☰A loss pick is the actuary's estimate of what your losses will cost in the coming policy year, and it is the number captive pricing is built on. The actuary develops it from your loss history, adjusted for growth, trend, and how open claims are likely to develop. Premium is then set to fund that estimate plus expenses and a margin for the unexpected.
This is where captive economics tend to differ from the commercial market's. An insurer prices to its portfolio and its capital costs; your captive prices to your own experience. When losses run better than the pick, the difference stays in the captive as surplus rather than leaving as someone else's profit. Newer risks without long loss records can still be priced, since actuarial methods can fill an experiential gap.