Post office
(609) 890-3406
NJAIRE ANNUAL CASH
SETTLEMENT
I have enclosed your
company's Statewide NJAIRE Annual Cash Settlement Reports evaluated as of First
Quarter 2003.
·
The first report is the Annual Cash Settlement Report for Form #2. This report summarizes your company's
territorial reimbursement information for calendar/accident years 1992 through
1995.
·
The next report is the Annual Cash Settlement Report for Form #3. This report summarizes your company's
territorial reimbursement information for calendar/accident years 1996-1998 and
1999-2000 (policies in force prior to
·
The third report is the Annual Cash Settlement Report for Form #4. This report summarizes your company’s
territorial reimbursement information for calendar/accident years 1999-2000
(policies in force after
· Following the three Annual Cash Settlement Reports is the Annual Cash Settlement True-up Report. The True-up Report combines the total amounts for Form #2, Form #3 and Form #4, and adjusts the total to reflect the 2002 monthly payments and quarterly disbursements, and re-evaluates the distribution of investment income for 1992-2002.
If the BALANCE on the True-up
report is positive, payment is due from your company and an invoice is
enclosed. Instructions for the
remittance of funds are included at the end of this letter. If the BALANCE on the True-up report is
negative, you should expect a check from NJAIRE in approximately 10 weeks. The amount of this check will be equal to the
BALANCE on the True-up report, providing all companies with positive balances
are able to make their full payment. As
in prior Annual Cash Settlements, in the event that some companies are
For your information, an
explanation of the amounts and calculations used in this evaluation of the
Annual Cash Settlement Reports (including the Annual Cash Settlement True-up
Report) follows:
Annual Cash Settlement
Evaluations
The NJAIRE Plan of
Operations requires that each Calendar/Accident year be evaluated in full
territory detail, and that each year be re-evaluated until NJAIRE determines
that it is fully developed. As a result,
for Form #2, calendar/accident years 1992 through 1995 are being re-evaluated.
For Form #3,
calendar/accident years 1996-1999 are being re-evaluated using claim data.
For Form #4, calendar/accident year 2000 is being evaluated for the first time using claim information, calendar/accident year 2001 is being re-evaluated using exposure information and calendar/ accident year 2002 is being evaluated for the first time, also using exposure information.
Data
The following table displays
the account quarter submissions included for each calendar/accident year.
All submissions processed
through
Assessment data
|
Calendar/Accident Year |
Form |
Assessment base |
Account Quarters |
|
1992 |
#2 |
Earned Exposures |
1Q92-4Q92 |
|
1993 |
#2 |
Earned Exposures |
1Q93-4Q93 |
|
1994 |
#2 |
Earned Exposures |
1Q94-4Q94 |
|
1995 |
#2 |
Earned Exposures |
1Q95-4Q95 |
|
1996 |
#3 |
Paid BI Claims against the Zero Dollar Threshold |
1Q96-1Q03 |
|
1997 |
#3 |
Paid BI Claims against the Zero Dollar Threshold |
1Q97-1Q03 |
|
1998 |
#3 |
Paid BI Claims against the Zero Dollar Threshold |
1Q98-1Q03 |
|
1999 |
#3 |
Paid BI Claims against the Zero Dollar Threshold |
1Q99-1Q03 |
|
2000 |
#4 |
Paid BI Claims against the Zero Dollar Threshold |
3Q99-1Q03 |
|
2001 |
#4 |
Zero Dollar Threshold Earned Exposures |
1Q01-4Q01 |
|
2002 |
#4 |
Zero Dollar Threshold Earned Exposures |
1Q02-4Q02 |
|
Calendar/Accident Year |
Form |
Reimbursement base |
Account Quarters |
|
1992 |
#2 |
Paid BI claimants |
1Q92-1Q03 |
|
1993 |
#2 |
Paid BI claimants |
1Q93-1Q03 |
|
1994 |
#2 |
Paid BI claimants |
1Q94-1Q03 |
|
1995 |
#2 |
Paid BI claimants |
1Q95-1Q03 |
|
1996 |
#3 |
Paid BI Claims against the Verbal Threshold |
1Q96-1Q03 |
|
1997 |
#3 |
Paid BI Claims against the Verbal Threshold |
1Q97-1Q03 |
|
1998 |
#3 |
Paid BI Claims against the Verbal Threshold |
1Q98-1Q03 |
|
1999 |
#3 |
Paid BI Claims against the Verbal Threshold |
1Q99-1Q03 |
|
2000 |
#4 |
Paid BI Claims against the Verbal Threshold |
3Q99-1Q03 |
|
2001 |
#4 |
Verbal Threshold Earned Exposures |
1Q01-4Q01 |
|
2002 |
#4 |
Verbal Threshold Earned Exposures |
1Q02-4Q02 |
Annual Cash Settlement
Report
Calculation of Amount Due
From/Owed to Your Company is done separately for Form #2, Form #3 and Form #4.
A) Assessments
Once again, accident years 1996, 1997, 1998 and 1999 are evaluated on a per claim basis. The territorial assessments are derived by multiplying each Paid BI Claimant against the Zero Dollar Threshold by a per claim charge. The per claim charges for this year’s settlement are attached. The charges were determined based a statewide assessments of $77,000,000 for 1996, $70,000,000 for accident years 1997 and 1998, and $48,000,000 for accident year 1999. Please note that once again accident year 1999 is the combined Form #3 data for accident years 1999 and 2000.
Please note that beginning with this evaluation, the evaluation basis for accident year 2000 will be claims. More information regarding the transition of exposure to claim evaluation is available in the NJAIRE Plan of Operations.
Each territory assessment is determined by multiplying the combined number of Paid BI Claimants against the Zero Dollar Threshold by a per claim charge. The per claim charge for this evaluation for 2000 was determined based on a statewide assessment of $65,000,000.
The resulting territory
assessments are summed to determine your company’s total statewide Calculated Assessment. This number appears in the column titled
Assessments at Present Rate on each of the Annual Cash Settlement Reports.
Please note that once again accident year 2000 is the combined Form #4 data for accident years 1999 and 2000.
Please
remember that NJAIRE is enabled to evaluate and adjust the assessment
percentages and/or per claim charge retroactively. Therefore, a different assessment
percentage/claim charge may be used for each evaluation of a calendar/accident
year.
Accident years 1991 – 1995
and 2001 - 2002
Territory assessments at
present rate are calculated by multiplying the indicated territory base rates
by the number of appropriate exposures for that accident year by the current
assessment percentage for that accident year.
The following table lists this information by accident year:
|
Accident Year |
Form |
Rates used |
Exposure data used |
Assessment Percentage |
|
1992 |
Form #2 |
MTF |
Zero Dollar Tort Threshold
earned exposures |
112% |
|
1993 |
Form #2 |
PAIP |
Zero Dollar Tort Threshold
earned exposures |
52% |
|
1994 |
Form #2 |
PAIP |
Zero Dollar Tort Threshold
earned exposures |
49% |
|
1995 |
Form #2 |
PAIP |
Zero Dollar Tort Threshold
earned exposures |
30% |
|
2001 |
Form #4 |
PAIP |
Zero Dollar Tort Threshold earned exposures |
20% |
|
2002 |
Form #4 |
PAIP |
Zero Dollar Tort Threshold earned exposures |
20% |
B) Assessment Allocations
Form #2
The following procedure is
applied by accident year:
Within each territory, your
company's number of BI paid claimants is divided by the number of Industrywide
BI paid claimants for that territory.
The resulting claimant percentage is then multiplied by the total
Industrywide Assessments for the territory, generating your company's territory
Assessment Allocation.
The territory Assessment
Allocation totals are summed, and the final statewide result is shown on your
company's Annual Cash Settlement Reports (Column (4)).
Form #3 (Accident Years 1996
- 1999) & Form #4 (Accident Year 2000)
The following procedure is
applied for Form #3, accident years 1996 – 1999 and Form #4, accident year 2000:
Within each territory, your
company’s number of Paid Bodily Injury Claimants against the Verbal Threshold
is divided by the number of Industrywide Paid Bodily Injury Claimants against
the Verbal Threshold for that territory.
The resulting claimant percentage is then multiplied by the total
Industrywide Assessments for that territory, generating your company’s
territory Assessment Allocation.
The territory Assessment
Allocation totals are summed, and the final statewide result is shown on your
company's Annual Cash Settlement Report (Column (6)).
Form #4 (Accident years 2001
and 2002)
The following procedure is
applied by accident year:
Within each territory, your
company’s number of Verbal Threshold Earned Exposures is divided by the number
of Industrywide Verbal Threshold Earned Exposures for that territory. The resulting exposure percentage is then
multiplied by the total Industrywide Assessments for that territory, generating
your company’s territory Assessment Allocation.
The territory Assessment Allocation totals are summed, and the final statewide result is shown on your company's Annual Cash Settlement Report (Column (6)).
C) Previous Financial Transactions
The amounts paid by (or paid
to) your company as a result of previous evaluations of the Annual Cash
Settlement are reflected in the Previous Financial Transactions column of your
report. The amounts paid by your company
in the 2002 monthly payments and the amounts paid to your company in the 2002
provisional disbursements are reflected in the Annual Cash Settlement True-up
Report.
The amount due from (or owed
to) your company on the Annual Cash Settlement Report is equal to your
Assessments, minus your Reimbursements, minus your Previous Financial Action.
We have attached reports displaying the Industrywide Total Assessments and BI Paid Claimants by territory by calendar/accident year for Form #2, the Industrywide Total Assessments and Paid Bodily Injury Claimants against the Verbal Threshold Exposures by territory by calendar/accident year for accident years 1996 – 2000, and the Industrywide Total Assessments and Earned Verbal Threshold Exposures for accident years 2001 and 2002. These, along with your quarterly Compiled Figures Reports and your previous Annual Cash Settlement Reports, will enable you to verify your company's Annual Cash Settlement should you wish to do so. To verify Form #2 through fourth quarter 1992, you will need to use either the revised Compiled Figures Reports (if your company resubmitted using Earned Exposures) or the Exposure Conversion Monitoring Report (enclosed). Please note that exposures were reported on an earned basis beginning with the first quarter of 1993.
The Interest Income Due from/Owed to Your Company on the Annual Cash Settlement Reports reflects the time value (interest) of the money either owed to or due from your company.
Your company's share of the total 2004 NJAIRE administrative expense is shown on the Form #4 Annual Cash Settlement report and is reflected in the total amount due from or owed to your company.
Please see Section 1 of the attached summary, "Explanation of Calculations", for a description of the figures on the Annual Cash Settlement Report.
Annual Cash Settlement
True-up Report
Part A, the Annual Cash
Settlement True-up, adjusts the Annual Cash Settlement amount for Form #2, Form
#3 and Form #4 combined due from (or owed to) your company to reflect the 2002
monthly payments and the 2002 quarterly disbursements.
Part B, the Investment
Income Redistribution, reflects the differences between the method of
calculating your company's share of the investment income in the provisional
quarterly reimbursements, and the method of calculating your company's trued-up
share annually.
For the 2002 Quarterly
Reimbursements, your company received a share of the Investment Income based on
your company’s share of the industrywide Earned Verbal Threshold
exposures. Now, in the Annual Cash
Settlement True-up, the Investment Income is redistributed based on your
company's share of the total Industrywide Reimbursement amount for accident
year 2002. It also re-evaluates and redistributes
the 1992-2001 investment income based on how your company's share of the total
Industrywide Reimbursement amount for the accident year has changed due to the
development of that accident year.
The Investment Income
redistributed here is the amount earned on funds while they were held by NJAIRE
awaiting disbursement.
The Total Industrywide
Reimbursement amounts for accident years 1992-2002 appear on the report labeled
Industrywide Total Assessments. This
will enable you to verify your company's share of the Investment Income
Redistribution.
Column (3) reflects the time
value (interest) of the money either owed to or due from your company.
Please see Section 2 of the
attached summary, "Explanation of Calculations", for a description of
the figures on the Annual Cash Settlement True-up Report.
Remittance of Funds
If the total calculated
Annual Cash Settlement amount is positive on the True – up Report, please send
a check for this amount, payable to New Jersey Automobile Insurance Risk
Exchange to:
Payment should be made
within 20 days of receipt of this letter.
Please note that late payments will be subject to penalties as outlined
in Chapter 10 of the NJAIRE Plan of Operations.
Financial Information
We have enclosed, for your
information, the financial information for all companies participating in the Eighteenth
NJAIRE Annual Cash Settlement.
For years 1992-1995:
The Statewide Reimbursement
Reports contain by company and by accident year, the following: statewide BI
paid claimants, statewide claimant percentages, statewide exposures, assessment
allocations by territory summed to statewide totals, previous financial actions
by territory summed to statewide totals, and what was owed to or due from
companies by territory summed to statewide totals. Note that the report for Form #2 shows earned
exposures.
For 1996-2000:
The Statewide Reimbursement
Report contains by company, the following: statewide BI claims against the zero
dollar tort threshold, statewide BI claims against the verbal threshold,
statewide earned verbal threshold Exposures, statewide verbal threshold claimant
percentages, statewide earned Zero Dollar tort threshold exposures, assessment
allocations by territory summed to statewide totals, and what was owed to or
due from companies by territory summed to statewide totals.
For 2001 and 2002:
The Statewide Reimbursement
Report contains by company, the following: statewide BI claims against the zero
dollar tort threshold, statewide BI claims against the verbal threshold,
statewide earned verbal threshold Exposures, statewide verbal threshold
exposure percentages, statewide earned Zero Dollar tort threshold exposures,
assessment allocations by territory summed to statewide totals, and what was
owed to or due from companies by territory summed to statewide totals.
We have also enclosed an
exhibit displaying the member companies and their company numbers.
It is important to note that
the amounts owed to or due from companies on the Reimbursement Reports are
exclusive of any adjustments for interest income, investment income or
administrative expense assessment. Monthly
payments and quarterly disbursements are not reflected here either. The amounts owed or due in the Reimbursement
Report are the amounts that appear in column (6) or column (7) on Form #2
reports and columns (8) and (9) on the Form #3 and Form #4 reports of each
individual company's Statewide Annual Cash Settlement Reports.
Questions
If you have any questions
concerning the calculation of your company's Annual Cash Settlement, please
contact:
James Gilmartin
Insurance Services Office,
Inc.
(201) 469-2327
Sincerely,
Fred
Lloyd
Assistant
Vice President
Insurance
Services Office, Inc.
NJAIRE
Central Processor
cc: Mr. William Clarke, NJAIRE
Explanation of Calculations
- Section 1
Annual Cash Settlement
Reports
Form #2
Columns (1) and (2) are provided for information only. These are your company’s (statewide) total reported BI Paid
Claimants by accident year and Earned
Exposures by calendar year.
Column (3) is
your company's total calculated assessment for all territories combined by calendar year.
Column (4) is
your company's total calculated reimbursement for all territories combined by accident year.
Column (5) is
the net amount of all previous annual calculated reimbursements and assessments by calendar/accident year. If an amount is positive, it was paid to NJAIRE. If an amount is negative, it was paid to your
company by NJAIRE.
Columns (6) and (7) are the calculated assessment (Column
(3)) minus the calculated reimbursement
(Column (4)) minus the previous financial action (Column (5)). If the
resulting amount is positive, it is placed in Column (6), the Amount Due From Company.
If the amount is negative, its absolute
value is placed in Column (7), the Amount Owed to Company.
Columns (8) and (9) are the amounts in Columns (6) and (7)
respectively, multiplied by an interest
factor. They account for the time value
of these funds.
The TOTAL CALCULATED ANNUAL
CASH SETTLEMENT is the sum of Columns (6) and (8) minus the sum of columns (7)
and (9).
Explanation of Calculations
- Section 1
Annual Cash Settlement
Report
Form #3
Columns (1) and (2) are provided for information only. These
are your company’s statewide total
reported BI Paid Claimants against policies in which the insured chose the Zero Dollar Threshold
(Column 1) and which the insured chose
the Verbal Threshold (Column 2).
Columns (3) and (4) are provided for information only. These are your company’s statewide
total reported Earned Zero
Dollar Tort Threshold Exposures (Column 3)
and your company’s statewide
total reported Earned Verbal Tort
Threshold Exposures (Column
4).
Column (5) is
your company's total calculated assessment for all territories combined.
Column (6) is
your company's total calculated reimbursement for all territories.
Column (7) is
the net amount of all previous annual calculated reimbursements and assessments.
If an amount is positive, it was paid to NJAIRE. If an amount
is negative, it was paid to your company by NJAIRE.
Columns (8) and (9) are the calculated assessment (Column
(5)) minus the calculated reimbursement
(Column (6)) minus the previous financial action (Column (7)). If the
resulting amount is positive, it is placed in Column (8), the Amount Due From Company. If the amount is negative, its absolute value is placed in Column (9), the
Amount Owed to Company.
Columns (10) and (11) are the amounts in Columns (8) and (9)
respectively, multiplied by an interest
factor. They account for the time value
of these funds.
The TOTAL CALCULATED ANNUAL
CASH SETTLEMENT on the Form #3 report is the sum of Columns (8) and (10) minus
the sum of Columns (9) and (11).
Explanation of Calculations
- Section 1
Annual Cash Settlement
Report
Form #4
Columns (1) and (2) are provided for information only. These are your company’s statewide total reported BI Paid Claimants against
policies in which the insured chose
the Zero Dollar Threshold (Column 1) and which the insured chose the Verbal Threshold (Column 2).
Columns (3) and (4) are provided for information only. These are your company’s
statewide total reported
Earned Zero Dollar Tort Threshold
Exposures (Column 3) and your
company’s statewide total reported
Earned Verbal Tort Threshold
Exposures (Column 4).
Column (5) is
your company's total calculated assessment for all territories combined.
Column (6) is
your company's total calculated reimbursement for all territories.
Column (7) is
the net amount of all previous annual calculated reimbursements and assessments.
If an amount is positive, it was paid to NJAIRE. If an amount
is negative, it was paid to your company by NJAIRE.
Columns (8) and (9) are the calculated assessment (Column
(5)) minus the calculated reimbursement
(Column (6)) minus the previous financial action (Column (7)). If the
resulting amount is positive, it is placed in Column (8), the Amount Due From Company. If the amount is negative, its absolute value is placed in Column (9), the
Amount Owed to Company.
Columns (10) and (11) are the amounts in Columns (8) and (9)
respectively, multiplied by an interest
factor. They account for the time value
of these funds.
The TOTAL CALCULATED ANNUAL
CASH SETTLEMENT on the Form #4 report is the sum of Columns (6) and (8) minus
the sum of Columns (7) and (9).
The SUBTOTAL on the Form #4
report is the sum of Columns (8) and (10) minus the sum of columns (9) and
(11).
The TOTAL is the sum of the
SUBTOTAL and the ADMINISTRATIVE EXPENSE for the upcoming year.
Explanation of Calculations - Section 2
Annual Cash Settlement
True-up Report
A. Annual Cash Settlement True-up
Column (1) is
the total calculated Annual Cash Settlement due from (or, if negative, owed to)
your company from the Form #2, Form #3 and Form #4 Annual Cash Settlement
Reports combined.
Column (2) shows
the Monthly Payment and Quarterly Reimbursement amounts from First through
Fourth Quarter 2002. The total reflects
the net amount paid to (or, if negative, received from) your company as a
result of the monthly and quarterly financial transactions.
Column (3) is
the total in Column (2) multiplied by an interest factor of 0.02. This accounts for the time value of these
funds.
Column (4) is
the sum of columns (1) to (3), and represents the Annual Cash Settlement amount
adjusted for the transactions which have already taken place.
B. Investment Income Redistribution
Column (1) shows
the years for which Investment Income is being redistributed.
Column (2) first
shows the net difference between the 2002 investment income owed to your
company based on the current Annual Cash Settlement and the 2002 investment
income previously distributed to your company on a quarterly basis. (The share
due to your company is calculated as your company's statewide reimbursement for
2002, divided by the industrywide total statewide reimbursement for 2002, and
multiplied by the total investment income earned in 2002.) This amount is due from your company if
positive, and owed to your company if negative.
Then, for each earlier year,
it shows the net difference between the investment income for that year
evaluated as of the last Annual Cash Settlement and the investment income for
that year re-evaluated as of this Annual Cash Settlement. These amounts are due from your company if
positive, and owed to your company if negative.
Column (3) shows
the difference in Column (2) multiplied by an interest
factor. The interest factors used are:
2002 .0191150
2001 .0541092
2000 .1187043
1999 .1806072
1998 .2398878
1997 .3107723
1996 .3830082
1995 .4590831
1994 .5323465
1993 .5796480
1992 .6345886
These interest factors account for the time
value of the funds.
Column (4) shows
the sums of columns (2) and (3).
The BALANCE represents the total amount due from or owed to your company as a result of this Annual Cash Settlement. If the amount is positive, an invoice is enclosed for that amount.