How is the Retrospective Rating Formula changed to recognize the All Risk Adjustment Program (ARAP)?
The Retrospective Rating Formula is changed as follows: Retrospective Premium = (Basic Premium + (Standard Premium x ARAP Adjustment Factor x Excess Loss Premium Factor x Loss Conversion Factor) + Losses x Loss Conversion Factor) x Tax Multiplier + (Standard Premium x ARAP Adjustment Factor x Retrospective Development Factor x Loss Conversion Factor x Tax Multiplier), subject to Minimum and Maximum Premiums. In effect, when calculating a Retrospective Rating, the Standard Premium is modified by the ARAP Adjustment Factor at each step in the process, i.e.
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