SUBJECT:

PURPOSE:

The Workers’ Compensation Security Fund (WCSF) was created to secure the obligations of insurers to policyholders and beneficiaries by settling unpaid claims in the event of an insurer’s insolvency. Funding for the WCSF comes from: (1) quarterly assessments on workers’ compensation carriers writing business in New York State equal to one percent of each insurer’s net written premiums; (2) distributions from insolvent insurance companies’ estates; and (3) investment income. When assets in the Fund equal or exceed $74 million at the end of any quarterly period, no further contributions are required until such assets fall below $74 million, at which time, contributions resume. Current law requires companies to surcharge policies to recover these assessments.

The State Insurance Department (SID) first notified the Legislature in late January of this year that the WCSF will be bankrupt in a matter of weeks, and unable to pay claims as of March 1, 2005. According to SID, without an immediate short-term solution, at least 7,500 claimants, mostly injured workers in need of medical treatment or permanently disabled and dependent on this income to support themselves on a day-to-day basis, will stop receiving their weekly checks by the end of the month. This hearing will examine SID’s role in overseeing insurer solvency, the liquidation process and its administration of the WCSF; actions to ensure no interruptions in claims payments and actions needed to ensure the WCSF’s solvency in the future.

The committees are seeking testimony on the questions below.

Testimony will be heard by invitation only, persons planning to present pertinent testimony to the Committee at the above hearing should complete and return the enclosed reply form as soon as possible. It is important that the reply form be fully completed and returned so that persons may be notified in the event of emergency postponement or cancellation.

Oral testimony will be limited to 15 minutes’ duration. In preparing the order of witnesses, the Committee will attempt to accommodate individual requests to speak at particular times in view of special circumstances. These requests should be made on the attached reply form or communicated to Committee staff as early as possible. In the absence of a request, witnesses will be scheduled in the order in which reply forms are postmarked.

Ten copies of any prepared testimony should be submitted at the hearing registration desk. The Committee would appreciate advance receipt of prepared statements.

In order to meet the needs of those who may have a disability, the Assembly, in accordance with its policy of non-discrimination on the basis of disability, as well as the 1990 Americans with Disabilities Act (ADA), has made its facilities and services available to all individuals with disabilities. For individuals with disabilities, accommodations will be provided, upon reasonable request, to afford such individuals access and admission to Assembly facilities and activities.

SELECTED ISSUES TO WHICH WITNESSES MAY DIRECT THEIR TESTIMONY:

1. How does SID monitor insurers that are distressed or in liquidation to anticipate claims against the WCSF and its adequacy to meet them? Were there warning signs that should have alerted SID to the need for more timely action?

2. What is the process, and what is the role of SID’s Liquidation Bureau, with respect to insolvencies of insurers domiciled in other states? How are WCSF claims of an insolvent insurer administered and in what order of priority?

3. Are there other compensation carriers on the brink of insolvency that could worsen the existing crisis? What is the anticipated impact of any such insolvencies on the WCSF?

4. How has the trend by large employers to self-insure for compensation coverage affected the compensation insurance market within New York? The WCSF?

5. SID has asked the Legislature to authorize an increase in the premium assessment on workers’ compensation carriers, and a loan from the Property and Casualty Insurance Security Fund, which is funded by assessments on property and casualty insurers. What would be the impact if these steps were taken?

6. What other sources of relief could be looked to or measures taken to ensure the future viability of the WCSF?

7. Why was this crisis not presented to the Legislature sooner?

PUBLIC HEARING REPLY FORM

Persons wishing to present testimony at the public hearing on The Current and Future Solvency of the Workers Compensation Security Fund are requested to complete this reply form as soon as possible and mail it to:

Louann Ciccone
Principal Legislative Analyst
Assembly Committee on Insurance
Room 520 - Capitol
Albany, New York 12248
Email: cicconl@assembly.state.ny.
Phone: (518) 455-4928
Fax: (518) 455-5182

I will address my remarks to the following subjects:

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