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. 38, September 20, 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repealed by operation of law on the following day.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 Repealed by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.
