1. New York Workers Compensation Reforms and Their Impact on Loss Development Ziv Kimmel Vice President and Chief Actuary New York Compensation Insurance Rating Board CAGNY 2015 SPRING MEETING

2. Overview Major New York Workers Compensation (WC) Reforms Pricing of Reform Elements Adjusting Loss Development to Reflect Reforms

3. Elimination of Special Disability Fund Increase in Maximum Weekly Benefit Caps on Permanent Partial Disability Duration (PPD) PPD Claims Into Aggregate Trust Fund Medical-Related Provisions System Improvements Major Components of the 2007 Reforms

4. The 2008 Reform Effective 10/1/2008 End of “Administered Pricing” Loss Costs  LCMs NYCIRB’s governing structure

5. The 2013 Reform Revised Assessment Process Closing of the Reopened Case Fund

6. Actual Assessment Data From State WC Board Relate Assessments to Paid Losses Mitigation / Efficiency Factor Indemnity Impact:+17.8% Total Impact: +13.3% Elimination of Special Disability Fund

7. Fratello Method Recognition of Varying Wage Levels by Injury Type Increased System Utilization Increase in Maximum Weekly Benefit

8. Effective DateMax Weekly Benefit Overall Impact 7/1/2007$5006.0% 7/1/2008$5501.9% 7/1/2009$6001.5% 7/1/2010$7404.1% 7/1/2011$7730.8% 7/1/2012$7920.3% 7/1/2013$8030.2% 7/1/2014$8090.1% 7/1/2015$8440.4% Total To Date 16.2% Increase in Maximum Weekly Benefit Impact

9. % Loss of Earnings = # Weeks of Benefits Actual PPD Data From State WC Board Distribution of Loss of Earnings PPD Settlement Considerations Hardship Provision Total Impact: -28% Caps on PPD Duration

10. Loss of Earning %Number of Weeks Greater than 95%525 90% to 95%500 85% to 90%475 80% to 85%450 75% to 80%425 70% to 75%400 60% to 70%375 50% to 60%350 40% to 50%300 30% to 40%275 15% to 30%250 Less than 15%225 Benefit Duration by Impairment Ratings

11. Loss of Earning percentage Number of WeeksSelected Distribution Percentage Savings Lump sum CasesOther Cases Greater than 95% 5250.5% 17.0%33.5% 90% to 95% 5000.5% 18.5%34.2% 85% to 90% 4752.4% 20.0%35.0% 80% to 85% 4502.4% 21.5%35.7% 75% to 80% 42510.1% 46.1%73.0% 70% to 75% 40010.1% 49.1%74.6% 60% to 70% 37519.9% 52.2%76.0% 50% to 60% 35015.8% 55.3%77.6% 40% to 50% 30021.5% 61.4%80.7% 30% to 40% 2758.2% 64.5%82.3% 15% to 30% 2506.4% 67.7%83.9% Less than 15% 2252.0% 70.9%85.4% Average 54.2%75.6% Total Average Savings on Perm. Partial Non Schedule 71.3% Total Average Savings on Perm. Partial 50.5% Total Impact -28.0% Final Calculation

12. Reflection of Reforms in Subsequent Filing Back to Basics What’s in the Reported Data? Pre-Reform vs. Post Reform

13. Historical loss development information is primarily pre- reform OK to use it if we assume losses are at pre-reform levels Need adjustment if applying loss development factors (LDF) to losses at post reform levels Paid vs. Paid + Case Loss Development Adjustment

14. Duration Cap Development Adjustments

15. Reported Indemnity Paid Loss Development Triangle PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT 1991 1.0151.164 1992 1.0171.0141.162 1993 1.0161.0101.0131.165 1994 1.0161.0131.0151.0131.161 1995 1.0161.0121.0131.011 1.162 1996 1.0171.0161.0151.0131.011 1997 1.0201.0181.016 1.014 1998 1.0211.0161.0201.015 1999 1.0291.0191.0211.0191.020 2000 1.0291.0241.0221.0191.020 2001 1.0511.0331.0321.0251.020 2002 1.1001.0381.033 1.017 2003 1.1351.0951.0501.0421.028 2004 1.1461.1291.0901.0531.039 2005 1.1671.1101.1301.0851.037 2006 1.2911.1701.1131.1281.078 2007 1.4561.2471.1741.1091.125 20082.2001.4801.2711.1921.096 20092.1501.4711.2581.149 20102.1591.5061.240 20112.1451.459 20122.111 Note: Numbers shown in this exhibit are for illustration purposes only

16. Restating the Loss Development Factors: Example (1)Reported PY 2002 7th to 8th link ratio1.100 (2)Development portion 0.100 (3)% of Non Scheduled out of total PPD 66.7% (4)% of PPD out of total indemnity 86.6% (5)% Non Scheduled out of indemnity (3)x(4) 57.8% (6)Development portion that is NSPPD (2)x(5) 0.058 (7)Development portion that is other than NSPPD (2)-(6)0.042 (8)*% of cases affected by limited duration 25% (9)Restated NSPPD Development portion (6) x [1-(8)]0.043 (10)Restated PY 2002 7th to 8th link ratio 1+(9)+(7) 1.086 Row (8) assumes at this point in the development, 25% are cases are now limited, whereas before they were still developing. 75% of the cases are still developing at this point in the triangle, even after the reform, as they still haven't reached the maximum duration. These assumed percentages can be found on the top of each column of the "restated" triangles. The percentages are based on a distribution of severities obtained from the Workers’ Compensation Board. Note: Numbers shown in this exhibit are for illustration purposes only

17. Restated Indemnity Paid Loss Development Triangle PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT % Cases affected0000515254055707580859095 1991 1.0071.074 1992 1.0081.0061.073 1993 1.0071.0051.0061.075 1994 1.0071.0061.0071.0061.073 1995 1.0081.006 1.005 1.073 1996 1.0091.0081.0071.0061.005 1997 1.0111.0091.0081.007 1998 1.0121.0091.0101.007 1999 1.0171.011 1.0101.009 2000 1.0201.0141.0131.010 2001 1.0391.0231.0191.0141.011 2002 1.0861.0291.0231.0201.010 2003 1.1231.0811.0381.0291.017 2004 1.1421.1181.0771.0411.027 2005 1.1671.1071.1191.0731.028 2006 1.2911.1701.1111.1201.070 2007 1.4561.2471.1741.1091.125 20082.2001.4801.2711.1921.096 20092.1501.4711.2581.149 20102.1591.5061.240 20112.1451.459 20122.111 Note: Numbers shown in this exhibit are for illustration purposes only

18. Reform Development Adjustment Summary 1 st to 19 th 19 th to Ultimate 1 st to Ultimate Adjustment Total Full Year Adjustment ReportedRestatedAdjustmentReportedRestatedAdjustment 7.9217.0960.8961.1621.0730.9230.827-17.3% Note: Numbers shown in this exhibit are for illustration purposes only

19. Special Disability Fund (SDF) Development Adjustments

20. Reported Indemnity Paid + Case Loss Development Triangle Evaluated as of 2008 PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT 1984 0.9991.040 1985 1.0001.0151.040 1986 1.0090.9971.0091.040 1987 1.0191.0041.0161.0191.040 1988 1.0020.9791.0171.0120.9911.040 1989 1.0120.9961.0151.0090.999 1990 1.0051.0061.0281.0070.998 1991 1.0021.0131.0311.0100.999 1992 1.0031.0191.0311.0131.000 1993 0.9911.0221.0271.0101.003 1994 1.0081.0241.0381.0171.009 1995 0.9991.0231.0181.0141.006 1996 1.0051.0241.0271.0161.008 1997 1.0431.0531.0141.0191.008 1998 1.0741.0701.0371.0021.015 1999 1.0931.0731.0321.0231.038 2000 1.2721.1211.0721.036 20011.5861.2891.1751.0621.066 20021.4191.1811.0681.069 20031.3881.1691.116 20041.4071.214 20051.392 Note: Numbers shown in this exhibit are for illustration purposes only

21. Restating the Loss Development Factors: Example (1)Reported PY 1997 5th to 6th link ratio1.043 (2) % of indemnity claims were subject to the SDF elimination 5.8% (3) % of claims accepted by the SDF at each development age 60.1% (4) % of all claims that were accepted by the SDF at each development age (2)x(3) 3.5% (5) % of all claims that were not accepted by the SDF at each development age 1-(4) 96.5% (6)Adjustment Factor* 1.189 (7)Restated PY 1997 5th to 6th link ratio (1)x(4)x(6)+(1)x(5) 1.050 *The adjustment factor is determined by restating the reported loss development triangle which consists entirely of pre-reform years so that the restated LDF to ultimate is 17.8% higher than the original LDF to ultimate. Note: Numbers shown in this exhibit are for illustration purposes only

22. SDF Acceptance Rate Year Claims were Accepted Accident Year1998199920002001200220032004200520062007200820092010201120122013 Total by Accident Year 1998 1562981741694403265102381661349053332293 2,821 1999 -88106129434352506443295196169736834147 2,914 2000 --205625844154240040126923914075581411 2,924 2001 ---1679263508411440411391228137924115 3,032 2002 ----1087311334450410570313180935425 2,837 2003 -----10851623583534904282341836323 2,389 2004 ------112115228943441433219510433 1,985 2005 -------62910630834626523615043 1,489 2006 --------21613828627121220363 1,191 2007 ---------1197812811310039 478 TOTAL by Acceptance Year1563863003701,2211,4792,4732,0152,2932,1852,8482,3591,7231,23875226222,060 Years of Development Accident Year12345678910111213141516Ultimate 1998 1564546287971,2371,5632,0732,3112,4772,6112,7012,7542,7872,8092,8182,8212,823 1999 881943237571,1091,6152,0582,3532,5492,7182,7912,8592,8932,9072,914 2,917 2000 20763347751,3171,7172,1182,3872,6262,7662,8412,8992,9132,924 2,935 2001 16953588661,2771,7172,1282,5192,7472,8842,9763,0173,032 3,060 2002 10974087421,1921,6022,1722,4852,6652,7582,8122,837 2,888 2003 10952576159681,4581,8862,1202,3032,3662,389 2,474 2004 11321844739071,3211,6531,8481,9521,985 2,107 2005 6351414497951,0601,2961,4461,489 1,649 2006 2181564427139251,1281,191 1,416 2007 12098226339439478 640 Years of Development Accident Year12345678910111213141516 1998 6%16%22%28%44%55%73%82%88%93%96%98%99%100% 1999 3%7%11%26%38%55%71%81%87%93%96%98%99%100% 2000 1%3%11%26%45%58%72%81%89%94%97%99% 100% 2001 1%3%12%28%42%56%70%82%90%94%97%99% 2002 0%3%14%26%41%55%75%86%92%96%97%98% 2003 0%4%10%25%39%59%76%86%93%96%97% 2004 1%2%9%22%43%63%78%88%93%94% 2005 0%2%9%27%48%64%79%88%90% 2006 0%1%11%31%50%65%80%84% 2007 0%3%15%35%53%69%75% Average AY 1.2%4.4%12.5%27.6%44.3%60.1%74.9%84.2%90.3%94.2%96.6%98.2%99.1%99.6%99.9%

23. Restated Indemnity Paid + Case Loss Development Triangle Evaluated as of 2008 PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT % Cases affected4.4%12.5%27.6%44.3%60.1%74.9%84.2%90.3%94.2%96.6%98.2%99.1%100.0% 1984 1.0101.051 1985 1.0111.0261.051 1986 1.0201.0081.0201.051 1987 1.0301.0151.0271.0301.051 1988 1.0130.9901.0281.0231.0021.051 1989 1.0231.0071.0261.0201.010 1990 1.0161.0171.0391.0181.009 1991 1.0131.0241.0421.0211.010 1992 1.0141.0301.0421.0241.011 1993 1.0011.0331.0381.0211.014 1994 1.0181.0351.0491.0281.020 1995 1.0081.0331.0291.0251.017 1996 1.0131.0331.0371.0271.019 1997 1.0501.0621.0231.0291.018 1998 1.0791.0771.0461.0111.025 1999 1.0961.0781.0391.0311.048 2000 1.2741.1241.0771.0431.045 20011.5871.2911.1791.0671.073 20021.4201.1831.0711.074 20031.3891.1711.119 20041.4081.216 20051.393 Note: Numbers shown in this exhibit are for illustration purposes only

24. Reported Indemnity Paid + Case Loss Development Triangle Evaluated as of 2014 PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT 19911.0021.032 19921.0091.0061.032 19931.0061.0041.0021.032 19941.0101.004 1.032 19951.0041.0051.0041.003 1.032 19961.0091.005 1.0031.002 19971.0091.0041.0051.0031.001 19981.0011.0041.002 1.004 19991.0021.0051.0071.0031.006 20001.0181.0081.0071.0051.008 20011.0291.0151.0181.0031.006 20021.0241.0111.0201.0151.009 20031.0341.0181.0241.0101.013 20041.0711.0401.0211.0271.011 20051.0771.0381.0281.0211.013 20061.1131.0581.0681.0261.017 20071.2261.1091.0501.0371.011 20081.4511.2491.1141.0431.023 20091.5261.2001.1151.035 20101.5091.2191.089 20111.5131.207 20121.495 Note: Numbers shown in this exhibit are for illustration purposes only

25. Restated Indemnity Paid + Case Loss Development Triangle Evaluated as of 2014 PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT % Cases affected4.4%12.5%27.6%44.3%60.1%74.9%84.2%90.3%94.2%96.6%98.2%99.1%100.0% 1991 1.0131.043 1992 1.0201.0171.043 1993 1.0171.0151.0131.043 1994 1.0211.015 1.043 1995 1.0151.0161.0151.014 1.043 1996 1.0201.016 1.0141.013 1997 1.0201.0151.0161.0141.012 1998 1.0121.0151.013 1.015 1999 1.0131.0161.0181.0141.017 2000 1.0291.0191.0181.0161.019 2001 1.0391.0251.0291.0141.017 2002 1.0331.0211.0311.0261.020 2003 1.0421.0271.0341.0201.024 2004 1.0781.0491.0301.0371.021 2005 1.0821.0451.0361.0301.023 2006 1.1161.0621.0741.0331.025 2007 1.2261.1091.0511.0381.012 20081.4511.2491.1141.0431.023 20091.5261.2001.1151.035 20101.5091.2191.089 20111.5131.207 20121.495 Note: Numbers shown in this exhibit are for illustration purposes only

26. SDF Impact in The 2015 Filing (1)Reported 1 st to 19 th development factor2.546 (2)Restated 1 st to 19 th development factor2.931 (3)Adjustment factor for 1 st to 19 th (2)/(1)1.151 (4)Reported 19 th to ultimate factor1.032 (5)Restated 19 th to ultimate factor1.043 (6)Adjustment factor for 19 th to ultimate (5)/(4) 1.011 (7)Total development adjustment factor (3)x(6)1.164 16.4% Note: Numbers shown in this exhibit are for illustration purposes only

27. Doubly Adjusted Triangle

28. REPORTED INDEMNITY PAID + CASE TRIANGLE PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/2020/ULT 1.0081.029 19911.0021.0051.029 19921.0091.0061.0041.029 19931.0061.0041.0021.0011.029 19941.0101.004 1.029 19951.0041.0051.0041.003 19961.0091.005 1.0031.002 19971.0091.0041.0051.0031.001 19981.0011.0041.002 1.004 19991.0021.0051.0071.0031.006 20001.0181.0081.0071.0051.008 20011.0291.0151.0181.0031.006 20021.0241.0111.0201.0151.009 20031.0341.0181.0241.0101.013 20041.0711.0401.0211.0271.011 20051.0771.0381.0281.0211.013 20061.1131.0581.0681.0261.017 20071.2261.1091.0501.0371.011 20081.4511.2491.1141.0431.023 20091.5261.2001.1151.035 20101.5091.2191.089 20111.5131.207 20121.495 Reported Indemnity Paid + Case Triangle Note: Numbers shown in this exhibit are for illustration purposes only

29. RESTATED TRIANGLE POST DURATION CAP ADJUSTMENT PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/2020/ULT % Cases affected0515254055707580859095 1.0041.013 19911.0011.0021.013 19921.0041.0031.0021.013 19931.0031.0021.0011.0001.013 19941.0051.002 1.013 19951.002 1.001 19961.0041.002 1.001 19971.0041.002 1.0011.000 19981.0001.0021.001 1.002 19991.0011.0021.0031.0011.003 20001.0101.0041.0031.0021.004 20011.0161.0081.0091.0011.003 20021.0141.0061.0111.0081.004 20031.0231.0111.0141.0051.007 20041.0551.0271.0131.0151.006 20051.0661.0291.0191.0131.007 2006 1.1061.0521.0571.0201.012 2007 1.2261.1091.0501.0371.011 20081.4511.2491.1141.0431.023 20091.5261.2001.1151.035 20101.5091.2191.089 20111.5131.207 20121.495 Duration Cap Adjusted Indemnity Paid + Case Triangle Note: Numbers shown in this exhibit are for illustration purposes only

30. SDF & Duration Cap Adjusted Indemnity Paid + Case Triangle RESTATED TRIANGLE POST SDF ADJUSTMENT PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT % Cases affected4.4%12.5%27.6%44.3%60.1%74.9%84.2%90.3%94.2%96.6%98.2%99.1%100.0% 1991 1.0121.028 1992 1.0151.0141.026 1993 1.0141.0131.0121.026 1994 1.0161.013 1.024 1995 1.013 1.012 1.026 1996 1.0151.013 1.012 1997 1.0151.013 1.0121.011 1998 1.0111.0131.012 1.013 1999 1.0121.0131.0141.0121.014 2000 1.0211.0151.0141.0131.015 2001 1.0261.0191.0201.0121.014 2002 1.0231.0161.0221.0191.015 2003 1.0311.0201.0241.0151.018 2004 1.0621.0361.0221.0251.016 2005 1.0711.0361.0271.0221.017 2006 1.1091.0571.0631.0271.020 2007 1.2261.1091.0511.0381.012 20081.4511.2491.1141.0431.023 20091.5261.2001.1151.035 20101.5091.2191.089 20111.5131.207 20121.495 Note: Numbers shown in this exhibit are for illustration purposes only

31. SDF Impact of 16.4% Is Then Maintained (1)Restated 1 st to 19 th development factor post Duration Cap adjustment2.382 (2)Restated 1 st to 19 th development factor post Duration Cap & SDF adjustments2.741 (3)Adjustment factor for 1 st to 19 th (2)/(1)1.151 (4)Restated 19 th to ultimate factor post Duration Cap adjustment1.015 (5)Restated 19 th to ultimate factor post Duration Cap & SDF adjustments1.026 (6)Adjustment factor for 19 th to ultimate (5)/(4) 1.011 (7)Total development adjustment factor (3)x(6)1.164 16.4% Note: Numbers shown in this exhibit are for illustration purposes only

32. Summary Reform adjustment depends on the reported data Adjustments can be part of on-level factors or as part of development factor Adjust one triangle at a time The devil is in the details

33. Questions?