization is authorized to continue to use all rates and deviations in effect until the rates are disapproved or until the insurer makes its own filing to change its rates, either by making an independent filing or by filing a reference filing form adopting the rating organization’s prospective loss costs or modification of those costs. Auth: sections 374.045, 379.316 and 379.321, RSMo (1986) and 379.882 and 379.888, RSMo (Cum. Supp. 1990).* This rule was previously filed as 4 CSR 190. 16.045. Original rule filed Jan. 17, 1990, effective May 1,199O. *Original authority: 374.045, RSMo 119671; 379.316 and 379.321, RSMo (1972); and 379.882 and 379.888, RSMo (19871. Exhibit A Date: Insurer Rate Filing Space Reserved for Insurance Department Use Adoption Of Advisory Organization Prospective Loss Costs Reference Filing Adoption Form i
7. 1. INSURER NAME &ADDRESS

PERSON RESPONSIBLE FOR FILING TITLE TELEPHONE C 2. INSURER NAIC $ 3. LINE OF INSURANCE 4. ADVISORY ORGANIZATION 5. ADVISORY ORGANIZATION REFERENCE FILING # 6. The above insurer hereby declares that it is a member, subscriber or service purchaser of the named advisory organization for this line of insurance. The insurer hereby files to be deemed to have independently submitted as its own filing the prospective loss costs in the captioned Reference Filing. \ The insurer’s rates will be the combination of the prospective loss costs and the loss cost multipliers and, if utilized, the expense constants specified in the attachments. 7. PROPOSED RATE LEVEL CHANGE ‘X EFFECTIVE DATE _ 8. PRIOR RATE LEVEL CHANGE WI EFFECTIVE DATE 9. ATTACH “SUMMARY OF SUPPORTING INFORMATION FORM” (Use a separate Summary for each insurer-selected loss cost multiplier) 10. CHECK ONE OF THE FOLLOWING: 0 The insurer hereby files to have its loss cost multipliers and, if utilized, expense constants be applicable to future revisions of the advisory organization’s prospective loss costs for this line of insurance. The insurer’s rates will be the combination of the advisory organization’s prospective loss costs and the insurer’s loss cost multipliers and, if utilized, expense constants specified in the attachments. The rates will apply to policies written on or after the effective date of the advisory organization’s prospective loss costs. This authorization is effective until disapproved by the Director, or amended or withdrawn by the insurer. 0 The insurer hereby files to have its loss costs multipliers and, if utilized, expense constants be applicable only to the above Advisory Organization Reference Filing. 11. Attach $50 filing fee. Section 374.230(6), RSMo. 20 CSR 500-4-INSURANCE

Exhibit B Date:

Insurer Name: NAIC Number: Insurer Rate Filing Adoption Of Advisory Organization Prospective Loss Costs Summary Of Supporting Information Form Calculation of Company Loss Cost Multiplier

1. 1. Line, Subline, Coverage, Territory, Class, etc. combination to which this page applies:

2. 2. Lost Cost Modification:

   1. A. The insurer hereby files to adopt the prospective loss costs in the captioned reference filing: (CHECK ONE) 0 Without modification. (factor = 1.000) 0 With the following modification(s). (Cite the nature and percent modification, and attach supporting data, rationale, or both, for the modification.)
   2. B. Loss Cost Modification Expressed as a Factor: (See examples below.)

NOTE: If Expense Constants Are Utilized, Attach “Expense Constants Are Utilized, Attach Constant Supplement” Or Other Supporting Information. Do Not Complete Items 3-7 Below.

1. 3. Development of Expected Loss Ratio. (Attach exhibit detailing insurer expense data or other supporting information or both.) Selected Provisions

   1. A. Total Production Expense
   2. B. General Expense
   3. C. Taxes, Licenses & Fees
   4. D. Underwriting Profit & Contingencies
   5. E. Other (explain)
   6. F. TOTAL

4A. Expected Loss Ratio: ELR = 100% - 3F = 4B. ELR in decimal form = 5. Company Formula Loss Cost Multiplier: (2B + 4B) = 6. Company Selected Loss Cost Multiplier = Explain any differences between 5 and 6:

1. 7. Rate level change for the coverages to which this page applies

Example 1: Loss Cost modification factor: If your company’s loss cost modification is -lo%, a factor of .90 (1.000 - ,100) should be used. Example 2: Loss Cost modification factor: If your company’s loss cost modification is +15%, a factor of 1.15 (1.000 t ,150) should be used.

Judith K. Moriarty

CODE OF STATE REGULATIONS (8/20/91)’

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Exhibit C Date:

Insurer Name: NAIC Number:

Expense Constant Supplement

Calculation of Company Loss Cost Multiplier With Expense Constants

1. 3. Development of Expected Loss Ratio. (Attach exhibit detailing insurer expense data, or other supporting information, or both.

   Selected Provisions Variable Fixed

   Overall

   1. A. Total Production Expense
   2. B. General Expense
   3. C. Taxes, License & Fees
   4. D. Underwriting Profit & Contingencies
   5. E. Other (explain)
   6. F. TOTAL

2. 4. A. Expected Loss Ratio: ELR = 100% - Overall 3F =

   1. B. ELR expressed in decimal form =
   2. C. Variable Expected Loss Ratio VELR = 100% -Variable 3F
   3. D. VELR in decimal form

3. 5. Formula Expense Constant: [(l.OO + 4B)-(1.00 + 4D)] X Average Underlying Loss Cost

   Formula Variable Loss Cost Multiplier: (2B + 4D) =

4. 6. Selected Expense Constant =

   Selected Variable Loss Cost Multiplier =

5. 7. Explain any differences between 5 and 6:

6. 8. Rate level change for the coverages to which this page applies

   Judith K. Moriarty (8/20/91)’ 7 20 CSR 500-4-INSURANCE