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CA Department of Insurance

Certificate of Authority Section 4-2

Guidelines & Sample Language

This section of the application contains detailed guidelines and sample language intended to assist you with preparing many of the documents you will be required to submit.

All forms are located in a separate forms packet which you can request by calling the department at 415-538-4035. Guidelines and samples of some contract language are set forth below. The item number listed for each guideline corresponds to the item number assigned to the document in Section III and, therefore, represents the item number you should assign to the document in your application.

If, after reviewing this section, you still have questions about any portion of the Certificate of Authority application, please do not hesitate to contact the department's Legal Division at 415-538-4035. Our Corporate Affairs staff is always available to answer your questions and provide assistance.

Table of Contents

More Guidelines

Items 3, 4, 7, 8, 10, 11, 14 and 17

Application Item #18

Workers' Compensation Deposit

Workers' compensation insurers must file a securities deposit pursuant to California Insurance Code Sections 11691. State law and regulations (CIC §11715; Workers' Compensation Deposit Regulations Article 9.5, Subchapter 3; California Administrative Code §2509.1 - 2509.20, Chapter 5, Title 10-lists deposit options available to insurers. The options are as follows:

  1. Placing a Securities Deposit of the required deposit value with the State Treasurer or an approved bank, savings and loan association or trust company;
  2. Placing a Letter of Credit of the required deposit value with the State Treasurer; or
  3. Placing a Combination Deposit of a letter of credit and securities, the total of which is equal to the required deposit value. All items of the deposit must be placed at the State Treasurer.

The following guidelines are intended to assist you with accomplishing one of the three alternatives listed above. However, these are merely guidelines and any insurer entering into any of these alternatives should consult the pertinent statutes and regulations noted above.

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Securities Form Fee

A securities transaction Form A-174, or Form D-174 is required for all securities transactions. The fee for such form varies, as described below.

Deposit Value

The deposit value must be equal to the deposit value required under California Insurance Code Section 11691. If you are applying for admission in California and want to transact workers' compensation, the deposit value is $100,000.

Please be advised that securities with sinking fund values are no longer accepted by the State Treasurer. If you submit such securities on your A-174, you will be asked to replace them with securities without sinking fund values.

Workers' compensation insurers must file a Special California Schedule P on an annual basis. This schedule allows the department to monitor the premium volume of the company and adjust the deposit accordingly. The deposit must always meet the last Schedule P requirement.


The deposit value of acceptable securities is the lower of par or market value, except that preferred stock and common stock are to be valued at market. This deposit may be placed with the State Treasurer, an approved bank, savings and loan association, or trust company.

State Treasurer

If your deposit is to be placed with the State Treasurer, please fill out the enclosed A-174 Securities Transaction form according to the attached instructions. Return two (2-copies of the form and the securities transaction filing fee to the Securities Deposit Unit.

Bank, Savings and Loan Association, or Trust Company

If your deposit is to be placed with an approved bank, savings and loan association, or trust company, you must place such deposit in accordance with Insurance Code §11691 and the Workers' Compensation Deposit Regulations, Article 9.5, Subchapter 3, Chapter 5, Title 10 of the California Administrative Code.

We refer you to the regulations themselves for specifics as to the entities available for the deposits and all other details regarding this arrangement. The agreement to be used is identified as Workers' Compensation Deposit Trust and Security Agreement. No deviation will be allowed. The agreement should be executed in quadruplicate. Submit four (4) copies of the agreement and two (2) copies of Form D-174. Please refer to the current fee schedule for the applicable filing fee for the agreement and securities transaction fee. These items are to be submitted with Item 20 of your application.

List of Outside Workers' Compensation Depositories

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Letter of Credit

A letter of credit must be deposited with the State Treasurer. A letter of credit used for deposit must be a clean and irrevocable letter which meets the Department's requirements as set out in Regulation 2509.18 of Article 9.5, Subchapter 3, Chapter 5, Title 10 of the California Administrative Code. Regulation 2509.18. A sample of an acceptable letter of credit is identified as Form WCD-001 (PDF, 168 kb-under Certificate of Authority Application Forms.

  • The letter should run or be effective from April 1 March 30 of the following year. This requirement is pursuant to California Insurance Code Sections 11693.
  • Please refer to the current schedule of fees for the filing fee for a new letter of creditor subsequent letters from the same bank.
  • In order to submit a letter of credit for approval, the package must contain a cover letter, one original letter of credit, two (2) original A-174's and the appropriate filing fee. The filing must be sent to the Tax and Securities Unit in the Accounting Services Bureau located at: 300 Capitol Mall, 14th Floor, Sacramento, CA 95814.
  • Additionally, since the original letters of credit are sent directly from the bank, it is suggested that the insurer forward the cover letter, check, and A-174 to the bank. The bank should add the original letter of credit and forward the entire package to this Department at the address as shown above.

Combination Letter of Credit and Securities

A deposit may be made of a letter of credit and securities if the sum total value is equal to the required deposit value. The letter and securities must be placed with the State Treasurer.

If you have any questions regarding these deposits, please contact the Department's Legal Division at 415-538-4035.

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Application Item #21

Minimum Paid-In Capital and Surplus Requirements

The sections of the California Insurance Code reprinted in this guideline govern the minimum paid-in capital and surplus requirements that applicants must meet in order to gain admission to California.

CIC §36

Section 36 of the Insurance Code defines "paid-in capital" or "capital paid-in" as:

  1. In the case of a foreign mutual insurer not issuing or having outstanding capital stock, the value of its assets in excess of the sum of its liabilities for losses reported, expenses, taxes, and all other indebtedness and reinsurance of outstanding risks as provided by law. Such foreign mutual insurer shall not be admitted, however, unless its paid-in capital is composed of available cash assets amounting to at least two hundred thousand dollars ($200,000).
  2. In the case of a foreign joint stock and mutual insurer, its paid-in capital computed, according to its desire, pursuant to the provisions of subdivision (a) or subdivision (c) of this section. If computed pursuant to the provisions of subdivision (a), its admission is subject to the qualification therein expressed.
  3. In the case of all other insurers, the lower of the following amounts:
    1. The value of its assets in excess of the sum of its liabilities for losses reported, expenses, taxes and all other indebtedness and reinsurance of outstanding risks as provided by law.
    2. The aggregate par value of its issued shares of stock, including treasury shares.

For the purpose of computing paid-in capital or capital paid-in shares of stock are not taken as liabilities.

CIC §700.01

In addition to any or all of the classes of insurance which it is permitted to transact by all other applicable provisions of this code, any incorporated insurer admitted or hereafter admitted for one or more of the classes of insurance stated in Section 100, except life, title, mortgage or mortgage guaranty shall (subject to any limitations contained in its articles of incorporation or charter) be admitted after January 1, 1990, for any or all of the following classes, upon making application therefor and complying with all applicable requirements of law, if its paid-in capital is not less than two million six hundred thousand dollars ($2,600,000) or the aggregate of the amounts hereinafter set forth opposite the classes transacted by it in the United States if an alien insurer, or in any jurisdiction if other than an alien insurer, whichever is lower; provided, that the paid-in capital of incorporated insurers not transacting either fire, marine or surety insurance making application under this section shall be at least three hundred thousand dollars ($300,000) in excess of such aggregate amount. In no event shall any incorporated insurer, as a condition for its admission, be permitted to have a paid-in capital of less than one million dollars ($1,000,000) or be required to have a paid-in capital in excess of two million six hundred thousand dollars ($2,600,000) for any or all of the classes of insurance hereinafter set forth.

Name of Class
Amount of Capital
Plate Glass
Liability )   $300,000
for any or all of these:
9. Workmen's Compensation )
10. Common Carrier Liability )
11. Boiler and Machinery $100,000
12. Burglary $100,000
13. Credit $100,000
14. Sprinkler $100,000
15. Team and Vehicle $100,000
16. Automobile $200,000
18. Aircraft $100,000
20. Miscellaneous $100,000

This section shall not be applicable to life, title, mortgage or mortgage guaranty insurance, and an insurer now or hereafter admitted to transact life, title, mortgage or mortgage guaranty insurance shall not be admitted under the provisions of this section, but its admission is governed by other applicable provisions of this code.

Insurers admitted for one or more classes of insurance on December 31, 1989 shall be governed by the provisions of this section in effect as of December 31, 1989 until December 31, 1999. As of December 31, 1999, all insurers governed by this section shall meet the capital requirements of this section as become effective January 1, 1990. Insurers admitted for one or more classes of insurance on December 31, 1989, which thereafter amend their Certificate of Authority to add thereto a class or classes of insurance, shall thereupon become subject to the capital requirements of this section.

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CIC §700.02

No insurer shall be issued a Certificate of Authority other than a renewal Certificate of Authority for any of the classes set forth in Section 100 unless at the time of such issuance it possesses, in addition to the minimum paid-in capital required by this code a surplus of not less than 100 percent of the minimum paid-in capital required.

As used in this section, surplus means the excess of admitted assets over the sum of (1) liabilities for losses reported, expenses, taxes and all other indebtedness and reinsurance of outstanding risks as provided by law, and (2) paid-in capital, in the case of an insurer issuing or having outstanding shares of capital stock, or (3) the minimum paid-in capital required, in the case of any other insurer.

CIC §700.025

An insurer, including a reciprocal or inter-insurance exchange, admitted on January 1, 1970, to transact automobile liability insurance under class 8 and automobile insurance under class 16, or which had a valid bona fide application to transact both such classes of insurance pending before the commissioner on or before August 1, 1970, shall not be affected by this section.

Any other insurer, including a reciprocal or interi-nsurance exchange, applying to transact either of such class of insurance in this State, shall possess, at the time of admission for either of such classes, in addition to all minimum paid-in capital required by Section 700.01 and all surplus and paid-in capital required by Sections 700.02 and 700.05, an additional surplus of two hundred thousand dollars ($200,000).

CIC §700.05

(a) In determining the minimum amount of paid-in capital and surplus required by the applicable provisions of this code for admission of an insurer, there shall be included all of the classes of insurance transacted by it in the United States if an alien insurer, or in any jurisdiction if other than an alien insurer; provided that life, title, mortgage or mortgage guaranty insurance shall not be included among the classes of insurance in determining the minimum amount of paid-in capital and surplus required if the minimum paid-in capital is two million six hundred thousand dollars ($2,600,000) or more, and if the paid-in capital is less than two million six hundred thousand dollars ($2,600,000) the minimum shall be measured by adding to the amounts set forth in Section 700.01 two million two hundred fifty thousand dollars ($2,250,000) for life insurance, two hundred fifty thousand dollars ($250,000) for mortgage insurance, one million dollars ($1,000,000) for mortgage guaranty insurance and two hundred fifty thousand dollars ($250,000) for title insurance.

In applying such provisions, it shall be conclusively presumed that an insurer transacts all classes of insurance for which it is or seeks to be admitted to transact in this State.

(b) As used in this section "insurer" includes a reciprocal or inter-insurance exchange and its Attorney in Fact.

CIC §10510

An incorporated life insurer issuing policies on the reserve basis shall not transact life insurance in this State unless it has a paid-in capital of at least two million two hundred fifty thousand dollars ($2,250,000) plus the surplus required by Section 700.02 and Section 700.05.

CIC §10511

If authorized by its charter, such an incorporated life insurer may, except as provided in Section 700.03, transact, in addition to life insurance, any of the following classes of insurance if its total paid-in capital is at least two million two hundred fifty thousand dollars ($2,250,000) in excess of the sum of the amounts set forth opposite the classes of insurance transacted:

Number Name of Class Transacted Amount of Capital to be Added 6. Disability $250,000 8. Liability ) $300,000 for any or all of them 9. Workmen's Compensation ) 10. Common Carrier Liability )

CIC §10512

An insurer holding a certificate of authority for life insurance and any other proper class on December 31, 1989, shall be governed by the provisions of Sections 700.05, 10510 and 10511 in effect on December 31, 1989 until December 31, 1999. As of December 31, 1999, any insurer holding a certificate of authority for life insurance and any other proper class shall meet the capital requirement of Sections 10510 and 10511 as become effective January 1, 1990.

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Application Item #25

Report of Examination

A foreign insurer seeking admission to California shall submit in support of its application a current Report of Examination. The report must bear an examination date of no more than three years from the date the application for admission is filed.

If a current Report of Examination is unavailable, the Department may allow an exception. To qualify for this exception, the applicant must submit a supplemental filing within 30 days of notification. The supplemental filing must satisfy all of the following:

  1. No current examination report is available, but one not older than four (4-years is available; and
  2. The applicant must provide an update of the forepart of such report (i.e., history through accounts and records-certified as true and correct by an officer of the applicant; and
  3. The applicant must provide an independent audit report, including the management letter, not older than one year; and
  4. The applicant must provide a letter from the domiciliary authority setting forth the reason that an examination has not been conducted during the previous four (4-years; and
  5. Such domicile applies similar standards to foreign companies applying for admission. Proof of such standards should be certified by the appropriate official of the domiciliary state.

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Application Item #32

Debt-to-Equity Ratio Statement

For applicants who are members of a holding company system, the Uniform Certificate of Authority application will review the applicant's debt-to-equity ratio statement for adherence to the guidelines set forth below.
  • Shareholders
  • Holding Company
  • Insurance Companies
  1. Holding company, on consolidated basis, should have tangible net worth at all times.
  2. Outside debit to consolidated equity* should be no more than:

    In case of: Ratio
    5 year loan 1.0 to 1.0
    10 year loan 1.5 to 1.0
    20 year loan 2.0 to 1.0

  3. Debt service should not be in excess of 10 percent of the insurer's capital and surplus. Debt service should not contemplate more than 15 percent return on insurer's statutory equity.
  4. The assets of the insurer(s-should not be pledged to fund the debt service or debt repayment of an affiliate, otherwise said pledged assets would be considered non-admitted.
  5. The applicant must demonstrate with evidence that there is a source of repayment independent of future income of the insurer(s).
  6. There should be no personal guarantees from the shareholders for repayment of the debt. However, for obvious reasons, this condition does not apply to publicly traded holding companies.

*Note: May be on GAAP basis, but adjustments generally should be made to eliminate the material effects of goodwill.

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Application Item #33

Reinsurance Arrangements

The summary of the applicant's reinsurance arrangements should specify the point at which risks are ceded, and note all layers of reinsurance included in the applicant's reinsurance program.

In addition to a summary of the applicant's reinsurance program, the applicant will need to provide the full contract wording of each major reinsurance agreement.

* A completed Treaty Summary Form and checklist (proportional or non-proportional, whichever applies-should accompany each reinsurance agreement submitted. A Treaty Summary Form and the necessary checklists are enclosed in the back pocket of this Admission Information Packet. Please feel free to duplicate the form and checklists as needed.

*Note: A "major reinsurance agreement" should consist of quota share agreements having the two highest percentages of the quota share arrangements, a pooling agreement (if the applicant is a participant in the Inter-company pooling agreement), some excess layer agreements, catastrophe contracts and sample facultative agreements, if applicable.

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Application Item #42

Rate Filing - General

The rate filing requirements explained in this guideline apply only to insurers requesting authority to transact any line of insurance other than life, ocean marine, title, disability, workers' compensation (see Item 43) or mortgage insurance, or to insurers that will not exclusively transact business as a re-insurer.

Every insurer wishing to change any rules, rates, forms, or introduce a new program must complete a Rate Application or Forms Application and file it to the Commissioner. The application must include all data referred to in Sections 1857.7, 1857.9, and 1864 of the California Insurance Code (CIC), a justification of the rate and that the rate meets the applicable requirements of CIC Sections 1861.01 through 1861.16, and any other detailed supporting statistics and information as the Commissioner may require.

Send all applications to:

California Department of Insurance
Rate Regulation Division
Rate Filing Bureau
45 Fremont Street, 23rd Floor
San Francisco, CA 94105.

Do not submit any fee with this application. Each insurer will be billed an administrative fee.

Filing Memorandum

Attach a filing memorandum immediately after each CA-RA1. The filing memorandum should indicate the purpose of the filing and provide a summary of proposed changes within the filing.


A rate application must be submitted for all rate and rule changes. All filings containing forms (whether company or an advisory organization-must have forms filing pages CA-FA1 and CA-FA2 attached to the rate application.

A rate impact includes, but is not limited to, a change in the rates (increase or decrease-or coverage changes (broadening or restricting).

All Private Passenger Automobile class plans must be filed separately from a prior approval rate application. A class plan must be filed to indicate the rating factors to be applied, relativities for each rating factor, base rate, good driver discount plan and a statistical analysis used to determine the classification variables plus any surcharges or discounts.

Filings for declaration pages, application forms and installment payment plans are considered attachments to the latest applicable filings. Separate approvals will not be issued to these attachments.

Number of Copies of the Application and Acknowledgment

One (1) original and two (2) paper copies of the CDI application and supporting documents must be submitted. ALL filings must contain a self-addressed, stamped envelope for acknowledgment. A copy of the CA-RA1 page will be sent to the filer as acknowledgment.

Group Filings

Group filings can be made for rates, forms, rules and new program filings. If a common database is used by several companies within a group to derive the premium charge, then a group filing may be submitted. A complete group application and supporting documents must be submitted with a separate CA-RA1 page for each company within a group filing. In addition, the group filing must explain and support the rate differentials between the companies of the group in Exhibit 24-Group Filing.

Printed Rate and Rule Manual Pages

For filings requesting changes in rates or rules, the revised manual rate and rule pages must accompany the application. Unless the current manual is on file with the Rate Filing Bureaus (identify CDI filing number), provide a copy of the rate and rule pages that are being revised.

Underwriting Rules

When underwriting rules with rate impact are being revised, the proposed underwriting rules as well as the present underwriting rules must be attached to the file. For those programs with different rating tiers, underwriting rules must accompany the filing to show which risks are written in each rate level.

Filing by Line of Business Versus by Program

Filings must be made per line of insurance as stated in CA-RA3. For example, Personal Earthquake should be separately filed from Personal Homeowners Multi-Peril. Filings per line of business may be made for specialized or individual programs within the line (such as a Commercial Automobile Auto Dealers). The filing must contain the rules, rates, and forms for each coverage and provide documentation to support the rates for each coverage. The rates, rules and forms for the same line of business may be combined in one filing.

Automobile Liability and Automobile Physical Damage may be combined in a single filing. However, separate CA-RA5 pages must be submitted per coverage (BI, PD, MP, UM, Comprehensive and Collision-as well as a CA-RA5 for all coverages combined. Separate CA-RA6 and CA-RA7 must be submitted for Liability and Physical Damage. Personal automobile data should exclude assigned risk data.

All revisions to existing programs should include all the impacted rules and forms.

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File and Use Requirements

File and Use provisions apply only to Financial Guaranty and Credit Insurance. For these lines of business, the rate or forms should be submitted on the File and Use format with an explanation for each change.

The change may be implemented by the company without prior approval from the Department of Insurance by stating the effective date. The effective date of the change should be no earlier than the date the application is received by the San Francisco filing office. These filings are subject to review and analysis by the Department of Insurance.


When forms are being revised, the proposed forms must be included with the filing as well as a copy of the current version. The forms must be highlighted to indicate what changes are being made. The application pages must be completed and an explanation of the rate or rate impact must also be included. For forms restricting or deleting coverage, an explanation of prior losses incurred must be included.

New Programs

A new program is a new concept without an existing rate manual, policy forms and underwriting rules. It is also a program that has not been previously written and its filing requires at least one year of projections. A rule filing differs from a new program filing in that rule filings are filings intended to either add, delete or limit specific coverages to an existing program.

There is no longer a separate New Program Application. Filings for new programs must be submitted on the Rate Application.

At a minimum, provide the projected figures or substitute data on CA-RA5 of the application. The minimum data necessary for new program filings are Projected Written Premium, Projected Earned Premium, Projected Number of Earned Exposure Units, Projected Incurred Losses, Projected ALAE, Projected Expenses (Commissions, Other Acquisition, General Expenses, Taxes, Licenses & Fees and ULAE), and the Projected Reserves (Loss Reserve, LAE Reserve and Unearned Premium Reserve). If relying upon the data from an affiliate within a group, submit the affiliate's historic data in addition to the projected figures. A complete application for a new program must include CA-RA1, 2, 3, 4, 5, 8, and Exhibit 23-New Program. In addition, ALL manual rules, underwriting rules, rates, and forms must be included in a new program filing.

Several filings are required for a new Private Passenger Automobile program. A class plan must be filed to indicate the rating factors to be applied, relativities for each rating factor, base rate, good driver discount plan and a statistical analysis used to determine the classification variables. In addition, a prior approval rate filing is required to support the rate level to be applied.

Lack of Data Availability

When an insurer is requesting the use of substitute data in place of data required by the Department, the company must provide Exhibit 12-Data Availability Report.

Required Exhibits

The following is a summary of exhibits that must be attached to the application to support the figures applied in rate making analysis (CA-RA5). Indicate the appropriate exhibit number in the upper right hand corner of the page. In addition, number the pages in each exhibit in consecutive order.


Exhibit 1-Filing History

Provide a list of all the previous California Department of Insurance rate filing numbers that have been made for this line, sub-line, and program within the last three years.

Exhibit 2-Rate Level History

  • List all of the rate level changes for the last five years per coverage affected by this filing.
  • Show the effective date of the rate change. 

The following is an example for Private Passenger Automobile Liability:

Effective Date BI PD MP UM Combined
01-01-94 +10.0% -5.0% +1.0% +4.0% +8.0%
01-01-93 -5.0% +2.0% 0.0% 0.0% -4.0%
01-01-92 +8.5% 0.0% 0.0% -10.0% +8.3%
01-01-91 +5.0% +1.0% 0.0% +2.0% +4.7%
01-01-90 -5.0% -2.0% +5.0% 0.0% -4.8%

Exhibit 3-Premium Adjustment Factor

From the rate level changes in Exhibit 2-Rate Level History, show how the premium adjustment factors in row 3 on CA-RA5 were derived to bring premiums to the current rate level.

Exhibit 4-Premium Trend Factor

Indicate how the premium trend factors in row 4 on CA-RA5 were developed.

Exhibit 5-Allocated Loss Adjustment Expense (ALAE)

Show how the allocated loss adjustment expenses in row 7 on CA-RA5 were determined from the historic costs associated with the adjustment of specific claims.

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Exhibit 6-Loss Development Factors

Indicate how the loss development factors in row 8 on CA-RA5 were developed. This exhibit must include the loss development triangle which is the basis of the average of the ratios of losses for the three most recent accident years available for the reporting interval.

Insurers should submit sufficient reporting intervals to fully develop the losses. Paid losses and case-specific reserves in Exhibit 6 must correspond to CA-RA7 (page 2 of 3).

Exhibit 7-ALAE Development Factors

Present the computation of the ALAE development factors as in Exhibit 6 which are shown in row 9 on CA-RA5.

Exhibit 8-Loss Trend, ALAE Trend, and Expense Trend

Provide support for the loss trend, ALAE trend, and expense trend factors in rows 10, 11 and 23 on CA-RA5. Provide selected annualized trend factors and explain the trending methodology including the trending period for loss trend, ALAE trend, and expense trend. Report paid claim severity and frequency data by calendar quarter for at least 12 quarters.

If using linear or exponential methods to determine the trend, provide the coefficient of determination (R2).

Exhibit 9-Catastrophe Adjustment

To support the catastrophe adjustment factors that were shown in row 12 on CA-RA5, show how the multi-year loading was derived. Provide a definition of what is considered catastrophic loss and show how the catastrophic losses were eliminated from the Historic Losses. Indicate the catastrophic reserves and the portion of the catastrophic losses paid.

The filing must have sufficient and corresponding data for the number of years the program has been written. Include ONLY the California actual losses, a list of the causes of loss and the outstanding catastrophic reserves for large loss years.

Exhibit 10-Policy Term Distribution

Explain the policy term options that are available and provide the percentage of business written in each option.

Exhibit 11-Credibility Adjustment

If the data is not 100% credible, indicate how the loss credibility factor and ALAE credibility factor in rows 13 and 14 on CA-RA5 were determined. Provide the credibility formula or table that was used to derive the factors. Include the credibility criteria (parameters-and appropriate source of substitute data.

Exhibit 12-Complementary Losses / Data Availability Report

State how the complementary losses and complementary ALAE in rows 15 and 16 on CA-RA5 were determined.

Support why data are unavailable to the insurer. The explanation should include: reasons why data is unavailable, references to the practices of similar insurers, state the source of the substitute data, justify the use of the substitute data, discuss other feasible alternatives in place of the substitute data, and provide a plan for providing the Department with the company's data when adequate data is obtained. Provide a statistical plan to show that data elements will be collected for future rate development.

Exhibit 13-Projected Expenses / Inter-Jurisdictional Expense Allocations

When reliable California data exist, the California data should be used to determine the projected expenses in rows 17, 18, 19, and 20 of CA-RA5. Exhibit 13 should provide the actual dollars for each of the above expenses for the recent three years. Explain how the projected dollar figures for the expenses were derived. The percentages must be calculated over the direct earned premium.

In addition, California allocation of multi-state data should be provided. Where California data varies from the California allocation of multi-state data, the insurer must demonstrate the accuracy of the data and justify any deviation from the insurer's experience in other states.

If data is maintained on a multi-state basis only or if California data are not reliable, the multi-state data allocated to California must be used.

Exhibit 14-Unallocated Loss Adjustment Expense (ULAE)

Detail how the unallocated loss adjustment expenses in row 21 of page CA-RA5 were derived. ULAE is loss adjustment expenses not considered as ALAE.

Exhibit 15-Other Expense Items

Provide a breakdown of other expenses not included in Exhibit 13-Projected Expenses / Inter-Jurisdictional Expense Allocations and Exhibit 14-Unallocated Loss Adjustment Expense. These expenses should be listed separately by type of expense and include the following:
  • Political contributions and lobbying;
  • Executive compensation for the five highest-paid policymaking positions;
  • Bad faith judgments;
  • All costs for unsuccessful defense of discrimination claims;
  • Fines and penalties;
  • Institutional advertising expenses; and
  • All payments to affiliates that exceed fair market rate.

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Exhibit 16-Ancillary Income

Show the breakdown of the ancillary income for the recent three years. Ancillary income is defined as income that was derived from operations directly related to insurance (such as premium finance revenues and membership dues but not insurance premium). Expenses associated with collecting ancillary income must not be deducted from the ancillary income.


Exhibit 17-Federal Income Tax Rate

Indicate how the federal income tax rates in row 25 on CA-RA5 were determined by providing the federal income tax rate reported for the most recent three years. Give a full account of all the tax credits and offsets that were used or available to the insurer.

Exhibit 18-Projected Investment Income Ratio

Show how the projected investment income ratio in row 26 on CA-RA5 was derived. This exhibit also should show the insurer's California investment income ratio for the most recent three years and the California average realized capital gains for the last recent five years.

Exhibit 19-Loss Reserves, Loss Adjustment Expense Reserves, and Unearned Premium Reserves

Indicate how the loss reserves, LAE reserves, and unearned premium reserves in rows 27, 28, and 29 on CA-RA5 were derived. Provide two years of the most recent calendar year data for each of these reserves. This exhibit must reconcile with the page 14 of the annual statement.

Exhibit 20-Insurer's Rate making Calculations

Provide a full explanation of the development of the insurer's calculations of the indicated rate change and proposed overall rate change. The components indicated in the CA-RA5 pages plus any additional relevant rate making data should reconcile with Exhibit 20, otherwise a full explanation must be provided.

Exhibit 21-Rate Distribution

Demonstrate how the proposed earned premium will be allocated among the rating factors. Provide the current and proposed base rates as well as the percentage change for each base rate. This exhibit should provide the current and proposed base premium to determine the overall impact for all the changes.

Exhibit 22-Rate Classification Relativities

Provide loss experience to support the changes in all rate classification relativities. This exhibit should provide current, indicated and proposed relativities. (Note: Exhibit 22 applies to all lines other than Private Passenger Automobile. For Private Passenger Automobile, a separate classification plan filing must be submitted.)

Exhibit 23-New Program

  • Explain the source used to develop the rates for the new program (such as an affiliated company or unaffiliated company). For new programs that are based upon the loss costs of an advisory organization, indicate the edition date of the loss costs that are adopted by the insurer, state the loss costs multiplier to be applied (should be the latest edition), and detail how the loss cost multiplier was developed (including a breakdown of expenses, unallocated loss adjustment factor, and trend factor).
  • Identify if the new program or a similar program has been written in California by the insurer or an affiliated company. Explain the reason for the new program development and the relationship and/or differences between the proposed rates, coverage, and underwriting requirements to any similar existing programs.
  • If the program has not been written in California by the insured or affiliate, indicate if the new program has been written in another state. Again, describe how the rates were determined.
  • Explain if the out-of-state rates were considered in the calculation of California rates.
  • All new program filings must contain the corresponding rules, rates, underwriting guidelines, and forms. At a minimum, the CA-RA5 pages must be completed with projected data using the projected column. These are line numbers 1, 2, 5, 6, 7, 17, 18, 19, 20, 21, 27, 28 and 29.
  • New programs with entirely new concepts and without any source or basis from which rating data may be available must be submitted with a statistical plan that shows how data will be captured for future rate development.

Exhibit 24-Group Filing

Identify, support and explain the rate differentials applied by the companies within the group filing.

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Application Item #43

Rate Filing - Workers' Compensation

This item is a requirement only if you are requesting authority to transact workers' compensation insurance.

To write policies that begin or renew on or after January 1, 1995, every insurer that writes workers' compensation insurance in California must have on file with the California Department of Insurance its complete rating manual. The rating manual must include all rates, classifications, rating plans, rate deviations, modification factors, and other information to enable the Department to determine all workers' compensation rates the insurer will charge.

In addition, the Insurance Commissioner has specified by regulation that a Rate Filing Form (the "Form") be completed which requires the disclosure of certain financial and expense information. The Form is to be submitted with exhibits.

The Department provides these instructions to filers to assist companies in filing workers' compensation insurance rates and rules. They should be read in conjunction with the applicable regulations (California Code of Regulations, Title 10, Ch. 5, Subch. 3, Art. 9.6, sections 2509.30 through 2509.34, called the "Regulations" in these instructions), statutes (California Insurance Code), and the Form itself. Failure to mention an item in these instructions does not imply that filing it is not required or that failure to include it may not result in an incomplete filing.

Questions may be addressed to the Rate Filing Bureau for Workers' Compensation Insurance at the address below or by telephone at 213-346-6783.

Where to File

The Rate Filing Bureau for Workers' Compensation Insurance (the "RFB/WC") in the Department's Rate Regulation Branch will receive and process insurers' Forms and rate filings. It will be the point of contact for all routine matters concerning workers' compensation rate filings. The RFB/WC also maintains the Los Angeles public viewing facilities. This filing bureau is different from the independent rating organization known as the Workers' Compensation Insurance Rating Bureau.

Rate filings should be submitted electronically via the NAIC's SERFF system. However, for the time being paper filings will still be accepted at the following address:

California Department of Insurance
Rate Regulation Branch
Rate Filing Bureau for Workers' Compensation Insurance
300 South Spring Street
Los Angeles, CA 90013.

The Department does not accept filings by FAX.

Designated Rating Organization

The Workers' Compensation Insurance Rating Bureau of California ("WCIRB") is the rating organization the Commissioner has designated pursuant to Insurance Code section 11734, subdivision (b). Periodically, the WCIRB will file advisory pure premium rates (prospective loss costs) and advisory manual classifications, rules, and rating plans. After the Commissioner has approved a WCIRB filing, an insurer may adopt some or all of it, either as filed or with company-specific modifications, by checking where indicated on page one, and entering the Department ruling number on page two, of the Form.

Public Viewing

All materials filed will be available for public viewing on the Department's website and at Department offices in Los Angeles and San Francisco. Visitors to Department offices ewers may photocopy filed materials at their own expense, but because Department copying facilities are limited, the viewer may have to retain a copying service.

File-and-Use Timeline

Each insurer must file rates and rating information at least 30 days before their use, unless the insurer requests an earlier effective date and the Department approves that earlier date. The 30-day period is counted from the date a filing is received by the RFB/WC in Los Angeles.

Rejection for Incompleteness

The Department will reject a filing for incompleteness if it does not include the Form and all appropriate data. The Form is a tool to collect required information; it must be completed in every case. Supplementary information and exhibits, required in addition to the Form, are of equal importance to a complete filing.
  • If during the 30-day analysis period the reviewing analyst discovers the filing is incomplete, the insurer will be notified of the deficiency:

  • If the insurer corrects the deficiency before the end of the 30th day, the original filing date will be retained.

  • If the 30 days expires before the insurer can correct the deficiency, the analyst will assign a new filing date − the date the filing is correct and complete − and a new 30-day filing period will begin. In that case, the insurer may request an early effective date (please see Insurance Code section 11735, subdivision (a)).

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Filing Fee

Each insurer that writes workers' compensation insurance in California will pay an annual fee to support the Department's review and processing of workers' compensation insurance rate filings.
  • The fee will be the lesser of (1) a specified flat fee or (2) a percentage of written premium, each subject to a minimum.
  • The Department will base the fee on written premiums for the most recent year for which there is complete data.
  • The Department will re-evaluate the assessment formula each year to determine whether it is generating funds that properly match actual expenditures.
  • The annual filing fee is the lesser of (1) $4,025 (four thousand dollars twenty five-or (2) 1% (one percent-of the insurer's workers' compensation insurance written premium, but not less than $125. Each admitted insurer is required to pay an annual filing fee, regardless of whether it files as a member of a group, and need pay only one filing fee a year, regardless of how many filings it makes.
  • The Department has developed a mandatory Form to accompany each workers' compensation insurance rate filing.

Most items on the Form are self-explanatory. A few general comments follow. If there are questions about the Form, please call the RFB/WC at 213-346-6783.

1. General Filing Information

  • Insurer name and address: Enter the insurance company name and the address to which the Department may mail correspondence about the insurer's rate filing, except for notice of rate disapproval hearings. (Notice of a rate disapproval hearing will be mailed to the insurer's agent for service of process in California (see Regulations, section 2509.33, subdivision (g)). The company name should appear on each page of the form.
  • Name of person responsible for filing, etc.: This person is the only person in the insurer's organization whom the reviewing rate analyst will contact for additional information or to answer questions about the filing.
  • Proposed overall rate level change: Enter the calculated, overall premium impact of the filing. If this is the insurer's initial filing, no entry is required for this item.
  • Insurer direct written premium for the most recent calendar year: Enter the workers' compensation insurance direct premium (California, aggregate, and aggregate in affected classifications) for the most recent calendar year, not the premium projected as a result of the changes proposed in the filing.

2. Pure Premium Rate Filings

  1. For combinations of 'reference' and 'non-reference' filings: If the insurer uses pure premiums from the WCIRB filing for some classifications and from some other source for other classifications, it may check both the "By reference to. . ." and the "Non-reference. . ." items. In that case, the insurer must file actuarial support for the pure premiums that are not from the WCIRB filing

    If the insurer intends to adjust the WCIRB's pure premium rates upward or downward before application of its projected expenses and profit, the amount of the deviation should be entered here and supporting documentation attached as indicated.

  2. Underwriting Expense Loading. Enter the expenses incorporated in the pure premium rate modifier as percentages of the insurer's standard premium. Show investment income two ways, separately and included in the profit & contingencies item. Because these values are projections, an item's value may be 0 (zero) if no provision has been made for it in the pure premium rate modifier.

  3. Final pure premium rate modifier. Enter the insurer's combined expense and deviation loading. It may be multiplicative or additive or both.If the modifier is not solely a multiplier, attach an exhibit that shows how it is calculated and applied.

3. Rating Plans and Supplementary Rate Information.

Insurance Code section 11730, subdivision (j), defines "supplementary rate information" as ". . .any manual or plan of rates, classification system, rating schedule, minimum premium, policy fee, rating rule, rating plan, and any other similar information needed to determine the applicable premium for an insured." Attach as exhibits all Supplementary Rate Information that is relevant to the filing.

The Department should be able to determine from the Form and its exhibits all the rates the insurer will charge its insureds and the separate provisions for losses and expenses.

4. Classification System

Insurance Code section 11734, subdivision (b), permits an insurer to modify the WCIRB classification system or develop its own, so long as the insurer can demonstrate that data the system produces can be reported consistent with the WCIRB Uniform Statistical Reporting Plan. The required showing may be made in either of two ways:

  • By including with the filing an exhibit that describes the classifications and the data generation and reporting under the insurer's system; or
  • By including with the filing a letter from the WCIRB, certifying that the insurer's classification and reporting systems will report data consistent with the WCIRB's Uniform Statistical Reporting Plan.

5. Electronic Copy of Manual Rates

Provide a copy of the insurer's manual rates in PDF and excel formats.

6. Signature Authorization

The "person responsible for the filing" and corporate officer of the insurer must co-sign the Form.

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