1. Forms
2. IL
3. IL-09-21

What the form is

The IL 09 21, titled "Retrospective Premium Endorsement - Short Form," is an insurance policy endorsement used to add a specific insurance policy to an existing retrospective premium rating agreement. Retrospective rating is a plan where the final premium for the policy period is determined by the insured's actual incurred losses during that same period, subject to certain pre-agreed minimums and maximums. This endorsement essentially allows a new line of coverage or a new policy to become part of an already established retro plan, rather than requiring a separate, new retrospective rating plan for that additional policy.

Classes of business it applies to

This endorsement is typically used for larger commercial insureds who have fluctuating loss experience and significant premium volume, making them suitable candidates for retrospective rating plans. It can apply to various lines of commercial insurance that might be subject to retrospective rating, such as:

• Commercial General Liability
• Commercial Auto
• Workers' Compensation

Real-world example: A large manufacturing company already has a retrospective premium plan covering its General Liability and Workers' Compensation policies. If the company acquires a new fleet of vehicles and obtains a Commercial Auto policy, the IL 09 21 could be used to add this new auto policy into the existing retrospective rating structure, allowing for a consolidated approach to its risk financing program.

Special considerations

Key considerations for using the IL 09 21 include:

• Existence of a Master Retro Plan: This form is a "short form" because it relies on an existing, more comprehensive retrospective premium endorsement (e.g., IL 09 18 Retrospective Premium Endorsement – One Year Plan – Multiple Lines, or IL 09 19 Retrospective Premium Endorsement – Three Year Plan – Multiple Lines) being in place.
• Administrative Simplicity: It simplifies the process of adding policies to a retro plan by avoiding the need to draft a full new retro agreement for each added policy.
• Agreement by All Parties: Both the insurer and the insured must agree to add the policy to the existing retro plan under the terms already established in that plan.
• Impact on Retro Calculations: The premiums and losses from the policy added via IL 09 21 will be combined with those of other policies in the retro plan to determine the overall retrospective premium adjustment.

Key information for agents and underwriters

For Agents:

• Identify opportunities for clients with existing retro plans who are adding new coverages or policies that could beneficially be included in the main plan.
• Explain to the client how adding a policy via this endorsement will impact their overall retrospective premium calculation.
• Ensure the client understands that the terms of the existing retro plan will apply to the newly added policy.

For Underwriters:

• Verify that an appropriate master retrospective premium endorsement is already part of the insured's program.
• Assess the suitability of the existing retro plan's parameters (e.g., minimum/maximum premiums, loss conversion factors) for the combined exposures, including the policy being added.
• Ensure proper documentation and scheduling of the policy being added to the retrospective premium agreement.
• Consider any potential changes in overall risk profile and loss potential resulting from the addition of the new policy to the plan.