SECTION VI RATING PROCEDURE
1. Actual Primary Losses
Actual Primary Losses (Ap), as tabulated in accordance with the provisions of Rules 4 and 5 of Section V, shall be used in the rating.
2. Expected Losses
Expected Losses (E) shall be determined from the application of the appropriate Expected Loss Factor, shown in Table A, to the payrolls or other exposures for each classification for the experience period.
3. Credibility
The Credibility (C) of the experience of the risk shall correspond to Expected Losses (E), as shown in Table B.
4. Limit Charge
A limit charge (L) reflecting the loss dollars eliminated by the split point placed on One Accident, shall be included in calculating the modification. The Charge times Credibility, or L x C, shall be determined by entering Table B at the level of Expected Losses for the experience period.
5. Credibility Complement (1-C)
The Credibility Complement is computed by subtracting the Credibility (C) from unity (1.0).
6. Experience Modification
The Experience Modification shall be determined from the formula:
[Ap x C + E x C x L + E(1.0 – C)] / E
The indicated modification will be subject to capping based on the Maximum Modification formula below:
1.10 + 0.0004 x (E / G), where G=10
If the indicated modification, after application of the Maximum Modification formula, still exceeds +40% compared to the prior final experience modification, the Final Modification will be capped at 40% of the prior modification.
7. Transition Rules
During the transition period based on the RED between 4/1/2024 to 3/31/2026, the current capping rules will remain in effect, which limit changes (up or down) to no more than +/-25% of the prior Final Modification and the application of the Double Swing Cap (Secondary Capping) defined below. Additionally, the maximum modification, calculated using the formula above, will be applied to the Final Modification. The Final Modification factor will be determined by selecting the lower value between the modification calculated based on the current capping rule and the Maximum Modification.
The Double Swing Cap recognizes the favorable experience of the risk by setting the Final Modification to 1.0 in specific situations. When the 25% swing limit is applied to a previous experience modification factor that is above 1.0 but the Indicated Modification is below 1.0, the Final Modification shall be set at 1.0. The Double Swing Cap will be eliminated once the two-year transition period concludes.
The experience modification shall be rounded to three decimal places.