Excess Loss Factor (ELF)
Classes are placed into hazard groups based on their excess ratios
An ELF is the ratio of the expected portion of losses greater than a particular loss limit to standard premium. For example, given a loss limit of $200,000 and an associated ELF of 10%, the expected losses over the deductible or retention of $200,000 per occurrence is equal of 10% of standard premium.
Classification codes are placed into hazard groups based on their excess ratios (which indicate their potential of having losses in excess of a given threshold) at different loss limits. Classes in Hazard Group A have the lowest potential for large claims, while those in Hazard Group G have the highest potential.
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