Newspaper article THE JOURNAL RECORD

Fund Ponders Compensation Rate Increase

Newspaper article THE JOURNAL RECORD

Fund Ponders Compensation Rate Increase

Article excerpt

Journal Record Staff Reporter

Policyholders at the Oklahoma State Insurance Fund could be looking at a 19 percent increase in their workers compensation rates later this year, according to recommendations presented to the board of managers Tuesday.

E. James Stergiou, the fund's actuary, said the loss experience of the fund would require a 9 percent hike with another 10 percent needed to bolster the fund's surplus.

He also urged the board to consider entering into a reinsurance agreement which would lessen the size of a rate increase to about 13 percent while providing other protections for the fund.

The rate increase recommendation was based on a dramatic reduction in the fund's investment income. It reflected data through May and thus could be adjusted up or down by the time the board actually considers rates.

"For the first time in a long time _ three years _ you have an unrealized capital loss."

The loss was $11 million for the first five months, compared with capital gains of $29.7 million during 1993.

Stergiou said he wanted to see the filing of the National Council on Compensation Insurance before making a final determination on how the fund should adjust its rate.

The National Council makes filings on behalf of private carriers. The group has indicated that it will probably make a filing on the industry's loss cost in September. Individual private carriers will be required to file their own multiplier information, which makes up the rest of the rate and includes expenses, profits and contingencies.

Stergiou used the rise in the fund's operating ratio to explain the need for additional rates. For the first five months of 1994, the fund had an operating ratio of 1.05 percent, more than for any year since 1990. The ratio takes into account the losses from claims, expenses and investment income as a percentage of net premium. A break-even ratio is 1 percent. The fund's ratio was 0.99 percent in both 1993 and 1992 and 1.03 percent in 1990.

In previous years, the operating ratio was kept low because of large contributions from investment income. …

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