ANNUAL CASH SETTLEMENT (ACS) TRANSACTIONS

 

Each year, NJAIRE performs an Annual Cash Settlement, which utilizes the latest available accident year data and the latest AIRE charges to recalculate the Assessments and Reimbursements for each company. The Annual Cash Settlement also takes into consideration all of the previous transactions that have taken place for each company, and the time value of money. In the Annual Cash Settlement, NJAIRE also collects each company’s share of NJAIRE’s administrative expense budget.

A. Annual Cash Settlement Assessments

 

Form #2:

Assessments are calculated based on exposure data. For each accident year, these assessments are calculated on a territory basis (a company's exposures for that territory multiplied by the base rate for that territory multiplied by the assessment percentage for that accident year). The sum of the territory assessments is the total assessment for a company.

Form #3 and Form #4:

A revised formula will be applied for accident years 1996 and subsequent and will ultimately use only claims to calculate a company's assessments (and reimbursements), the "Pure Claims" method. However, it will take some time (i.e., a few years) for BI claims to develop and become credible enough to be used as the basis for the assessments (and reimbursements). As a result, until BI claim credibility is high enough, assessments (and reimbursments) will be based on the "Pure Exposure" method:

 

The Pure Exposure method (to be used for the first few evaluations of an accident year)

Companies will be assessed by territory. Territory assessments are calculated by multiplying a company’s zero dollar threshold earned exposures for that territory by the base rate for that territory and by the assessment percentage for that accident year.

The "Pure Claims" method (to be used when claim credibility for an accident year is high enough)

Companies will be assessed by territory. The necessary territory assessment pool will be established and then territory assessments are calculated by taking a company’s percentage of the industrywide BI paid claimants against zero dollar threshold policies, multiplied by the total assessment pool for that territory.