Restatement of the Consideration of Investment Income in Workers' Compensation Insurance Ratemaking [Discussion]

It is axiomatic among casualty actuaries that the subject of profit/contingency factors, investment income, and measurements relating to the "riskiness" of an insurer's underwriting portfolio are interrelated and cannot be fairly appraised in isolation from one another. With his "Restatement" Mr. Harwayne has offered a major contribution to the literature covering these interdependent concepts. His paper serves as a comprehensive, carefully organized guided tour through the rudiments of investment income measurements, methods for quantifying the "riskiness" of an insurer's book of business, and the appropriateness of introducing investment income measurements directly into the ratemaking formula - all exclusively from the standpoint of one line, Workers' Compensation. The paper quite obviously has directed its attention primarily to observers of the insurance business, particularly those in the regulatory fraternity, to whom the interdependence of the three above mentioned concepts is not such a truism. Profit Factor, Rate of Return, Risk, Investment Income