FSCO [Ontario] – Major Filing Guidelines

February 3, 2019 0 By c.boersma


There is separate content regarding regulation 664.

Regulation 664 is often tested as credit scoring is a special topic for this exam.

Worth pointing out they only included the major filing guideline and the only content of significant interest is the territorial regulations and general restrictions.

Actuarial Support

The insurer must provide detailed support for any rate level change. Actuarial support should contain the data and narrative description of all ratemaking steps for each of the specific rate changes being proposed. At a minimum, detail should be provided for Liability – Bodily Injury, Liability – Property Damage, Standard Accident Benefits (by sub-coverage), Uninsured Automobile, Direct Compensation – Property Damage, Collision, Comprehensive, All Perils, Specified Perils and OPCF 44R, even if a rate level change is not proposed for each of these coverages.

Overall Rate Level Indication

  • a) Methodology
  • b) Losses: Development, Loss Trend, Large Losses, Catastrophe, Reform adjustments, Other adjustments
  • c) ALAE: development, trend, catastrophe, other adjustments
  • d) ULAE
  • e) Premium: On-level adjustments, trend, other adjustments
  • f) Other expenses: Exposure expenses, and Premium expenses
  • g) Underwriting Profit
  • h) Credibility
  • i) Other adjustments
  • j) Rate Differential Indicators
  • k) Territory: indicated, off-balance
  • l) CLEAR: indicated, off-balance
  • m) Classification: Indicated, off-balance


Territorial indications must be provided and the territorial ratemaking process must be outlined in detail in every filing whether or not the insurer is proposing rate level changes that differ by territory.

Territorial indications should be calculated by making use of the insurer’s own data. Should the insurer find it necessary to rely on outside data or a different source of internal data, the filing must identify the source of the data and provide an explanation of its applicability in the instant circumstance. All data used in the process of developing territorial indications must be exhibited and labelled.

A comparison of the current, indicated, and proposed territorial differentials must be provided for each coverage for which rates are changing by territory, as well as the rebased current, proposed and indicated differentials. Included in this should be the written premium distribution and the exposure distribution by coverage, by territory. .

If credibility procedures are used, they must be disclosed and supported in the same detail as outlined in subsection (4.h.).

The general approach to calculating territorial differentials can be expected to remain reasonably constant over the years for the insurer. Any change in either the approach or the underlying data from the prior rate filing should be disclosed and supported. Costs must be fairly allocated between territories. The rates for newly formed adjoining territories should not vary by more than +/-10%.

Territory Requirements

  • cap territorial differential changes at +/-10% from the current differential
  • in the direction of the coverage indication.

The requirements for changes must be in the direction of the indication and within +/-10% on and all coverages, as well as an overall basis. The +/-10% is to be measured from the current differential after re-basing the average proposed differentials to the same average current differentials for each coverage. FSCO is not likely to approve territorial differential changes significantly outside of the +/-10% parameter.


  • 1. This rate filing is in respect of the private passenger automobile insurance category of automobile insurance and the following dependent categories for new business and for renewal business.
  • 2. I have reviewed the data underlying this rate filing for reasonableness and consistency, and I believe the data is reliable and sufficient for the determination of the indicated rate changes.
  • 3. The indicated rate changes have been calculated in accordance with Accepted Actuarial Practice. In my opinion, the risk classification system is just and reasonable, reasonably predictive of risk and distinguishes fairly between the classes.

Question #1 – 2015 Fall Exam 6C

Territory Differentials

The CAS had this to say about the the answer to a complicated question:

No candidate provided a solution that was awarded full credit

Problem (1b)

This insurer’s rating algorithm consist of three territories.  After reviewing the territorial indication for a given coverage, the following changes are proposed in the rate files.

Filed Territorial Indications

Assuming the territorial indications are actuarially sound, demonstrate whether the proposed territorial differentials meet the requirements for approval.

Solution (1b)

Table provided in solution. Calculation found in solution

Territory #1 is fine. It passes all tests: Same direction (indicated: increase, proposed: increase). Within 0% and indicated amount (not exceeding indication). Not more than +/- 10%.

Territory #2 is fine: The 8.2% proposed is greater than the 6.0% indicated (as supplied by CAS), but I’m not sure what part of the regulation specifies this as not reasonable. I will review this in more detail later.

Territory #3 is not: The -14% proposed exceeds the +/- 10% max.

To remember: cap on territory changes of +/- 10% (rebased).