Consulting Actuaries NEW YORK STATE WORKERS COMPENSATION BOARD ASSESSMENTS A DISCUSSION OF ASSESSMENTS AND RECENT INCREASES IMPACTING EMPLOYERS APRIL 2013 AUTHORS Scott J. Lefkowitz, FCAS, MAAA, FCA Steven G. McKinnon, FCAS, MAAA, FCA
CONTENTS 1. INTRODUCTION 1 2. ASSESSMENTS 2 Discussion of Individual Assessments 2 The Assessment Base 3 3. ASSESSMENT COSTS 6 Increases to Required Funding and Expected Future Costs 6 Impact on Assessment Percentages 7 Current Proposals 8
1. INTRODUCTION All employers in New York State (NY) are assessed by the Workers Compensation Board (WCB). The WCB oversees the workers compensation system in NY and assessments levied by the WCB to fund various programs in NY managed directly by the WCB, including the WCB s own operating expenses. Assessments have increased materially since 2007, so much so that annual assessment costs often exceed the premium for excess insurance protection for self-insured 1 employers. Assessment costs for some employers have more than doubled since 2007. The reasons for these increases is a complex interaction of the workers compensation law changes implemented in 2007, the insolvency of a large number of group self-insured trusts 2 in NY, and the economic disruption that began in 2008, which is only recently beginning to moderate. The purpose of this paper is to provide an explanation of the reasons for these increases in the context of a brief discussion of the following items: The individual assessments; The assessment base and differences between insured and self-insured employers; Increases to assessments since 2007; and Expected future behavior and recent proposals by the Governor. 1 Insured employers enter into insurance policy contracts with insurance carriers that, from a regulatory perspective, place the financial responsibility for benefit payments with the insurance carrier. Examples of insurance contracts include guaranteed cost policies, retrospectively rated policies, and large deductible policies. Premium determination and payment varies widely for these programs, but in all cases the insurance carrier is responsible for benefit payments, regardless as to whether or not the employer meets premium payment obligations. This is to be contrasted with a self-insured employer, which from a regulatory perspective, acts as its own insurance company and retains the financial responsibility for benefit payments. Notwithstanding bonding and other requirements to establish a self-insurance program, it is the placement of responsibility for benefit payments that is the primary difference between an insured employer and a self-insured employer. 2 A group self-insured trust is a mechanism that allows smaller employers to self-insure workers compensation exposures by pooling risk. The group functions essentially as an insurance company and facilitates administration of the workers compensation program on behalf of its members. The resulting efficiency affords smaller employers an opportunity to self-insure that they would not otherwise have had due to their size. However, group members are responsible (financially in a joint and several manner) for the financial health of the group. If premium and other income prove insufficient to provide for claim costs and other group expenses, individual members can be assessed to fund the shortfall. In 2005, there were approximately 65 operating group self-insured trusts in NY. Of these groups, 25 are insolvent with current liabilities estimated to be approximately $867 million. There are currently three groups still operating. All others are estimated to have sufficient assets to fund remaining claim liabilities, but are closed and are no longer writing new business. Copyright 2013 Oliver Wyman 1
2. ASSESSMENTS DISCUSSION OF INDIVIDUAL ASSESSMENTS The following is a brief description of each assessment currently charged by the WCB. Special Disability Fund (15-8): This assessment funds claim reimbursements made by the Special Disability Fund (the Second Injury Fund, or SIF). The SIF provides for reimbursement of all or a portion of indemnity and/ or medical benefits paid after 260 weeks (five years) if a second injury to a claimant results in a disability greater than that resulting from the second injury alone. The SIF was closed to new entrants with dates of loss on or after July 1, 2007 as part of the package of workers compensation law changes enacted in 2007. The expectation is that over time, the cost of running the SIF will continually decline until all claims in the fund are paid and closed. However, the cost of running the fund has actually increased materially since 2007, from $600 million in 2007 to $910 million in 2012. This is due to limits placed on the time to request second injury fund relief on eligible claims (that is, claims with dates of loss prior to July 1, 2007) and the resulting surge in applications. Our expectation is that the operating costs of the SIF have peaked, and that costs should begin to decline. Reopened Case Fund (25-A): This assessment funds the Reopened Case Fund, which assumes both the financial responsibility and claims management responsibility 3 for claims that meet one of the following conditions: A claim for benefits (medical or compensation 4 benefits) is made after a lapse of seven years from the date of injury or death, and the claim for compensation benefits had previously been disallowed or otherwise disposed of without an award for compensation benefits. This condition essentially addresses claims where the initial claim for compensation benefits was denied. After a minimum of seven years passes from the date of loss, the claimant reopens the claim and reapplies for either medical benefits, compensation benefits, or both. A claim for benefits (medical or compensation benefits) is made after a lapse of seven years from the date of injury or death, and also a lapse of three years from the date of the last payment of compensation benefits. This condition essentially addresses claims where compensation benefits were paid, and a minimum of three years have passed since the most recent compensation payment, and a minimum of seven years have passed from the date of loss. Where a death resulting from injury shall occur after the time limited by the provisions above shall have elapsed, but an award is allowed by the WCB. The cost of running 25-A increased from approximately $140 million in 2007 to $470 million in 2011, dropping to $370 million in 2012. It is possible that this increase is due to a surge in reopened claims filed because of economic conditions. This item and potential future operating costs (notwithstanding current proposals to close 25-A) are discussed later in this paper. 3 This represents a fundamental difference between 15-8 and 25-A. The responsibility for administering claims admitted into the second injury fund remains with the insurance carrier or the self-insured employer. This is reasonable, given that the second injury fund will provide for partial or full reimbursement of claim costs. When a claim is admitted into 25-A, 25-A assumes both the full cost of benefit payments as well as claims management responsibility. An insurer or selfinsured employer can effectively close their claim file once a claim is admitted into 25-A. 4 Compensation benefits are wage replacement benefits, also known as indemnity benefits. Copyright 2013 Oliver Wyman 2
Interdepartmental Expenses (IDP): This assessment provides appropriated funding associated with: NYS Dept. of Health, Occupational Health Clinics Network NYS Dept. of Labor, Occupational Safety and Health Training Fund NYS Dept. of Labor, Enforcement of Occupational Safety and Health Regulation IDP operating costs have traditionally been relatively low, but have increased materially, on a percentage basis, from $63 million in 2007 to $86 million in 2012. Workers Compensation Board Expenses (151): This assessment funds operating expenses of the Workers Compensation Board. WCB operating costs have increased only modestly over the past five years, from $230 million in 2007 to $250 million in 2012. Self-Insurers Assessment (50-5): This assessment provides funding for oversight of NY self-insurers by the WCB as well as claim payments for insolvent employers. This latter item has evolved into a material issue 5 with the insolvency of a large number of group self-insured trusts in the 2006 to 2008 timeframe. The cost of the 50-5 assessment has increased from approximately $8 million in 2007 to $26 million in 2012. The actual assessment percentages have varied over time. Additionally, prior to 2008, all self-insured employers were responsible for paying the 50-5 assessment. In 2008, municipal (public entity) self-insured employers were exempted. Currently, only non-public entity self-insured employers pay the 50-5 assessment. THE ASSESSMENT BASE Prior to the mid-2000 s, the manner by which assessments were charged and paid was substantially the same for both insured and self-insured employers (both as individual self-insured employers or as member employers of a group self-insured trust 6 ). The assessment base had been the prior year s indemnity payments 7 multiplied by an assessment percentage determined by the WCB. The percentage for each assessment was calculated in a manner such that the resulting aggregate assessment would be sufficient to fund the estimated cost of each program, plus a margin for unexpected costs, in the following year. 8,9 Currently, this approach is still used for self-insured employers. However, since the mid-2000 s, the 5 Under current policies, the huge cost of these insolvencies is being funded by self-insured employers, and is the primary reason why the 50-5 assessment has increased by a factor of three from 2007 to 2012. An approach to address this issue, and assessments in general, was offered by the Governor in his budget proposal earlier this year. This proposal is discussed later in this paper. 6 In 2008, 2009, and 2010 group self-insured trusts were assessed using pure premiums as an assessment base. The pure premium assessment base is explained in footnote (9). In all other years the assessment base was indemnity payments, as discussed above. For the purpose of this paper, the indemnity payment equivalent of the pure premium assessment base for group self-insured trusts is calculated and used. This was done for simplicity of explanation. It is important to note that the contribution of the pure premium assessment base is only a small portion of the overall assessment base. 7 The assessment base is indemnity payments prior to consideration of any excess insurance protection. That is, the assessment base is unlimited indemnity losses, as opposed to retained indemnity losses. For example, consider a permanent total disability claim with expected lifetime indemnity benefit payments equal to $450,000, plus expected medical costs of $100,000. A self-insured employer with a $350,000 per occurrence retention will be responsible for only $350,000 of the $550,000 total claim cost. The insured employer or an insurance company on behalf of their insured employer will, however, be responsible for assessments based on the entire $450,000 of expected indemnity benefits, as they are paid out over time. 8 In reality, the actual timing and frequency of measurement and charges varied by assessment. Therefore, the time periods for which indemnity payments were measured varied by assessment. Conceptually, though, the underlying process was the same for each assessment. The assessment percentage for a specific fund was determined by the state as the estimated required funding for the following year plus a margin divided by the total statewide indemnity payments during a specified time interval. The assessment paid by a self-insured employer or an insurance company on behalf of their insured was the calculated percentage multiplied by indemnity benefits paid by the specific entity during the same time period. 9 The assessment base for 50-5 had been fundamentally different from other assessments. Prior to 2008 the assessment base for 50-5 had been the value of the bond posted by the self-insured employer. In 2008 the base was changed to what is termed the pure premium for the self-insured employer. Our understanding is that the pure premium was defined to be the self-insured employer s payroll multiplied by the published loss cost, by workers compensation classification. The pure premium base was in effect for only one year, and was subsequently changed in 2009 to indemnity payments, as described above. The indemnity payment base remains in effect today. Copyright 2013 Oliver Wyman 3
assessment base was changed for insured employers. Insured employers currently pay an assessment at policy inception based on the standard premium 10 associated with a specific insurance policy. The state determines the assessment percentages for each assessment base in a manner such that on average, the assessment payments are equitable, in the aggregate, for insured employers and self-insured employers. However, there are fundamental differences, both from a balance sheet perspective as well as in long term assessment costs, between the two assessment bases. These are discussed below: BALANCE SHEET ACCRUALS Insured Employers: From the insured employer perspective, there is no need to maintain a balance sheet accrual for future assessments. The assessment fee is paid up front based on the specific employer s standard premium. In theory, the assessment charge is a pass through from the state, to the insurance carrier, to the insured employer. This is almost, but not quite true, because insurance carriers are assessed based on their actual written premium. The carrier then distributes the assessment charge to its insured employers using standard premium. Self-Insured Employers: Assessments are charged using indemnity payments as the assessment base. A balance sheet accrual is required to provide for future assessments that will be charged based on future indemnity payments on claims with dates of loss on or prior to the balance sheet date. For example, if a selfinsured employer, as of December 31, 2012, estimated that there are $5.0 million dollars in unpaid indemnity benefits associated with claims with dates of loss on or before that date, that employer must carry an additional balance sheet reserve of $2.0 million dollars, assuming a long term average assessment percentage of 40% 11. SENSITIVITY TO ASSESSMENT RATE CHANGES Insured Employers: Given that there is no need for a balance sheet accrual, future changes to assessment rates affect only current year charges. Self-Insured Employers: Given that the assessment base is indemnity payments on all claims, new and old, assessment charges are sensitive to changes in assessment rates. For example, consider a self-insured employer, as of December 31, 2012 with a balance sheet reserve for $5.0 million in unpaid indemnity benefits associated with claims with dates of loss on or before that date, and an additional balance sheet reserve of $2.0 million for future assessments on those indemnity payments assuming a long-term average assessment percentage of 40%. If assessment rates materially decline in the future, the $2.0 million assessment reserve will have been too high, and that employer will show a balance sheet gain. The opposite is true as well. 10 Standard premium is calculated using a specific algorithm for every insured employer. The basic definition is premium calculated using the manual rates of the insurance carrier, adjusted by the employer s experience modification. Other adjustments apply as well. It is important to note that ideally, the assessment charge should essentially be a pass through from the WCB to the insurance carrier to the insured employer. This is not precisely the case. Oliver Wyman s understanding is that insurance carriers are assessed by the WCB based on their written premium. Insurance carriers then distribute the cost of these assessments to their insured employers using standard premium, as described above. 11 The actual forecast of future assessment percentages is a complex task, even before consideration of assessment base and other law changes. Consideration must be given to expected future fund utilization (for 15-8, 25-A, and 50-5), expected future funding needs (IDP and 151), and expected future changes to the respective assessment bases. 40% is used as a flat rate for simplicity of illustration. Copyright 2013 Oliver Wyman 4
TIME VALUE OF MONEY An explanation is best viewed in the context of two new businesses, one electing to self-insure, the other electing to purchase an insurance plan. In the first year of operation, the self-insured employer will pay no assessments, because the assessment base is a measurement of indemnity dollars paid in the prior year. Given that this is the first year of operation, the self-insured employer has no prior indemnity payment history. However, the self-insured employer must establish a balance sheet accrual for expected future assessments on current year claims. With each passing year, the self-insured employer will develop a growing indemnity payment history as the self-insurance plan matures. Assessment payments will grow as the indemnity payment history grows, as will the balance sheet accrual. If the self-insured employer ceases operations, the assets supporting the balance sheet accrual for future assessments will fund future assessments on the now defunct employer s book of workers compensation claims until all claims are paid and closed. The story for the insured employer is fundamentally different. The insured employer will pay an assessment based on standard premium in the first year of operation. That payment will be significant; however, there will be no balance sheet accrual requirement. In theory, the total assessments paid by either employer will be the same. The fundamental difference is that the self-insured employer pays the assessments over a materially longer period of time, and therefore benefits from the time value of money. Copyright 2013 Oliver Wyman 5
3. ASSESSMENT COSTS INCREASES TO REQUIRED FUNDING AND EXPECTED FUTURE COSTS The table below summarizes assessments by program, by assessment year. Assessment year roughly corresponds to the year the assessments were billed and paid. Base year roughly corresponds to the year the assessment base was measured. So for example, assessments billed and paid in 2012 were calculated using either indemnity payments or standard premium in 2011. The information presented in the table was taken from detailed assessment bills received by Oliver Wyman clients. ASSESSMENT YEAR BASE YEAR 15-8 25-A 50-5 151 IDP TOTAL 2007 2006 602,747,649 137,239,465 8,086,616 229,404,962 63,188,412 1,040,667,104 2008 2007 675,773,477 148,945,842 8,419,334 228,656,027 68,686,660 1,130,481,340 2009 2008 750,236,152 271,841,361 19,046,273 232,090,199 71,632,038 1,344,846,023 2010 2009 914,115,003 401,889,339 33,068,833 243,590,525 78,394,341 1,671,058,041 2011 2010 852,778,219 469,628,120 14,157,624 237,505,281 87,636,293 1,661,705,537 2012 2011 912,928,459 368,957,493 25,644,033 249,468,312 86,183,537 1,643,181,834 What is remarkable is the growth in total assessment payments from approximately $1 billion in assessment year 2007 to $1.67 billion in assessment year 2010. This represents 18% annual growth over this three year period. Assessments have been relatively flat since 2010. The growth to assessment costs is clearly driven by 15-8 and 25-A. Each program is discussed below. 15-8: 15-8 is closed to claims with dates of loss on or after July 1, 2007. However, 15-8 reimbursements do not begin until 5 years after the date of loss. Therefore, 2012 generally represents the last year for which payments are initiated on new 15-8 claims (with dates of loss in the first half of 2007). Additionally, our understanding is that deadlines established due to closure of the fund created a surge in applications, resulting in adjudication delays. Finally, fund usage had been accelerating prior to 2007. The combination of these items generally explains the acceleration in the cost of running 15-8. However, the expectation is that 15-8 costs have generally peaked, and will begin to slowly decrease over time. 25-A: 25-A experienced a material increase in claims experience. Our understanding, based on conversations with claims professionals and the WCB, is that this was due to a combination of the deterioration of economic conditions as well as increased usage of the fund. This latter item is a material concern as respects expected future costs of 25-A. Given that 15-8 is now closed, the general consensus is that insurers and self-insured employers will look for 25-A relief for claims that in the past would have been submitted to 15-8. Claims professionals managing claims of Oliver Wyman clients have indicated that case reserves on individual claims are at levels that anticipate future usage of 25-A. Of concern is that since the law change in 2007, there have been a large number of claims with settled compensation portions, but medical remains open. These claims represent a pool of potential future 25-A claims. Notwithstanding additional law changes, our expectation is that utilization of 25-A will significantly increase over the next 5 to 10 years, the result being materially higher assessments. Copyright 2013 Oliver Wyman 6
50-5: The growth to 50-5 is primarily due to the funding of benefit payments associated with insolvent group self-insured trusts. The total unpaid cost of claims associated with insolvent trusts is currently estimated to be approximately $867 million. A portion of this cost will be funded by remaining assets of the insolvent groups, as well as possibly through litigation efforts by the WCB. However, a significant portion of these costs will have to be funded through the 50-5 assessment. The result is that the self-insured employers and groups that properly funded their programs are being required to pay for the improper actions of the insolvent groups. IDP and 151: These two assessments contributed approximately $43 million of the $600 million increase to total assessments since 2007. Relative to 15-8, 25-A and 50-5, this cost increase is not material. IMPACT ON ASSESSMENT PERCENTAGES The following table displays assessment percentages paid by self-insured employers using indemnity payments (with the exception of 50-5): ASSESSMENT 2007 2008 2009 2010 2011 2012 15-8 18.3% 19.3% 20.6% 23.2% 21.8% 22.5% 25-A 4.1% 4.2% 7.4% 10.1% 12.2% 9.1% 151 6.9% 6.8% 6.6% 6.1% 5.5% 6.7% IDP 1.9% 2.0% 2.0% 2.0% 1.9% 1.9% 50-5 0.3% 0.3% 0.7% 3.5% 7.1% 7.4% Total 31.5% 32.6% 37.3% 44.9% 48.5% 47.6% Assessment percentages are equal to the targeted funding (displayed earlier) and the measured assessment base. The growth to assessment percentages generally follows the growth in funding costs presented earlier, but not exactly. This is due to changes in the behavior of the assessment bases themselves. As noted earlier, there have been two primary assessment bases: Standard premium for insured employees and indemnity payments for self-insured employees. The behavior of each over the past five years is discussed below: Standard Premium: The first graph on following page displays the premium assessment base by assessment base year. The assessment base year generally lags the actual assessment bill and payment by a single year. So the assessment base year of 2007 is the basis for assessments billed and paid in 2008, roughly, and therefore the basis for the assessment percentages in 2008. The material decline to premium in 2008 and 2009 is a direct result of loss cost decreases effective October 1, 2007 (18.4%) and October 1, 2008 (6.4%) as well as the economic contraction that began in 2008. Subsequent growth to premium is due to both stabilizing and improving economic conditions as well as loss cost increases of 4.5%, 7.7%, and 9.1% effective October 1, 2009, 2010, and 2011, respectively. Indemnity Payments: The second graph on following page displays the indemnity payment base by assessment base year. As noted previously, the assessment base year generally lags the actual assessment bill and payment by a single year. The behavior of indemnity payments is more complex because all prior claims contribute to indemnity payments, whereas premium is based on current year premium rates. This delays the effect of benefit changes and economic conditions. As respects benefit level changes, the maximum weekly Copyright 2013 Oliver Wyman 7
indemnity 12 benefit in NY had been relatively low and fixed at $400 per week since 1992. Effective July 1, 2007, and annually thereafter, there have been material increases to the maximum weekly benefit in NY, in order to bring the maximum weekly benefit to an amount equal to two-thirds of the NY average weekly wage. As a result, the maximum weekly benefit increased from $400 to $792 effective July 1, 2012. The impact of the increases is visible as growth to indemnity payments in 2007, 2008, and 2009. Note that benefit increases apply only to claims with dates of loss on or after the effective date. Had the benefit increases applied to all claims, the observed growth would have been much greater. The subsequent plateauing and decrease to indemnity payments in 2010 and 2011 is likely due to economic conditions. ASSESSMENT BASES: STANDARD PREMIUM AND INDEMNITY PAYMENTS STANDARD PREMIUM INDEMNITY PAYMENTS IN BILLIONS IN BILLIONS 3.50 3.50 3.00 3.00 2.50 2.50 2.00 2.00 1.50 1.50 1.00 1.00 0.50 0.50 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004 2005 2006 2007 2008 2009 2010 2011 2012 ASSESSMENT PAYMENT YEAR ASSESSMENT PAYMENT YEAR CURRENT PROPOSALS The current budget proposal by the Governor includes material changes to certain aspects of workers compensation law in NY, including the assessment process. The following are key components of the proposal impacting assessment charges: Combination of Assessment Charges: All assessments will be combined into a single charge using a single base for all employers, insured and self-insured. The expectation is that the assessment base will be premiumrelated, similar to that which is used for insured employers. Funding will no longer use indemnity payments as an assessment base. This will greatly simplify the assessment process, create better equity between insured employers and self-insured employers, and eliminate the need for accruals for expected future assessment costs. 12 The compensation rate for total disability is defined as 2/3 the average weekly wage of the specific employee, limited to the maximum weekly benefit. For high wage employees, the increase in the maximum weekly benefit from $400 per week to $792 per week effective July 1, 2012, amounts to a 98% benefit level increase. Put simply, the indemnity cost of a claim for high wage employees has essentially doubled over the past six years. The schedule of increases is as follow: Prior $400 July 1, 2007 $500 July 1, 2010 $740 July 1, 2008 $550 July 1, 2011 $773 July 1, 2009 $600 July 1, 2012 $792 Copyright 2013 Oliver Wyman 8
Spreading the Current Cost of 50-5 across all Employers: 50-5 is a material problem due to the insolvent group self-insured trusts. The ultimate unfunded liability is large and will materially impact self-insured employers who properly funded and monitored their programs. The proposal includes a plan to essentially fund the cost of insolvent groups through a bonding program which itself would be funded by an assessment across all employers in the state, to be included in the common assessment charge above. Eliminate 25-A: As noted earlier, the required funding for 25-A increased from $137 million in 2007 to $369 million in 2012. The increase is a result of greater utilization of the fund, exacerbated by economic conditions. A materially greater concern is the expectation of significantly greater utilization of 25-A given that 15-8 was eliminated in 2007 and that there is a large pool of claims with closed compensation files, but continuing medical costs. There is a concern that over the next 5 to 10 years required funding for 25-A could continue to increase, perhaps materially. The proposal is to simply close the fund, and pay out the claims currently in the fund until they close. From a system perspective, there is an expectation that claims are more efficiently managed by employers and/or insurers and that it is realistic to expect a net cost savings, similar to expectations with closure of 15-8. Additionally, the expected influx of claims into 25-A that might have otherwise been placed into 15-8 (had 15-8 not been closed) creates a situation where 25-A would be paying for claims it was never intended to fund. It is important to note that closure of 25-A will not eliminate the need to fund 25-A. Claims currently administered by 25-A will require funding through assessments until they are paid and closed. It will be decades before this occurs. Copyright 2013 Oliver Wyman 9
ABOUT THE AUTHORS Scott J. Lefkowitz is a Partner of the Actuarial Consulting Practice of Oliver Wyman and Leader of the Melville, New York office. Scott is a Fellow of the Casualty Actuarial Society, a member of the American Academy of Actuaries, and a Fellow of the Conference of Consulting Actuaries. Scott has twenty five years of actuarial experience in the insurance and risk management industry, and has provided consulting services to a wide variety of clients on all aspects of property/casualty risk exposure. Scott is regarded as an expert in the area of workers compensation and has provided consulting services to public and private firms, governments, and regulatory agencies. Scott s experience includes ratemaking, reserving, rate of return analysis, occupational disease, and the design and implementation of experience rating programs. Most recently, Scott has spent the past several years studying New York workers compensation costs, as well as the impact of the statutory changes that were implemented in New York in 2007. Steven G. McKinnon is a Principal of the Actuarial Consulting Practice of Oliver Wyman and is located in the Melville, New York office. Steve is a Fellow of the Casualty Actuarial Society, a member of the American Academy of Actuaries and a Fellow of the Conference of Consulting Actuaries. Steve has ten years of actuarial experience in the insurance and risk management industry. He specializes in all lines of property/casualty insurance, with a focus on workers compensation. Steve has assisted in the preparation of expert witness testimony for several state workers compensation rate filings. Most recently, Steve has spent the past several years studying New York workers compensation costs, as well as the impact of the statutory changes that were implemented in New York in 2007.
The Actuarial Consulting Practice of Oliver Wyman specializes in property, casualty, life and health insurance risks. We provide independent, objective advice combining a wide range of expertise with specialized knowledge of specific risks. With more than 80 credentialed actuaries it is one of the largest actuarial practices in North America. Oliver Wyman currently has actuarial consulting offices in Atlanta, GA; Charlotte, NC; Chicago, IL; Columbus, OH; Houston, TX; Los Angeles, CA; Melville, NY; Milwaukee, WI; New York, NY; Philadelphia, PA; Princeton, NJ; San Francisco, CA; St. Michael, Barbados, and Toronto, ON, Canada. For more information, contact: Scott J. Lefkowitz FCAS, MAAA, FCA 631-577-0548 scott.lefkowitz@oliverwyman.com Steven G. McKinnon FCAS, MAAA, FCA 631-577-0555 steven.mckinnon@oliverwyman.com Eric J. Hornick FCAS, MAAA, FCA 631-577-0537 eric.hornick@oliverwyman.com Oliver Wyman Actuarial Consulting, Inc. 48 South Service Road, Suite 310 Melville, NY 11747 Copyright 2013 Oliver Wyman. The Actuarial Consulting Practice of Oliver Wyman provides a wide range of consulting expertise to the banking, insurance, and other related industries. The casualty actuarial practice specializes in evaluating the long-term financial consequences of property and casualty insurance risks. The information contained herein is based on sources we believe reliable, but we do not guarantee its accuracy. It should be understood to be general risk management and insurance information only. Oliver Wyman makes no representations or warranties, expressed or implied, concerning the financial condition, solvency, or application of policy wordings of insurers or reinsurers. The information contained in this publication provides only a general overview of subjects covered, is not intended to be taken as advice regarding any individual situation, and should not be relied upon as such. Statements concerning tax and/or legal matters should be understood to be general observations based solely on our experience as risk consultants and insurance brokers and should not be relied upon as tax and/or legal advice, which we are not authorized to provide. Insureds should consult their own qualified insurance, tax and/or legal advisors regarding specific risk management and insurance coverage issues. This document or any portion of the information it contains may not be copied or reproduced in any form without the permission of Oliver Wyman, except that clients of any of the companies of Marsh and McLennan Companies need not obtain such permission when using this report for their internal purposes, as long as this report is reproduced in its entirety, and this page is included with all such copies or reproductions. www.oliverwyman.com