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| | State Fund President Silences Cynics By Robert Warne - January 15, 2002To start off the New Year right, State Compensation Insurance Fund President Kenneth C. Bollier didn’t waste any time in addressing the current trend of Fund criticism head-on. In a Dec. 31, 2001internal letter thanking fellow employees for their talent and attention to the tasks at hand, Bollier outlined the Fund’s position in the current tumultuous workers’ compensation market.
Last year many industry insiders voiced concerns over the Fund’s rapid growth. Bollier’s response to this matter was, “The assault on our nation had an impact on an already weakened economy. In California, carriers continued to dramatically reduce their writings or completely remove themselves from the market. State Fund remained the available, at cost, insurer for employers. This was not an intentional growth strategy. It is a natural outcome of such a volatile market. We operated as a state fund is supposed to in such times.”
He also said to accommodate the expansion, the Fund implemented new operational initiatives. Electronic claims and policy file projects; field service study recommendations; and expansion of customer service and claims processing centers are a few of the ways the Fund is meeting the demands of rapid growth.
Another aspect of the Fund recently brought into question is its surplus. Bollier said that much of the discussion about the Fund’s surplus is misleading. “Oddly enough, people who have never looked at our books or stepped inside our doors are posing as experts on the subject.”
As for the Fund, Bollier believes it has a sufficient surplus to meet unforeseeable liabilities. It is natural that during periods of fast growth, premium development outpaces surplus growth and investment returns, he said.
According to Bollier, as of Sept. 30, 2001, the Fund had a statutory surplus of approximately $1.3 billion. On top of that, the Fund’s reserves for future payment of claims total $6.5 billion. “I’m pleased to report that State Fund is both solvent and healthy,” said Bollier.
“Our attention is focused on coping with the pains of growth and managing our resources to increase statutory surplus,” he said. “For the immediate term, we are executing investment transactions to recognize existing capital gain opportunities. For the longer term, several financial reinsurnace alternatives are under discussion. These include retrospective approaches such as Loss Portfolio Transfer (LPT) and prospective approaches such as Quota Share and Excess of Loss.”
Bollier closed his letter by complementing Fund employees for their continued pursuit of excellence and wishes them a healthy and profitable 2002.
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