Retro Rating Calculator

Retro Rating Inputs

Use the form to model a retrospective premium range with detailed options.

Manual Premium ($)

Base premium before modifiers and credits.

Experience Modifier

Schedule Modifier

Premium Discount Factor

Example: 0.95 for a 5% discount.

Basic Premium Factor (BPF)

Expense Constant ($)

Added to basic premium (often flat expense charge).

Loss Conversion Factor (LCF)

Tax / Assessment Multiplier

Minimum Premium Factor

Maximum Premium Factor

Carrier Fee ($)

Broker Commission (0.00 to 0.50)

State Surcharge (0.00 to 0.50)

Loss Options

Apply per-claim loss limit

Per-Claim Limit ($)

Applied after deductible, before development and trend.

Deductible per Claim ($)

Subtracted from incurred, minimum zero.

Apply aggregate loss limit

Aggregate Limit ($)

Caps total loaded losses before LCF.

Loss Development Factor (LDF)

Applied after limits, before trend and load.

Split Point ($)

Amount above split is multiplied as excess.

Excess Loss Factor

Credits & Loads

Safety Credit (−0.20 to +0.20)

Positive reduces premium; negative increases it.

Loss-Free Credit (−0.20 to +0.20)

Inflation / Trend (−0.10 to +0.20)

Claim Handling Load (0.00 to 0.50)

Enable loss ratio cap ceiling

Loss Ratio Cap (e.g., 1.40)

Additional ceiling: standard × cap.

Context

Policy Years (1 to 10)

Exposure Basis

For documentation; not priced directly.

Exposure Amount

Claims (Paid + Reserves)

Add all relevant claims for the retro period.

Date	Description	Paid	Reserves

Reset

Example Data Table

A sample corridor and outcome, for demonstration.

Scenario	Standard After Credits	Losses After Limits	Final Retro Premium
Low Loss	$9,300	$4,050	$7,980
Moderate Loss	$11,370	$12,900	$13,120
High Loss	$14,100	$35,500	$17,625

Values are illustrative and not tied to any specific carrier filing.

Formula Used

This calculator demonstrates a flexible retrospective premium structure. Programs differ, but this model uses:

Standard Premium = Manual × Experience Mod × Schedule Mod × Discount Factor
Standard After Credits = Standard × (1 − Safety Credit) × (1 − Loss-Free Credit)
Incurred = Paid + Reserves (per claim)
Net Loss = max(0, Incurred − Deductible)
Limited Loss = min(Net Loss, Per-Claim Limit)
Split Loss = Primary + (Excess × Excess Factor)
Loaded Loss = Split Loss × LDF × Trend × (1 + Claim Load)
Aggregate Cap = min(sum(Loaded Loss), Aggregate Limit)
Converted Loss = Aggregate Cap × LCF
Basic Premium = Standard After Credits × BPF + Expense Constant
Retro Raw = (Converted Loss + Basic Premium) × Tax Multiplier + Carrier Fee
After Surcharges = Retro Raw × (1 + Broker) × (1 + State)
Final Retro = clamp(After Surcharges, Standard×Min, Standard×Max), then apply optional LR cap

Where clamp(x, a, b) limits x to the range [a, b].

How to Use This Calculator

Enter manual premium and modifiers to build standard premium.
Add claim paid and reserves for each loss entry.
Set deductible, limits, LDF, and any split point rules.
Enter LCF, BPF, taxes, fees, and optional surcharges.
Calculate to view final retro, corridor, and scenarios.
Export CSV or PDF for your internal file records.

Retro rating links premium to actual loss performance

Retrospective rating starts with a standard premium estimate and later recalculates the billed premium using reported losses, agreed expense factors, and contractual boundaries. This calculator shows both values side by side, so finance teams can see whether the retro adjustment produces an additional charge or a return premium.

Standard premium is built from manual premium and modifiers

Standard premium is computed as Manual Premium × Experience Mod × Schedule Mod × Discount Factor, then reduced or increased by optional credits. Typical modifier ranges are 0.80–1.30, and discount factors often fall near 0.90–1.00. These inputs represent expected cost before retro loss-sensitive mechanics apply.

Loss data is normalized with deductibles, limits, and development

Each claim uses Paid + Reserves as incurred loss. The tool can subtract a per-claim deductible, apply a per-claim limit, and cap total losses with an aggregate limit. A loss development factor projects immature claims toward ultimate, while trend and claim handling load align different valuation dates for consistent comparisons. A split point with an excess factor can also emphasize severity above a chosen threshold.

Retro premium combines converted loss and basic premium charges

After adjustments, losses are multiplied by the Loss Conversion Factor (LCF) to reflect claim expense and program services. Basic Premium is calculated as Standard After Credits × Basic Premium Factor (BPF) plus any expense constant. Many plans use LCF values around 1.05–1.35 and BPF values around 0.20–0.40, depending on coverage.

Corridors, fees, and scenarios help manage volatility

The calculated retro amount is constrained by minimum and maximum premium factors, then taxes, carrier fees, and optional broker or state surcharges are applied. The charts include a corridor view and a sensitivity run that shifts losses ±10% to stress-test outcomes. Exported CSV and PDF summaries support audits, budgeting, and renewal negotiations. If results frequently hit minimum or maximum, revisit limits, LCF, BPF, or an optional loss ratio cap for better risk alignment.

FAQs

1) What is a retro premium corridor?

It is the minimum and maximum premium range, usually expressed as factors of standard premium. The corridor limits extreme swings caused by unusually low or high losses.

2) Why use a loss conversion factor?

LCF converts adjusted losses into a program cost basis by reflecting claim expenses and administrative components. It helps align how losses impact the final premium.

3) How do deductibles and limits interact?

The model subtracts the deductible from incurred loss first, then applies the per-claim limit to the remaining amount. This reflects typical plan mechanics, but carrier rules may vary.

4) What does loss development factor represent?

LDF estimates how current reported losses may grow as claims mature. Use a higher LDF for newer accident years or lines with long settlement patterns.

5) When should I enable the loss ratio cap?

Enable it when your contract includes an extra ceiling tied to standard premium. It can protect against unusually severe years beyond the normal maximum factor.

6) Are the charts used for underwriting decisions?

Charts are for analysis and documentation. They help explain drivers and sensitivity, but the actual billed premium depends on contract language, audits, and carrier loss valuations.