Statement of Principles Regarding Property and Casualty Insurance Ratemaking

The purpose of this Statement is to identify and describe principles applicable to the determination and review of property and casualty insurance rates. The principles in this Statement are limited to that portion of the ratemaking process involving the estimation of costs associated with the transfer of risk. This Statement consists of four parts: I. DEFINITIONS II. PRINCIPLES III. CONSIDERATIONS IV. CONCLUSION The principles contained in this Statement provide the foundation for the development of actuarial procedures and standards of practice. It is important that proper actuarial procedures be employed to derive rates that protect the insurance system’s financial soundness and promote quity and availability for insurance consumers. Although this Statement addresses property and casualty insurance ratemaking, the principles contained in this Statement apply to other risk transfer mechanisms.