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Corro, Dan, and Yen-Chieh Tseng. 2021. “NCCI’s 2014 Excess Loss Factors.” Variance 14 (1).
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  • Figure 1.1. Major components of the 2014 methodology and of the annual update of ELFs

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