Statement of Work IFB 6100066762 for 12 8413 Actuarial Services SWIF.pdf

REV 12.09.19

STATEMENT OF WORK

ACTUARIAL SERVICES

INVITATION FOR BID 6100066762

I-1. Overview. The Department of Labor and Industry State Workers’ Insurance Fund was established by law to provide a quality workers’ compensation program for Pennsylvania businesses that choose the Fund to meet their required obligation under the Workers’ Compensation Act, and to contribute to a progressive, stabler workers’ compensation market in Pennsylvania.

The Commonwealth of Pennsylvania, Department of Labor and Industry (DLI) on behalf of the State Workers’ Insurance Fund’s (SWIF) is issuing this Invitation for Bid (IFB) to satisfy a need for Actuarial Services. This Statement of Work includes a description of the service to be provided; requirements which Contractors must meet to be eligible for consideration; and other requirements specific to this IFB.

Interested bidders must be familiar with standard and typical insurance policies, coverages, rate and rule manuals, classification plans, and ratemaking principles of workers compensation, medical professional liability, general liability, business owners, and umbrella/excess.

Bidders must provide proof they are a member of the Americal Academy of Actuaries, Society of Actuaries, or the Casualty Actuarial Society.

I-2. Term of the Project. The term of this Project shall commence upon issuance of a Contract or Purchase Order to the selected Contractor (“Effective Date”) and shall expire one (1) year after the Effective Date, with four single year renewal options unless it is terminated earlier pursuant to the terms of the Contract or Purchase Order. The term of this Contract may be extended by and at the sole option of the Commonwealth for up to 90 days upon the same terms and conditions where a continued needed exists for the services of the selected Contractor and there has been no termination under the terms of the Contract or Purchase Order.

I-3. General. The selected Offeror will perform an actuarial analysis of the reserves for the year ending

12/31/2026, as well as any following years for which the Commonwealth exercises an Option. The selected offeror will also perform other related services consistently with this IFB. Additional details are provided in Part IV of this IFB.

The Underlying data will be provided to the successful bidder in January each year. A preliminary report of the loss reserves will be due to SWIF by the 3rd from last business day in January. The draft report is due in March. The final report is due 30 days after the draft report. The contract does not have billable hours but is billed on an annual basis. There will be approximately 1 or 2 meetings in Scranton per year, the remaining meetings will take place in Harrisburg. SWIF’s most recent annual statements are available from Ray Kabata at rkabata@pa.gov. Actuarial analysis will be required once per year.

The successful offeror will provide an annual review of a sample of SWIF’s claims. The size of the sample will be determined by the offeror.

In the event any additional analyses may be required during the engagement, SWIF will provide the selected offeror with projected stream of asset cash flows associated with its year-end investment portfolio.

mailto:rkabata@pa.gov

Since this is a fixed price contract, the total cost should be presented for each individual year. Costs for option years, if exercised by SWIF, will be limited by an automatic escalation clause whereby the cost of the previous year will be increased by 3%.

Separate loss ratio projections will be needed for Commercial and Coal businesses, and those will need to be further split by indemnity and medical losses. Separate premium deficiency reserve calculations will be needed for the Coal and Commercial business.

SWIF requires a detailed report on reserve adequacy for all open claims where medical incurred is greater than $1 million. The report shall include indemnity reserve adequacy with consideration for diminished life expectancy (rated age calculation) and medical reserve adequacy with consideration for major organ failure as a result of the injury and aging process. SWIF has 70 open claims of this type.

The successful offeror will have access to SWIF’s claim system only at the SWIF home office in Scranton, Pa.

I-4. Pricing. Bidders shall provide a semi-annual price that is inclusive of labor, materials, services, skills supervision, reporting, facilities and necessary equipment to manage and services under this contract.

These services will be provided by the awarded contractor(s) as independent contractor(s), not as an employee of the Commonwealth. The awarded contractor(s) shall render services in accordance with the policies, procedures, and standards of the Commonwealth.

Subcontracting is permitted for up to forty-nine percent (49%) of the services under this Contract with the prior written approval of SWIF. The Contractor may subcontract any portion of the services described in this Contract to third parties selected by the Contractor and approved in writing by SWIF, whose approval shall not be unreasonably withheld. The Contractor shall remain fully responsible for the performance of all Contract requirements, including work performed by approved subcontractors.

I-5. Requirements.

A. The awarded Bidder shall be responsible for performing an analysis to address the following issues:

1. Adequacy of Loss Reserves. The evaluation must reflect:

a. The actuaries best estimate and likely range of results of the ultimate loss and loss adjustment expense as of the end of the calendar year for each year of the contract.

b. The impact of investment income potential matched to a range of reasonable discount rates, including IRS discount rates and those reflective of SWIF’s investment portfolio.

c. The impact of internal and external factors on present and future loss payment patterns and loss development.

d. Analysis of SWIF’s exposures, identifying characteristics and trends and the relationship of these factors to developing claims patterns. For example:

• Classification Distribution

• Premium size distribution

• Use of deductible/retrospective programs

• Type of business (i.e., Coal, Commercial, Longshore)

• Hazard group distribution

2. Adequacy of surplus. The evaluation must reflect:

a. The actuary’s best estimate of policy-holder surplus within a likely range of results.

b. The impact of investment income potential matched to a range of reasonable discount rates, including

IRS discount rates and those reflective of SWIF’s investment portfolio.

c. The evaluation must include an opinion on safely distributable surplus which is to be provided to the SWIF Advisory Council in accordance with the WCA (77 P.S. 2603 e (2)) and the State Workers’ Insurance Fund Board. The awarded bidder must also provide their best estimate as to what level of surplus SWIF would need to have safely distributable surplus.

3. Provide the exhibits described in Appendix A as part of the final actuarial report by the appropriates claims classification including the following:

a. Commercial-Indemnity

b. Commercial-Medical

c. Coal-Indemnity

d. Coal-Medical

e. F-Class Indemnity

f. F-Class Medical

B. This engagement requires the selected Offeror to provide the following services:

1. Provide under separate cover, an opinion with respect to expected loss, loss adjustment expense and loss ratio for the coming year based on an assessment of the loss development expectation from the previous year end financial statement for SWIF.

2. Provide compatible spreadsheets (Excel) for all the exhibits described in Appendix A.

3. Meet with SWIF’s Accounting and Actuarial staff to review the results of the report and assist them with implementing recommended actuarial changes to SWIF’s financial statements.

4. Provide preliminary report for each year of this engagement by a date determined by SWIF. All work must be completed 30 days subsequent to the submission of the preliminary project.

5. Provide a report identifying peer reviewer(s) qualifications and describe extent of review.

6. Submit an actuarial opinion letter for calendar year end Annual Statement after the actual submission for each year end Annual Statement. Also, submit an Actuarial Opinion Summary (AOS).

7. Provide actuarial peer review and advice to SWIF’s actuarial staff as requested on SWIF’s actuarial work product as required throughout this service period.

8. Provide retrospective analysis of selected Offeror’s calculation of reserves.

9. Provide an analysis of why awarded bidder’s calculation of reserves differs from the booked reserves.

10. Provide an analysis of the awarded bidder’s calculation of tail factors versus SWIF, show the differences, and explain why there is a difference.

11. Provide an annual review of a sample of SWIF’s claims.

12. Provide premium calculation and actuarial support for SWIF’s Retrospective Rating Plan, including updates of the plan parameters.

13. Provide projected premium deficiency reserve separately for Coal and Commercial.

14. Annually, as part of the review of the analysis of SWIF’s loss reserves, and when requested, provide a coal and commercial lost cost multiplier calculation based on awarded bidder’s loss and adjustment expense reserves.

15. Annually, as part of the review of the analysis of SWIF’s loss reserves, and when requested provide a recommendation as to the loss reserve discount factor to be used by SWIF.

16. Provide annual catastrophic/lifetime claims analysis.

17. Provide any other analysis necessary to complete this engagement.

C. Other Reports and Project Control.

1. Status Report. A periodic progress report covering activities, problems and recommendations. This report should be keyed to the work plan the Contractor developed in its quote, as amended or approved by the Issuing Office.

2. Problem Identification Report. An “as required” report, identifying problem areas. The report should describe the problem and its impact on the project overall and on each affected task. It should list possible courses of action with advantages and disadvantages of each and include Contractor recommendations with supporting rationale.

D. Qualifications.

1. Contractors must provide documentation demonstrating at least two (2) years of experience providing actuarial services.

2. Contractors must provide documentation demonstrating experience performing actuarial work involving Workers’ Compensation matters in Pennsylvania, including experience performing actuarial services for the Commonwealth of Pennsylvania and State Workers' Insurance Fund (SWIF).

3. Contractors must provide proof that the lead consultant assigned to the Contract is a member of at least one (1) of the following professional actuarial organizations, as applicable to the services to be performed under this Contract:

a. American Academy of Actuaries (AAA);

b. Society of Actuaries (SOA); or

c. Casualty Actuarial Society (CAS).

4. The Contractor shall identify the professional actuarial organization(s) of which the lead consultant is a member and provide documentation verifying such membership.

I-6. ISSUING OFFICE. Commonwealth of Pennsylvania, Labor and Industry, Bureau of Administrative Service, Division of Procurement. All inquiries should be referred to:

Department of Labor and Industry Bureau of Administrative Services, Division of Procurement, 651 Boas Street, Room 205 Harrisburg, PA 17121 Email: RA-li-OIT-BAS-Procur@pa.gov

I-7. BILLING AND REQUIREMENTS. The Contractor shall submit invoices on company letter head semi-annually to RA-OB69180@pa.gov. The invoices shall be itemized to match the purchase order and include the following:

1. Purchase Order number

2. Date of services; and

3. Contractor’s Federal Identification Number/Social Security Number

4. Contractor’s SAP Vendor number

5. Remittance address

Please submit a complimentary copy of the invoice via email to RA-LISWIF- PROCUREMEN@pa.gov.

SOW Acceptance & Acknowledgement

This SOW is acceptable. I (We) hereby acknowledge and confirm that I (We) have read this SOW and accept and approve the scope of work and related terms. I (We) understand that if additional work is required that by its nature was not known or determined at the time this SOW was executed, a written change order describing the additional work and any related expenses is required.

Submission of a solicitation response shall constitute the bidder's acknowledgement of and agreement to the requirements of this Statement of Work. Completion and signature of this SOW Acceptance & Acknowledgement is requested; however, failure to complete or sign this acknowledgment, in and of itself, shall not preclude consideration of an otherwise responsive and responsible bid.

Supplier/VENDOR Company Name

Approved & Acknowledged (date): _________________________

Authorized Supplier Signature

Authorized Supplier Printed Name Title mailto:RA-li-OIT-BAS-Procur@pa.gov mailto:RA-OB69180@pa.gov mailto:RA-LISWIF-PROCUREMEN@pa.gov mailto:RA-LISWIF-PROCUREMEN@pa.gov