A recent report by Standard & Poor's Ratings Services indicates that California's workers comp problems may be far from over, and that downward pricing pressures threaten to throw the market in another tailspin. The report does not mince words, stating that insurance commissioner Garamendi is inviting "the same irresponsible behavior that caused the last crisis."
From the Insurance Journal story:
"Much of Standard & Poor's analysis centers on the California State Compensation Insurance Fund (State Fund, or SCIF), which has "soaked up like a voracious sponge business abandoned by other insurers' flight or failure," the report states. After a six-fold increase in premiums in just four years, SCIF's premiums/surplus ratio reached the "very precarious" level of 3.7 for 2003, compared with a safe level of 0.9 in 1999.
"State Fund could be in serious trouble if pricing for newer business proves inadequate," said Standard & Poor's credit analyst Jason Jones.
Any failure of SCIF, which wrote more than half of California premiums in 2003, would bring into play the California Insurance Guarantee Association (CIGA), which pays claims against insolvent insurers and which has just taken the unprecedented step of borrowing $750 million in the bond market to keep up with its workers' compensation burden."
We've talked about California’s situation several times in the past, and will be monitoring developments - stay tuned for more:
California’s woes continue
The California workers comp experience as a cautionary tale
And the beat goes on
California keeps digging