Underwriting      •       Risk Sharing Pool Eligibility            Risk Sharing Pool Transmission Errors          Finance and Accounting

Updated June 5, 2006

 

Q. What does FARM stand for?

A. It stands for Facility Association Residual Market.

 

Q. When can we expect the FARM Monthly Participation Report?

A. While Facility Association makes every effort to produce and email the report to members within 45 days after the last day of the report month, due to extenuating circumstances, this report may be delayed on occasion. To ensure that the Participation report reaches your company, please be sure to notify Facility Association of any name, address or e-mail changes with respect to the personnel receiving this report.

 

Q. Should we use ‘year to date’ figures to book every month or use ‘this month’ figures from the Participation Report?

A. Facility Association does not stipulate how members book their figures each month. However, if processed properly, both methods will produce the same correct results.

 

Q. Can we access the Participation Report on the internet?

A. Facility Association management is reviewing this option with its IT service provider.

 

Q. Why do we have negative unearned premiums on our Participation Report?

A. This problem has the potential to arise due to the methodology applied to the calculation of Earned Premium and becomes most apparent when a member's share base varies materially from accident year to accident year. The problem is currently under active review by FA.

 

Q. What is the Outstanding Loss Transition Adjustment on the Participation Report?

A. The Outstanding Loss Transition Adjustment offsets the transition adjustment in the policy year system and is a result of the amendment made to the Plan of Operation of the Facility Association to change the sharing by members to an (earned) accident year basis from a (written) policy year basis, effective January 1994.

As no future development on the estimated ultimate incurred losses for policy years 1993 and prior was allowed, the amount as at December 31, 1993 was captured in the 'Outstanding Loss Transition Adjustment' amount and includes the outstanding losses, IBNR, and Provision for Retro Claims Expense.

 

Q. Will the Facility Association discontinue the settlement of account with members based on net operating results and settle based on the Transfer of Members’ Funds?

A. Facility Association will continue to charge members as stipulated in Article V of the Plan of Operations – “Profit shall be credited or distributed to each member and loss shall be charged against each member in accordance with the member’s appropriate participation ratio”.

The Facility Association Board of Directors authorized the transfer to member companies any excess funds that were not required to meet its short term cash flow needs and these funds must eventually be returned to the Facility Association to enable it to pay the policyholder claims to which these funds relate. This does not represent any change whatsoever in respect of your company’s obligations for the liabilities of Facility Association.

 

Q. Why is the Investment Income Bulletin released late to the members in January?

A. The Investment Income Bulletin is prepared after the close of Facility Association’s fiscal year end and is reviewed by its external auditors prior to being released to members. Some delay may be expected however every effort will be made to have it available to members by the end of December.

 

Q. When does the most recent annual audited financial statement become available?

A. It is available and posted on our website after it is approved by member companies at the Annual General Meeting.

 

Q. When is the Outlook available to the members?

A. The Outlook is prepared by our appointed actuaries, and after it is reviewed by the Actuarial and Accounting Committees, it is recommended to the Board of Directors for approval and then made available to the members. It is our intent to provide the Outlook four times per year.

 

Q. What is the difference between Alberta Grid and Non Grid Risk Sharing Pools?

A. The “Grid Pool” provides a means for Alberta automobile insurance underwriters to transfer personal use automobile insurance exposures that are subject to the statutory maximum premium.

The “Non-Grid Pool” provides a means for individual Alberta automobile insurance underwriters to transfer any eligible personal use automobile insurance exposures they underwrite up to 4% of their total written exposures not ceded to the Grid Pool. The results of both these pools are shared by all insurers’ personal use automobile insurers in Alberta in accordance to their (non-ceded) market share. For eligibility criteria, please refer to section III of the Risk Sharing Pool procedures manual.

 

Q. Can a member net the monthly payable and receivable amounts shown on the Operational Reports of the different Pools?

A. Facility Association prefers that members do not net payable and receivable amounts under any circumstances.

 

Q. We do not use the Pool, why are we receiving the monthly Operational Report?

A. All members share in the Pool based on a proportion of their total “voluntary private passenger non-fleet third party liability direct earned car years”, the proportion varies depending on which jurisdiction the Pool is operating in (i.e. Ontario, Alberta, or New Brunswick). Please refer to Article V of the Plan of Operations for a detailed explanation of the participation ratios and sharing.

 

Q. We need help with the Operational Report. Who can help us ‘walk through’ the report?

A. Please refer to Part II – Chapter 2 of the Accounting and Statistical Manual for a detailed description of the Operational Report. Alternatively, please do not hesitate to call our Operations Department or schedule a meeting at our office if you need further assistance.

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