Workers Compensation Solvency Guaranteed While Raid On PC Fund Is Prevented

ALBANY, NY - The New York State Legislature today passed legislation (S. 5248/A.7708) that will ensure the solvency of the Workers Compensation Security Fund (WC Fund) and prevent a raid on the Property Casualty Security Fund (PC Fund). Property Casualty Insurers Association of America (PCI) was instrumental in developing the proposal that will help address the WC Fund solvency crisis.

"This is a victory for auto and homeowner policyholders across New York," said Kristina Baldwin, regional manager and counsel for the PCI. "Two months ago, these policyholders were on track to be faced with future rate increases to pay for the money needed in the WC Fund, but thanks to the passage of today's bill, these increases won't be necessary."

In January, PCI learned that the legislature planned to borrow $50 million from the PC Fund to pay for the looming insolvency in the WC Fund. The likely outcome would have been increased guaranty fund assessments for property casualty insurance companies, which would be passed on to policyholders in the form of higher premiums. PCI worked diligently for another option.

The insolvency of the WC Fund was temporarily forestalled until April due to an unexpected infusion of cash from an out-of-state liquidation. On the brink of the WC Fund's insolvency and the possible interruption of workers compensation checks to injured workers, the legislature was able to reach an agreement on a proposal which was developed, in large part, by PCI and other industry partners.

This legislation will provide the necessary funding for the WC Fund through one or more loans from the estates of insurers in liquidation. In addition, the superintendent of insurance would be authorized to increase the guaranty fund surcharge on workers compensation policies from one to two percent. In the event that there is a delay in obtaining the funding from the estates, funds could be temporarily borrowed from the PC Fund not to exceed $30 million.

"We are pleased that the New York Legislature today took a step in the right direction in continuing to protect auto and homeowner policyholders," added Baldwin. "This legislation ensures that injured workers will receive their workers compensation checks while not unfairly burdening auto and homeowner policyholders. This is a win for everyone."

PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association. PCI members write $173.6 billion in annual premium, 39.1 percent of the nation's property/casualty insurance. Member companies write 49.1 percent of the U.S. automobile insurance market, 37.8 percent of the homeowners market, 31.8 percent of the commercial property and liability market, and 38.5 percent of the private workers compensation market.

Source: PCI