Corro, Dan, and Yen-Chieh Tseng. 2021. “NCCI’s 2014 Excess Loss Factors.” Variance 14 (1).
• Figure 1.1. Major components of the 2014 methodology and of the annual update of ELFs
• Table 2.1. Data used in analysis
• Table 6.1. Countrywide ALAE percentages by claim group
• Table B.1. Maximum additional duration to close after 10 years
• Table C.1. Credibility k value by claim group
• Exhibit D.1. Sample calculation of expected claim counts by claim group and hazard group for an NCCI state
• Exhibit D.2. Sample calculation of expected severity by claim group and hazard group for an NCCI state
• Exhibit E.1. Sample calculation of expected claim counts by hazard group for the PT claim group for an NCCI state
• Exhibit E.2. Sample calculation of expected severities by hazard group for the PT claim group for an NCCI state
• Exhibit G.1. Sample calculation of expected severities including ALAE by claim group and hazard group for an NCCI state
• Table H.1. Probability of multiclaim occurrences containing different numbers of claims
• Table H.2. Losses and claim counts by type of occurrence
• Table H.3. Losses and claim counts by type of occurrence and claim group
• Table H.4. Severity relativities by type of occurrence and claim group
• Table H.5. Per-claim excess ratio to per-occurrence excess ratio conversion
• Exhibit I.1. Sample calculation of per-occurrence excess ratios not including ALAE by loss limit for hazard group A for an NCCI state

## Abstract

An excess loss factor is a measure of expected loss that is in excess of a given per-occurrence limit. The National Council on Compensation Insurance (NCCI) uses excess loss factors in its retrospective rating plan as well as in aggregate and class ratemaking.

NCCI computes annual updates of excess loss factors by state and hazard group for certain limits ranging from $10K to$10M. These annual updates are filed with regulators in 37 NCCI states.

Periodically, NCCI reviews the methodology behind these annual updates. Such a review concluded in 2014 and made significant changes to the methodology used. This paper describes the new methodology and highlights some improvements over prior NCCI methodologies.

Accepted: March 13, 2019 EDT