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Expected Losses

Expected Losses definition:
The Expected Losses for a firm is the amount of loss an average firm reporting the same exposures (usually hours) in the same classifications would have had during the Experience Period.

Each Rating Year L&I calculates Expected Loss Rates for each classification and each of the three years in the Experience Period. These rates are based on the reported exposures and claim costs for injuries occurring during the Experience Period within each classification for all firms.

L&I also computes a Primary Ratio for each classification which represents the portion of the claim costs that are expected to be Primary. See the Expected Loss Rates and Primary Ratios by risk class (www.leg.wa.gov) for more information.

A firm's Expected Losses are calculated for each classification and each year in the Experience Period by multiplying the Expected Loss Rate (www.leg.wa.gov) by the firm's reported exposures by year and classification. The sum of these amounts is the firm's Expected Loss.

A firm's Expected Primary Loss is calculated for each classification by multiplying the Expected Losses by the classification Primary Ratio (www.leg.wa.gov). The sum of these amounts is the firm's Expected Primary Loss.

The Expected Excess Loss is the difference between the Expected Loss and the Expected Primary Loss.

Examples

The following two examples show how the Expected Losses are calculated and how they are used in computing a firm's experience factor.

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