Florida Workers’ Compensation Joint Underwriting Association Board of Governors Approves Committee Recommendations, including Market Rate Reduction
Jun 18, 2013
During a teleconference on June 12, 2013, the Florida Workers’ Compensation Joint Underwriting Association (“FWCJUA”) Board of Governors (“Board”) unanimously agreed to adopt a voluntary market rate reduction of 0.7 percent, effective July 1, 2013 if approved by the Florida Office of Insurance Regulation (“OIR”). The Board also agreed to return a $7.8 million premium dividend for policy year 2006.
The meeting materials are attached.
The Board approved numerous other Committee recommendations, including the adoption of proposed revisions to the FWCJUA’s Investment Policy Statement, finalization of a request to the OIR for a program to eliminate the FWCJUA’s Subplan D deficit through May actuals, and the hiring of Travelers Property and Casualty Insurance Company (“Travelers”) to provide policy administration and managed care services on behalf of the FWCJUA for four years.
During a brief discussion on the rate reduction, it was noted that, due to its relatively small impact, the FWCJUA should maintain the existing filed tier surcharges. The voluntary reduction of 0.7 percent would apply to new and renewal policies if approved by the OIR.
Thus, the following January 1, 2013 tier surcharge values will remain in place:
- Tier 1: 10 percent
- Tier 2: 49 percent
- Tier 3: 76 percent
“We think it’s a reasonable approach,” said Jim Watford, an actuary with the OIR. The Board unanimously approved the rate change.
Next, the Board unanimously voted on the return of $7.8 million as a premium dividend to policyholders for the 2006 policy year.
It was noted that the dividend is calculated using a 10 percent underwriting gain retention. The net dividend declaration includes a $10 per-policy distribution expense.
Payment is allocated among the Tiers as follows:
- Tier 1–$1,310,520
- Tier 2–$2,942,412
- Tier 3–$3,617,340
The Board also approved a recommendation by the FWCJUA Rates and Forms Committee to finalize a draft letter to the OIR outlining a program to eliminate the FWCJUA’s 2012 Subplan D deficit through May actuals.
Because the FWCJUA had a $64,763,931 surplus in 2012, it is not statutorily required to submit a deficit elimination plan to the OIR. However, with Subplan D posting a $272,077 deficit, the Board had previously agreed to update its plan to eliminate the individual rating plan deficit and submit the plan to the OIR. The letter will be submitted no later than August 1, 2013, FWCJUA Executive Director Laura Torrence noted.
Acting on another recommendation by the Rates and Forms Committee, the Board also voted to confirm booking the 2013 losses utilizing the latest 2013 filed rate changes, along with the loss ratios indicated from the loss experience evaluated as of the prior year-end adjusted for the 2013 first reinsurance layer annual aggregate deductible (AAD).
The loss ratios are:
Rating Tier Projected 2013 Net Loss Ratios Projected 2013 Gross Loss Ratios
Tier 1: 37.1 percent 42.1 percent
Tier 2: 44.6 percent 50.6 percent
Tier 3: 53.3 percent 60.5 percent
The Board also voted unanimously to adopt proposed OIR revisions to the FWCJUA Operations Manual to be filed for OIR approval as soon as practicable.
Changes include some revisions in wording relating to usage of the FWCJUA Web site, as well as a detailed listing of endorsements that require special attention. Those are:
- Assessable Policy Notice
- Tier and Premium Surcharge
- Florida Limited Other States
- “If-Any” Policy Notice
- Experience Rating Modification Factor
- Assigned Risk Adjustment Program (ARAP)
- Name Change
In other action, the Board:
- Voted unanimously and with little discussion to hire Travelers to provide policy administration and managed care services for the next three years. Travelers receivedunanimous approval to service FWCJUA policies effective January 1, 2014 through December 31, 2017, with the option of two one-year extensions by mutual agreement.
The FWCJUA Operations Committee recommended Travelers after comparing proposals submitted by Travelers and AmTrust/Technology Insurance Company (“AmTrust”). Scoring evaluated policy issuance, premium collection and audit; and scope of services, which included loss control services, claims administration and managed care. Travelers received a 93.4 score and AmTrust received a 72.92 score.
- Unanimously approved proposed revisions to the Investment Policy Statement and Guidelines, which include updated discretionary limitations for Prime Advisors.
The changes revise the Investment Policy Statement as follows:
- The FWCJUA’s investment manager has been provided with limited discretionary authority to opportunistically reposition securities within the FWCJUA portfolio.
- Prime Advisors and FWCJUA staff recommended setting the following initial annual limitations for 2013:
- Maximum Net Capital Loss: $100,000
- Maximum Net Capital Gains: $200,000
- Maximum Portfolio Turnover: Five percent
The maximum allocation to corporate securities was increased. A commercial mortgage-backed security component was added to the approved asset allocation list.
- Prime Advisors recommended that the maximum allocation for corporate securities be increased to 60 percent, and that a new asset class, “Commercial Mortgage-Backed Securities,” be added with a 10 percent maximum allocation.
The Board also heard a brief legislative update, which included a summary of four successful bills:
- SB 662 relating to Workers’ Compensation. The bill revises requirements for determining the amount of reimbursement for repackaged or relabeled prescription medication.
- HB 553 relating to Workers’ Compensation System Administration. The bill is essentially a regulatory reform package.
- SB 810 relating to Wrap-up Insurance Policies. The bill provides that wrap-up insurance policies may include workers’ compensation claims equal to or greater than a specified amount if specified standards are not met.
- HB 217 relating to Money Services Businesses. The bill requires money services businesses engaged in check cashing to submit transactional check cashing data to a common database.
With no other business before the Board, the meeting was adjourned.
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