Further Reliance had significant reinsurance through Unicover which was never

Further reliance had significant reinsurance through

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Further, Reliance had significant reinsurance through Unicover, which was never fully recovered. 7 o California Workers’ Compensation Industry – The California workers’ compensation industry incurred significant losses during the late 1990s. The principle cause was the implementation of open rating, effective January 1, 1995, which allowed insurers to determine their own rate level. 8 The result was a reduction in rate level of about 41% from policy year 1993 to policy year 1995, as estimated by the Workers’ Compensation Rating Bureau of California (WCIRB) 9 . The declining rates during this period were implemented just as medical loss trends began 4 Reliance Insurance ( ) (last visited on June 9, 2006); Pennsylvania Insurance Department () (last visited on June 9, 2006). 5 Pennsylvania Insurance Department () (last visited on June 9, 2006). 6 CFO Magazine ( ) (last visited on June 9, 2006). 7 EDGAR Online ( ) (last visited on June 9, 2006). 8 California Commission on Health and Safety and Workers’ Compensation ( ) (last visited on June 9, 2006). 9 Workers’ Compensation Rating Bureau of California ( ) (last visited on June 9, 2006). © 2006 National Association of Insurance Commissioners 15
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Attachment Three Casualty Actuarial (C) Task Force 6/11/06 accelerating to double-digit levels. As a result, ultimate loss ratios as estimated by the WCIRB increased from 60% in 1994, prior to the implementation of open rating, to between 100% and 135% for the six accident years from 1996 through 2001, after open rating went into effect. 10 Insurers that became either insolvent or impaired include Superior National Insurance Company, Business Insurance Group, Paula Insurance Company, HIH Insurance Company, and Fremont Insurance Group 11, 12 . o Texas Workers’ Compensation Industry – During the 1980s, the Texas workers’ compensation industry was characterized by high loss levels and high and increasing levels of loss development. 13 A major cause of these difficulties was the process of adjudicating disputed claims. If a claimant was not satisfied with the outcome of the claims hearing, he could request a trial, whereby any evidence gathered through the administrative hearing was not admissible in court. This process led to a high level of attorney involvement, unanticipated increases in cost, and high and increasing loss development factors at late points of maturity. Senate Bill 1 was passed in Texas in 1989. 14 Texas Employers Insurance and Employers Casualty Company were the two largest writers of workers’ compensation coverage in Texas during the 1980s. These two insurers were declared insolvent in 1991 15 and 1994 16 , respectively.
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