The exposure is split into three geographic regions: region A, region B and region C. The following accident year 1 data is available:

Region	Current relativity	Exposure	Earned Premium at Current Rates	Ultimate Loss
A	1	4,000	500,000	425,000
B	1.2	2,500	375,000	350,000
C	1.125	1,000	140,625	100,000

Suppose the following is true:

• Policies are annual.
• Loss cost inflation is 4% per annum.
• The insurer is targeting an 12% overall increase in rates.

Using the loss ratio method, determine the new rates, effective for calendar year 3, for region C.

• 124.55
• 128.66
• 130
• 137.25
• 155.4

According to the loss ratio method, the indicated differential change factor for region [math]i[/math] equals the projected loss ratio for region [math]i[/math] divided by the projected loss ratio for the base level:

Region [math]i[/math]	[math]R_{i,I}/R_{i,C}[/math]	[math]R_{i,I} [/math]
A	1	1
B	1.098	1.3176
C	0.8366	0.9412

Given a targeted overall change factor of 1.12, the indicated change factor for the base rate equals

[[math]] 1.12 \cdot \frac{\sum_{i} w_i R_{C,i}}{\sum_{i} w_i R_{I,i}} = 1.105. [[/math]]

Hence the base rate should be increased by 10.5%. The earned premium at current rates for region A's accident year 1 equals $500,000 with an exposure of 4,000; therefore, the current base rate is $125 per exposure unit. Since we have the current base rate, we can derive the rates for each region using the indicated rate differentials derived above:

Region	New Rate per Exposure Unit
A	$138.13
B	$182
C	$130