What is one advantage of a Retro Plan?

A Retro Plan, or Retroactive Premium Plan, is particularly designed to provide a cash flow advantage based on the paid loss plan. This type of insurance plan allows the insured party to potentially pay lower premiums in favorable loss years, as the premium is adjusted according to claims made over time. By utilizing a retrospective rating system, the insurer calculates premiums based on the actual losses incurred during a previous period, often resulting in a better cash flow situation for the insured.

In contrast, other options present aspects that do not align with the primary benefits of a Retro Plan. For example, strict regulations on cash flow can create burdens for businesses rather than alleviate them, while required payments for all past claims could be seen as a liability rather than an advantage. Lastly, guaranteed immediate self-insurance qualification may not apply, as entering into a Retro Plan does not inherently provide assurance of immediate qualification for self-insurance. Therefore, the cash flow advantage emerges as a significant benefit of a Retro Plan, aligning with the practical financial needs of companies seeking to manage their insurance costs effectively.