California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 4.8 - Review of Rates › Article 4 - Determination of Reasonable Rates › Section 2644.4 - Projected Losses

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a)
				  "Projected losses" means the insurer's historic losses per exposure, adjusted
				  by catastrophe adjustment, as prescribed in section
				  2644.5, by loss development, as
				  prescribed in section
				  2644.6, and by loss trend, as
				  prescribed in section
				  2644.7.
(b) Projected losses shall be calculated by
				  applying the loss trend factor separately to data from each accident-year in
				  the recorded period. However, for claims-made policies projected losses shall
				  be calculated on a report-year basis.
(c) For policies providing multi-year
				  coverage, such as mechanical breakdown, projected losses may be calculated on a
				  policy-year basis.
(d) For
				  professional liability and errors and omissions coverage, the insurer shall, in
				  lieu of the computation of projected losses specified in sections
				  2644.5 through
				  2644.7, tender an alternative
				  computation of projected losses, which the Commissioner shall approve if the
				  Commissioner finds the projection to have been made in the most sound actuarial
				  manner. Nothing in this section precludes the Commissioner from requiring the
				  additional filing of projected losses computed in the manner specified in
				  sections 2644.5 through
				  2644.7.
(e) For the earthquake line of business and
				  for the fire following earthquake exposure in other lines, projected losses and
				  defense and cost containment expenses may be based on complex catastrophe
				  models using geological and structural engineering science and insurance claim
				  expertise. The use of such models shall conform to the standards of practice as
				  set forth by the Actuarial Standards Board and the applicant shall have the
				  burden of proving, by a preponderance of the evidence, that the model is based
				  upon the best available scientific information for assessing earthquake
				  frequency, severity, damage and loss, and that the projected losses derived
				  from the model meet all applicable statutory standards.
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. Change without regulatory effect amending
					 subsection (d) filed 7-14-2021 pursuant to section
					 100, title 1, California Code of
					 Regulations (Register 2021, No. 29). Filing deadline specified in Government
					 Code section
					 11349.3(a)
					 extended 60 calendar days pursuant to Executive Order
					 N-40-20.
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.