California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 4.8 - Review of Rates › Article 4 - Determination of Reasonable Rates › Section 2644.17 - Leverage Factor and Surplus

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) "Leverage factor" means the ratio of
				  earned premiums to the average of year-beginning and year-end
				  surplus.
(b) The Commissioner shall
				  calculate industry-wide leverage factors for each insurance line annually,
				  within 45 days of the publication of the necessary source data. The factors
				  shall be calculated using the consolidated underwriting and investment exhibit
				  as published in Best's Aggregates and Averages. The allocation of the
				  commercial multiple peril data to liability and non-liability and the
				  allocation of the automobile physical damage data to private passenger and
				  commercial shall be done using data from the Exhibit of Premiums and losses
				  (Statutory Page 14 Data) as published in Best's Aggregates and Averages. For
				  medical malpractice, other liability and product liability, there shall be
				  separate leverage factors for claims-made and occurrence. Total national
				  industry surplus shall be allocated to lines of business in proportion to the
				  sum of the national industry-wide earned premium, unearned premium, loss and
				  loss adjustment expense reserves. The leverage factor for each line of business
				  shall be the national premium divided by the allocated surplus.
Notwithstanding the result of the calculation, the leverage
					 factor for earthquake shall be 1.0. For other lines of business subject to
					 catastrophes, mass torts and other unusual events, the Commissioner shall
					 modify the leverage factors where he finds that they do not provide a reliable
					 estimate of future risk, pursuant to section
					 2646.3.
(c) The Commissioner finds that investors'
				  perceived investment risk may vary from line to line. Thus, while the rate of
				  return does not vary by line, insurance perceived to have a greater risk will
				  yield higher returns per premium dollar.
1. New
					 section filed 8-13-91 as an emergency; operative 8-13-91 (Register 92, No. 3).
					 A Certificate of Compliance must be transmitted to OAL 12-11-91 or emergency
					 language will be repealed by operation of law on the following
					 day.
2. Repealed by operation of Government Code section
					 11346.1(g)
					 (Register 92, No. 15).
3. New section refiled 2-14-92 as an
					 emergency; operative 2-14-92 (Register 92, No. 15). A Certificate of Compliance
					 must be transmittted to OAL 6-15-92 or emergency language will be repealed by
					 operation of law on the following day.
4. Repealed by operation of
					 Government Code section
					 11346.1(g)
					 and new section filed 3-15-95; operative 3-15-95. Submitted to OAL for printing
					 only pursuant to Government Code section
					 11343(a)(1)
					 (Register 95, No. 11).
5. Amendment filed 1-3-2007; operative
					 4-3-2007. Submitted to OAL for printing only pursuant to Government Code
					 section
					 11340.9(g)
					 (Register 2007, No. 1).
6. Amendment of subsection (b) filed
					 5-16-2008; operative 5-16-2008. Submitted to OAL for printing only pursuant to
					 Government Code section
					 11340.9(g)
					 (Register 2008, No. 20).
Note: Authority cited: Sections
						1861.01 and
						1861.05,
						Insurance Code; and 20th Century v. Garamendi, 8 Cal.4th 216 (1994). Reference:
						Sections
						1861.01 and
						1861.05,
						Insurance Code; and Calfarm Insurance Company v. Deukmejian (1989) 48 Cal.3d
						805.