The categories of supporting information addressed in this
section describe the different items that may be required or requested
in a rate and rule filing. Section 5.9334 of this title (relating
to Requirements for Rate and Rule Filing Submissions) lists the categories
of supporting information that different rate and rule filings require.
Categories of supporting information include:
(1) Rate filing checklists. These are found in the
Filings Made Easy Guide and show the information filers need to include
with the filing.
(2) Actuarial memorandum. This memorandum describes
the methodologies for determining each component used in developing
the actuarial support, and a qualitative discussion on the selections
for each component. It includes an explanation for any changes in
methodologies or any changes to the component selections from the
previous analysis.
(3) Actuarial support. This type of support consists
of sufficient documentation and analysis to allow a qualified actuary
to understand and evaluate the rates, each component used in developing
the rates, and the appropriateness of each material assumption. Actuarial
support is divided into the following subcategories:
(A) Rate indications consist of the analyses the insurer
relies on to support its filed rates, each component used to develop
the rate indications, and support for each of these components, including
the data and methodologies used by the insurer. Rate indications may
be on an overall basis or by coverage, class, form, or peril when
appropriate. Rate indications must include each of the following with
documentation in support of each, to the extent applicable:
(i) premiums, on-level factors, and premiums at current
rate level;
(ii) incurred and paid losses;
(iii) loss and claim development factors;
(iv) premium and loss trend factors;
(v) hurricane and nonhurricane catastrophe factors
or loss provisions, including the definition of a catastrophe and
how the definition has changed over the experience period used to
calculate the provisions;
(vi) off-balance factors if there are changes in relativities,
for example: discounts, surcharges, or territorial definitions;
(vii) the measure of credibility, the complement of
credibility, the criteria for full credibility, and the method for
determining partial credibility;
(viii) expenses, including: general expenses; other
acquisition expenses; commissions and brokerage expenses; taxes, licenses,
and fees; loss adjustment expenses; and expense offsets from fee income;
(ix) the net cost of reinsurance;
(x) for rates filed under Insurance Code Chapter 2251,
profit provisions, including risk loads;
(xi) for rates filed under Insurance Code Chapters
2053 and 3502, profit and contingency provisions, including risk loads;
(xii) the effect on premiums of individual risk variations
based on loss or expense considerations; and
(xiii) any other component used in developing a rate
indication.
(B) Relativity analysis consists of both the analysis
and support for the selected rating factors, including the loss experience
and methodologies used by the insurer to derive the indicated rating
factors. Supporting information must include:
(i) the current relativity;
(ii) the indicated relativity;
(iii) support for the indicated relativities, including
the loss experience and methodologies used by the insurer to derive
the indications;
(iv) the selected relativity;
(v) support for the selected relativities if they differ
from the indicated relativities; and
(vi) the percent change from current to selected relativity.
(C) Other actuarial support consists of both the analysis
and support for the selected rates, including the loss experience
and methodologies used by the insurer to derive them. The support
must clearly demonstrate why the proposed rates are not excessive,
inadequate, or unfairly discriminatory. A rate is reasonable and not
excessive, inadequate, or unfairly discriminatory if it is an actuarially
sound estimate of the expected value of all future costs associated
with an individual risk transfer. These costs include claims, claim
settlement expenses, operational and administrative expenses, and
the cost of capital.
(4) SERFF rate data. This data consists of all information
necessary to complete the company rate information fields in SERFF.
(5) Policyholder impact information. Policyholder impact
information must reflect the changes for all policyholders. This information
consists of the following provided separately by form or coverage:
(A) a histogram that graphically depicts the impact
of the filed changes to policyholders in 5 percentage point intervals;
(B) the policy counts in each interval displayed in
either the histogram or a separate table;
(C) the minimum and maximum policyholder impact; and
(D) a description of the changes that contributed to
the minimum and maximum policyholder impact.
(6) Average rate change by county. This is the average
impact of all changes included in a filing by county, provided separately
by form or coverage.
(7) Rate change information. Rate change information
must reflect the changes for all policyholders.
(A) For loss cost reference filings, rate change information
consists of:
(i) the proposed percentage change in the underlying
loss costs;
(ii) the change in the insurer's loss cost multiplier;
(iii) the combined change in the loss costs and the
loss cost multipliers;
(iv) a six-year rate change history; and
(v) the effect that changes in fee income have on the
total average rate change for all coverages and forms combined.
(B) For all other filings, rate change information
consists of:
(i) the average proposed rate change for each applicable
coverage or form;
(ii) the total average rate change for all applicable
coverages and forms combined;
(iii) a six-year rate change history; and
(iv) the effect that changes in fee income have on
the total average rate change for all applicable coverages and forms
combined.
(8) Historical premium and loss information. This information
consists of an insurer's most recent five-year experience, for both
Texas and countrywide, of direct premiums written, direct premiums
earned, direct losses and defense and cost containment expenses paid,
direct losses and defense and cost containment expenses incurred,
and the ratio of the direct losses and defense and cost containment
expenses incurred to direct earned premiums. The Texas experience
is the amounts, or a subset of the amounts, pertinent to the line
of business reported on the Exhibit of Premiums and Losses (Statutory
Page 14 Data) in the insurer's Annual Statement. The countrywide experience
is the amounts, or a subset of the amounts, pertinent to the line
reported on the insurer's Insurance Expense Exhibit (IEE), Part III
in the insurer's Annual Statement.
(9) Expense information. This information consists
of Texas experience and, if applicable, countrywide experience. The
loss adjustment expenses must be shown as a dollar amount and as a
ratio to incurred losses. All other expenses must be shown as a dollar
amount and as a ratio to premium. All expense items must be on a direct
basis.
(A) Three years of historical Texas experience must
be included for commissions and brokerage expenses incurred; taxes,
licenses, and fees incurred; losses incurred; and defense and cost
containment expenses incurred. These must be the amounts, or a subset
of the amounts, reported on the Exhibit of Premiums and Losses (Statutory
Page 14 Data) in the insurer's Annual Statement.
(B) Three years of historical countrywide experience
must be included for commissions and brokerage expenses incurred,
other acquisition expenses incurred, general expenses incurred, losses
incurred, defense and cost containment expenses incurred, and adjusting
and other loss adjustment expenses incurred. These must be the amounts,
or a subset of the amounts, reported in the insurer's IEE, Part III
in the insurer's Annual Statement.
(C) Three years of historical countrywide experience
must be included for each category of disallowed expenses. These must
be the amounts reported in the insurer's response to the annual TDI
Disallowed Expense Call. Other acquisition and general expenses, each
adjusted to remove disallowed expenses, must be listed separately.
The total adjusted general expense percentage must reflect any necessary
adjustment due to the capping of general expenses at 110 percent of
the industry median for the line of insurance.
(D) To the extent that the expense provisions differ
from the historical expenses, the filing must provide additional support
for the expense provisions underlying the rates. Provisions for commissions
and brokerage expenses; other acquisition expenses; general expenses;
taxes, licenses, and fees; and profit and contingencies must be displayed
and a sum computed. For filings submitted under Insurance Code Chapter
2251, the expense provisions must exclude disallowed expenses.
(E) When additional expense provisions are included,
such as the net cost of reinsurance or an expense offset from fee
income, the filing must include expected or historical experience.
Support for provisions for the net cost of reinsurance may include
reinsurance premiums, expected reinsurance recoverables, and a description
of reinsurance coverage including attachment points and limits.
(10) Loss cost information for reference filings. This
information consists of the following:
(A) the TDI file number of the loss costs being referenced;
(B) the derivation of the proposed loss cost multiplier
including any loss cost modification factor and the following expense
and profit provisions:
(i) commissions and brokerage expenses;
(ii) other acquisition expenses, adjusted to remove
disallowed expenses;
(iii) general expenses, adjusted to remove disallowed
expenses;
(iv) taxes, licenses, and fees; and
(v) underwriting profit and contingencies;
(C) supporting documentation for loss cost modification
factors other than 1.00;
(D) the loss cost multiplier to be used as of the effective
date of the filing;
(E) the loss cost multiplier used immediately before
the effective date of the filing; and
(F) the effective rate-level change due to any change
in the loss cost multiplier.
(11) Profit provision information. This information
consists of a description of the methodology, assumptions, and support
for the assumptions used to arrive at the profit provisions underlying
the proposed rates.
(12) A side-by-side comparison. This comparison must
show any differences between the previously filed and the proposed
rates, rating manual, rules, or other supplementary rating information.
(13) A mark up. This is a copy of the previously filed
rates, rating manuals, rules, or other supplementary rating information
indicating the differences between it and the revised version, with
any new language or factors underlined and the deleted language or
factors in brackets with a strikethrough, or other clearly identified
or highlighted editorial notations referencing the new and replaced
language or factors.
(14) Sample premium impacts by selected ZIP codes.
These are sample premiums and premium changes based on all changes
included in a filing for certain specified policy types and ZIP codes.
(15) Rate filing templates. These are found in the
Filings Made Easy Guide and provide insurers with an optional means
of providing certain supporting information and supplementary rating
information.
(16) Other information. This includes any other information
required by the Commissioner necessary to determine that the rates
meet the rate standards.
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