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Steps for a rate neutral capped territory relativity change using the Loss Ratio Method.
1. Current premium by territory
2. Losses by territory
3. LR by territory
4. RLR by territory (Ind. Rel. Change)
5. Indicated Relativity
6. Apply caps (premium with relativity, x, capped = current premium)
RLR, than equal premiums with capped relativity
Formula for rate change percentage if permissible LR is 65%, Territory A is capped at 20%, and premium and LRs are given?
0.65 = (prem A * LR A + prem B * LR B ) / (prem A * 1.20 + prem B * x)
What's the formula for the permissible loss ratio using premium and losses?
For territory changes with territory A capped at 20%, what is the multiplicative percentage for territory B for the shortfall?
Prem A * (indicated change A - 1.20) / (prem B * indicated change B)
What is A's shortfall as a percentage of B's indicated premium?
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