Newspaper article THE JOURNAL RECORD

CompSource Reinsurance Costs Surge `We're Being Taken Advantage of and It's Lousy Coverage'

Newspaper article THE JOURNAL RECORD

CompSource Reinsurance Costs Surge `We're Being Taken Advantage of and It's Lousy Coverage'

Article excerpt

A skyrocketing reinsurance market hammered CompSource Oklahoma on Tuesday and forced the board of managers to choose the lesser of two evils: accept much lower reinsurance coverage at a much higher price, or drop the coverage altogether.

In the end, the board voted to pay more for less, although officials were not happy about the situation.

"We're being taken advantage of and it's lousy coverage," said Board Member Harry Rosengrants.

Reinsurance policies provide coverage to insurers. CompSource is a quasi-governmental agency that often serves as the insurer of last resort in Oklahoma's workers compensation market. The agency writes more than half the workers compensation policies in the state.

The reinsurance policy approved by the board will cost the agency $1 million, a 1,611 percent increase over last year's policy, which cost $60,000 and provided better coverage.

The reinsurance policy approved by the board provides coverage in five layers, staggering terms based on the size of the event covered and the percentage of participation. The top layer of the policy provides for $15 million in coverage for any event in excess of $30 million in damages, including acts of terrorism.

In a worst-case scenario -- a $60 million event caused by terrorist attack -- CompSource's share of the loss would be $45 million. That would give the agency an effective rate of $15 million worth of coverage for $1 million worth of premium. In case of a $40 million, non-terrorist event such as a large industrial accident, CompSource's share of the loss would be $8 million.

The policy assumes a $2 million maximum for any one life covered. However, board officials noted that it is rare for any workers compensation policy claim to exceed $2 million, noting that few policies hit that level even after the Oklahoma City bombing in 1995.

Officials also noted that, historically, few events have come close to creating $30 million worth in workers compensation claims.

However, the reinsurance coverage provided by the $1 million policy is only a fraction of what CompSource could rely on in the past.

Last year's $60,000 policy provided $40 million worth of coverage for any event (including terrorism) in excess of $5 million in claims. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.