Large loss development and excess loss development are relevant in determining excess loss factors used in NCCI’s ratemaking methodology and in retrospective rating. In this research brief, NCCI presents the results of an update to the periodic review of these development patterns.
This brief is an update to the 2007 and 2011 NCCI studies and adds five calendar years of large loss experience to the most recent study.
In addition to updating our previous analysis, we explore development patterns by size of loss across a broad array of experience and development periods using enhanced visualization techniques. Also included are tables of cumulative excess loss and excess claim count development factors through Development Year 31 for a variety of excess layers.
For large claims reported to NCCI in Financial Call 31 (Large Loss and Catastrophe Call) during the time period studied and development through 31 years:
- The development of case-incurred loss amounts, paid loss amounts, and claim counts varies significantly by loss size, accident year, and development year
- Claims with case-incurred losses less than $3 million generally developed upward, while claims with case-incurred losses in excess of $5 million generally developed downward
- Claims with case-incurred loss between $3 million and $5 million generally developed downward during earlier reporting periods and upward during later reporting periods
- For Florida, claims under large deductible policies had significantly more development in the excess layers than claims under other policies (i.e., guaranteed cost and small deductible)