Stop Loss FAQs
By Jamie Stack, Reinsurance Claims Representative
We often receive questions about the stop loss process and we’ve answered some of the most common ones. If you have questions that aren’t discussed below, please contact us!
What triggers an initial stop loss calculation?
An initial calculation can begin in a few ways. Most commonly, the reinsurance claims representative will request the necessary reports after reviewing the quarterly Data Reports. If the reported incurred or paid losses for the accident year are greater than the estimated annual or prorated attachment point, respectively, it may trigger a request for documentation.
A mutual experiencing high losses related to a specific accident year may also request a calculation directly by contacting their client representative, reinsurance claims representative or by emailing ContactWRC@thewrcgroup.com.
If your mutual has experienced a large storm, please contact your WRC reinsurance claims representative or call the WRC main number when you have estimated claim counts and reserves. This will allow us to run a quick calculation to determine if obtaining reports for a full stop loss calculation is necessary and will also help WRC determine potential CAT dates for tracking.
We’ve experienced a large storm. Can I request an advance of funds?
If you are experiencing cash flow issues due to paying numerous storm-related claims, the reinsurance claims representative will request the necessary reports to complete a stop loss calculation and a separate calculation to determine if you are eligible for an advance. WRC offers two options for advancing funds under the aggregate contract.
- Option 1 — Proration of Estimated Attachment Point: This option considers a mutual’s total loss and external Loss Adjusting Expense (LAE) paid to date versus its prorated estimated attachment point. The prorated attachment point is determined by the month of the calculation. For example, if a calculation is performed as of September 30, you would multiply the attachment point by nine-twelfths.
- Option 2 — CAT Advance: This option considers losses and external LAE paid toward a catastrophic event (CAT). If the amount paid towards a CAT event exceeds twice the mutual’s Per Risk Retention, a cash advance may be requested. The accumulation of advances cannot exceed 75% of the storm-related losses incurred less two Per Risk Retentions.
Why is WRC requesting reports to do an updated calculation?
WRC updates stop loss calculations quarterly for recent accident years (typically the current year and prior year) to stay informed of how losses are developing and to accurately book our reserves.
Older accident year calculations are reviewed at least twice a year and a determination is made if a calculation is necessary at that time. Some mutuals are required to file a quarterly statement with the NAIC and we process those stop loss calculations at the end of every quarter. We attempt to update any non-yellow book filer calculations in the month preceding the end of the quarter to process all calculations more efficiently.
If a stop loss calculation remains open due to a liability reserve, the reinsurance analyst will review loss payments made by WASI before requesting any stop loss reports.
We closed a stop loss calculation but had to make an additional payment later. What do I do?
You are still eligible for reimbursement even if a stop loss calculation was previously closed. You can contact the reinsurance claims representative and they will inform you of the reports needed to update the calculation.
Based on the information submitted on the quarterly data report, the reinsurance claims representative may also contact you if they notice a payment has been made for a loss year related to a previously closed stop loss calculation.
What information is necessary for a stop loss calculation and how often can we have our calculation updated?
To generate an accurate stop loss calculation, we need your property losses paid, loss adjusting expenses (LAE) paid, any salvage or subrogation recoveries, and current reserve listing for the loss year. These reports should be emailed to the reinsurance claims representative or ContactWRC@thewrcgroup.com in electronic format only. Electronic format file options are Excel, .ddf or .txt.
For a current loss year, WRC will process an updated calculation bimonthly or monthly. Please submit your reports by the end of the day Wednesday to receive payment the following Friday. This allows us adequate time to update your stop loss and address any questions we many have while reviewing the information.
Often at the end of the year, a mutual’s auditors will request an updated calculation to book an appropriate recovery. Please provide the reinsurance claims representative with the necessary reports to prepare the updated calculation at least one week before you need it completed. If there are any discrepancies between your auditor’s calculation and WRC’s, your auditor may contact us directly if we have an auditor permission form on file for your mutual.
What happens if my estimated premium varies from my final premium? How does that affect my attachment point and possible stop loss recovery?
At year-end, WRC reviews each mutual’s annual statement to update final premiums for the year. Your attachment point will increase or decrease depending on the original estimate provided and the final premium balance. If a stop loss calculation has been started for that loss year, an update will be made around mid-March (or sooner, if requested by your mutual) to true-up the calculation using the final attachment point. An invoice may be sent to the mutual if the result is a significant balance due to WRC, typically triggered if the amount is greater than $50,000.