The Optimal Use of Depopulation Credits in the Private Passenger Auto Residual Market

This paper describes the depopulation credits that are available in the private passenger auto residual market plans of many states and develops two models that can be used by an insurer to optimize the use of those credits. Each model represents an extreme case, with the real world falling somewhere between the two extremes. An example of the use of the models also is included, as is some discussion of how to measure the benefit of optimally using depopulation credits.