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	Assumptions & Parameters
	All blue-colored values are user inputs. Modify as needed for your pricing scenario.
	General Parameters					Profit & Capital Requirements
	Parameter	Value	Unit	Notes / Source		Parameter	Value	Notes
	Policy Effective Date	1/1/2026	Date	Start of rating period		Target Underwriting Profit Margin	5.0%	Pre-tax underwriting profit target
	Policy Expiration Date	12/31/2026	Date	End of rating period		Target Return on Equity (ROE)	10.0%	Minimum acceptable ROE
	Experience Period (Years)	5	Years	Historical data lookback window		Premium-to-Surplus Ratio	1.8x	Leverage ratio (industry avg: 1.5-2.5)
	Loss Development Tail Factor	1.03	Factor	IBNR development to ultimate		Federal Tax Rate	21.0%	Corporate income tax rate
	Loss Trend Factor (Annual)	2.5%	%	Annual loss cost inflation rate		Risk-Based Capital Factor	28.0%	Statutory capital requirement factor
	Premium Trend Factor (Annual)	3.0%	%	Annual earned premium trend		Catastrophe Loading	1.5%	Additional provision for CAT events
	Credibility Weight (Z)	0.8	Factor	Credibility assigned to own experience		Large Loss Loading	1.0%	Provision for shock losses
	Industry Loss Ratio	60.0%	%	Complement of credibility (industry benchmark)
	Target Combined Ratio	97.0%	%	Max acceptable combined ratio		Rating Class Factors
	Investment Income Rate	4.0%	%	Expected investment return on reserves		Risk Class	Relativity	Description
						Class 1 - Preferred	0.75	Low risk, favorable claims history
	Expense Assumptions					Class 2 - Standard	1.00	Base class (relativity = 1.00)
	Expense Category	% of Premium	Type	Notes		Class 3 - Moderate	1.25	Average risk with some adverse factors
	Commission & Brokerage	12.0%	Variable	Agent/broker compensation		Class 4 - Substandard	1.60	Elevated risk, higher expected losses
	Other Acquisition Costs	2.5%	Variable	Marketing, underwriting new business		Class 5 - High Risk	2.10	Highest risk tier, adverse selection concern
	General & Administrative	5.5%	Fixed	Overhead, salaries, rent, IT
	Premium Tax	2.2%	Variable	State premium tax rate		Territory Factors
	Regulatory & Licensing Fees	0.3%	Fixed	Filing fees, licensing costs		Territory	Factor	Region
	Claims Adjustment (LAE)	7.0%	Variable	Loss adjustment expenses (ALAE + ULAE)		Territory A - Urban	1.30	Major metropolitan areas
	Reinsurance Cost	3.5%	Variable	Ceded premium for reinsurance		Territory B - Suburban	1.00	Suburban / mid-density (base)
	Contingency / Other	0.5%	Fixed	Risk margin for unforeseen expenses		Territory C - Exurban	0.85	Low density / smaller cities
	Total Expense Ratio	33.5%				Territory D - Rural	0.70	Rural / agricultural areas