To develop a member's premium, each member's previous five-year loss history is collected and the data is then trended and developed by Columbus Insurance Ltd.'s actuarial service partner. The actuary produces what it believes a member’s predictable losses will be, plus what should be allocated for shock losses above $150,000. Operating costs for the program, such as excess reinsurance, policy issuance, and claims services, are also calculated and allocated to each member. Finally, a member's loss fund and operating costs are added together, producing their premium for each year. The intent of the Company's premium calculation formula is that each member pays a premium to fund for most of its ultimate losses while allowing for risk sharing and risk shifting amongst the entire membership primarily for shock losses. Because each member is expected to pay their own losses, subject to certain formula limits, a member can be billed additional premium up to a predetermined amount should their losses exceed expected levels.
