(609) 570-4110
September 24, 2007
NJAIRE ANNUAL CASH
SETTLEMENT
Dear NJAIRE Member Company,
I have enclosed your
company's Statewide NJAIRE Annual Cash Settlement Reports evaluated as of First
Quarter 2007.
·
The first report is the Annual Cash Settlement Report for Form #3. This report summarizes your company's
territorial reimbursement information for calendar/accident years 1997-1998 and
1999-2000 (policies in force prior to 7/1/1999). Please note that the data for
accident years 1999 and 2000 are combined and appear as accident year 1999 for
Form #3.
·
The second 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 7/1/1999 and subsequent), and 2001 through 2006. This report also includes the administrative
expense assessment for 2008 NJAIRE expenses.
Please note that the data for accident years 1999 and 2000 are combined
and appear as accident year 2000 for Form #4.
· Following the Annual Cash Settlement Reports is the Annual Cash Settlement True-up Report. The True-up Report combines the total amounts for Form #3 and Form #4, and adjusts the total to reflect the 2006 monthly payments and quarterly disbursements, and re-evaluates the distribution of investment income for 1997-2006.
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 #3, calendar/accident years 1997-2000 are being re-evaluated using
claim data.
For Form #4, calendar/accident years 2000-2003 are being re-evaluated using claim data, calendar/accident year 2004 is being evaluated for the first time using claim information, calendar/accident year 2005 is being re-evaluated using exposure information and calendar/ accident year 2006 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 September 11, 2007 are included.
Assessment data
|
Calendar/Accident Year |
Form |
Assessment base |
Account Quarters |
|
1997 |
#3 |
Paid BI Claims against the Zero Threshold |
1Q97-1Q07 |
|
1998 |
#3 |
Paid BI Claims against the Zero Threshold |
1Q98-1Q07 |
|
1999 & 2000 |
#3 |
Paid BI Claims against the Zero Dollar Threshold |
1Q99-1Q07 |
|
1999 & 2000 |
#4 |
Paid BI Claims against the Zero Dollar Threshold |
3Q99-1Q07 |
|
2001 |
#4 |
Paid BI Claims against the Zero Dollar Threshold |
1Q01-1Q07 |
|
2002 |
#4 |
Paid BI Claims against the Zero Dollar Threshold |
1Q02-1Q07 |
|
2003 |
#4 |
Paid BI Claims against the Zero Dollar Threshold |
1Q03-1Q07 |
|
2004 |
#4 |
Paid BI Claims against the Zero Dollar Threshold |
1Q04-1Q07 |
|
2005 |
#4 |
Zero Dollar Threshold Earned Exposures |
1Q05-4Q05 |
|
2006 |
#4 |
Zero Dollar Threshold Earned Exposures |
1Q06-4Q06 |
|
Calendar/Accident Year |
Form |
Reimbursement base |
Account Quarters |
|
1997 |
#3 |
Paid BI Claims against the Verbal Threshold |
1Q97-1Q07 |
|
1998 |
#3 |
Paid BI Claims against the Verbal Threshold |
1Q98-1Q07 |
|
1999 & 2000 |
#3 |
Paid BI Claims against the Verbal Threshold |
1Q99-1Q07 |
|
1999 & 2000 |
#4 |
Paid BI Claims against the Verbal Threshold |
3Q99-1Q07 |
|
2001 |
#4 |
Paid BI Claims against the Verbal Threshold |
1Q01-1Q07 |
|
2002 |
#4 |
Paid BI Claims against the Verbal Threshold |
1Q02-1Q07 |
|
2003 |
#4 |
Paid BI Claims against the Verbal Threshold |
1Q03-1Q07 |
|
2004 |
#4 |
Paid BI Claims against the Verbal Threshold |
1Q04-1Q07 |
|
2005 |
#4 |
Verbal Threshold Earned Exposures |
1Q05-4Q05 |
|
2006 |
#4 |
Verbal Threshold Earned Exposures |
1Q06-4Q06 |
Annual Cash Settlement
Report
Calculation of Amount Due
From/Owed to Your Company is done separately for Form #3 and Form #4.
A) Assessments
Once again, accident years 1997 - 2003 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 on statewide assessments of $69,700,000 for accident year 1997, $68,200,000 for accident year 1998, $45,200,000 for accident year 1999, $63,500,000 for accident year 2000, $52,000,000 for accident year 2001, $54,500,000 for accident year 2002 and $47,000,000 for accident year 2003. Please note that once again accident year 1999 is the combined Form #3 data for accident years 1999 and 2000, and accident year 2000 is the combined Form #4 data for accident years 1999 and 2000.
Please note that beginning with this evaluation, the evaluation basis for accident year 2004 will be claims. More information regarding the transition of exposure to claim evaluation is available in the NJAIRE Procedure Manual.
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 2004 was determined based on a statewide assessment of $44,000,000.
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.
Accident years 2005 and 2006
Territory assessments at
present rate are calculated by multiplying the indicated territory base rates
by the number of Zero Dollar Tort Threshold Earned 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 |
Assessment Percentage |
|
2005 |
Form #4 |
PAIP (Effective 12/01/04) |
15% |
|
2006 |
Form #4 |
PAIP (Effective |
15% |
|
|
|
|
|
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.
B) Assessment Allocations
Form #3 (Accident Years 1997
- 1999) & Form #4 (Accident Years 2000 - 2004)
The following procedure is applied
by accident year:
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 2005
and 2006)
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 2006 monthly payments and the amounts paid to your company in the 2006
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 Paid Bodily Injury Claimants against the Verbal Threshold Exposures by territory by calendar/accident year for accident years 1997 – 2004, and the Industrywide Total Assessments and Earned Verbal Threshold Exposures for accident years 2005 and 2006. 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.
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 2008 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 #3 and
Form #4 combined due from (or owed to) your company to reflect the 2006 monthly
payments and the 2006 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 2006 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 2006.
It also re-evaluates and redistributes the 1997-2005 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 1997-2006
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:
You may also wire payments. The instructions for wires are as follows:
Receiving Bank: North Fork
Bank
Bank
Client
Account:
Account
Number: 4314006034
Payment should be made
within 20 days of receipt of this letter.
Please note that late payments will be subject to the Incentive
Assessment Program as outlined in Chapter 6 of the NJAIRE Procedure Manual.
Financial Information
We have enclosed, for your
information, the financial information for all companies participating in the Twenty-Second
NJAIRE Annual Cash Settlement.
For 1997-2006:
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.
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 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:
Michael McAuley
Insurance Services Office,
Inc.
(201) 469-2323
Or
Patricia Lloyd
Insurance Services Office,
Inc.
(201) 469-2326
Sincerely,
Patricia
Lloyd
Manager
ISO,
Inc.
NJAIRE
Central Processor
cc: Mr. William Clarke, NJAIRE
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.
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.
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 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 #3 and Form #4 Annual Cash Settlement Reports
combined.
Column (2) shows
the Monthly Payment and Quarterly Reimbursement amounts from the four quarters
of the most recent accident year being evaluated. 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. 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 most recent accident year’s investment
income owed to your company based on the current Annual Cash Settlement and that
year’s 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 the most recent year being evaluated, divided by the industrywide total statewide reimbursement for that year,
and multiplied by the total investment income earned in that year.) 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.
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.