Risk Involved with Self Insured Plans
There are three primary financial risks to any self-funded program.First, there is the potential problem of the excess reinsurer becoming insolvent. This risk is not unique to this program. Our reinsurance is with Midwest Employers Casualty Company, a division of the W. R. Berkley Corporation Group. Midwest is rated A IX by A.M.Best and is the second largest writer of excess workers’ compensation in the country. They are a specialty company and excess workers’ compensation is their only business.Secondly, there is a potential gap between expenses and the aggregate excess attachment point. The attachment point is 90% of premium where as expenses are approximately 25%. Investment income closes this gap as well as the payout pattern of workers’ compensation. The fund has never come close to the aggregate attachment point.And last, but certainly most importantly, Louisiana Workers’ Compensation Law R. S. 1950 as amended, Section 1192; Sub A, Numeral 9 reads as follows:
9. Such funds shall not be considered partnerships under the laws of this state and participation in such funds shall subject the participants only to the obligation set forth in the agreement establishing such funds*; provided that nothing herein shall be construed to in any way reduce or limit a participant’s rights or obligation with respect to his or its employees under the provisions of this chapter. Fund members shall be liable jointly and in solido for claims not paid pursuant to this chapter.
*Excerpt from the LAC-SIF Trust Document page 5.
3.6(A) “Each Participants’ share of a deficiency for which an assessment is made shall be computed by applying to the premium earned from the participant during the period to be covered by the assessment, the ratio of the total deficiency to the total premiums earned during such period upon all participants subject to the assessment.”