Assigned to COMPS FOR
COMMITTEE
Assigned to COMPS FOR
COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
reinsurance; workers compensation
Purpose
Establishes that a workers' compensation program of reinsurance must be filed with, but not approved by, the Arizona Department of Insurance.
Background
The Arizona Department of Insurance (DOI) oversees insurance rate regulation to promote the public welfare and prevent excessive, inadequate or unfairly discriminatory rates (A.R.S. § 20‑341). DOI utilizes the National Council on Compensation Insurance (NCCI) as the designated rating organization for the annual making and filing of workers' compensation rates, or uniform plan (A.R.S. § 20-371). The uniform plan assigns differing rates based on industry classifications and specific job classifications.
An insurer may submit a uniform percentage increase or decrease to the uniform plan, referred to as a deviation, to DOI and NCCI. For each rate filing, the insurer may apply either: 1) a uniform percentage increase or decrease; or 2) a schedule rating plan reflecting the individual risk characteristics of the insured subject. DOI may require actuarial substantiation of the deviation at any time and NCCI must apprise DOI of any disapproved deviation filings (A.R.S. § 20-359).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Establishes that an accompanying offer of a qualified loss sensitive program of reinsurance must be filed with, but does not need to be approved by, DOI when a qualified insurer in this state issues a guaranteed cost workers' compensation insurance policy to a qualified insured on an approved form and with approved rates.
2. Defines guaranteed cost workers' compensation insurance policy as a workers' compensation policy that is based on approved rates, multiplied by applicable class codes and is not changed by losses in the period for which it was issued.
3. Defines qualified insured as an insured that has its principal place of business in this state and that has a total annual workers' compensation premium of at least $500,000.
4. Defines qualified insurer as an insurance company admitted in this state that has:
a) a combined loss ratio of less than 100 on January 1st of the two preceding years;
b) assets in excess of $500,000,000 on January 1st of the year in which the guaranteed cost workers' compensation policy is issued; and
c) a rating of A+ from a nationally recognized statistical rating organization designated by the National Association of Insurance Commissioners (NAIC).
5. Defines qualified loss sensitive program of reinsurance as an offering that:
a) is issued to the same qualified insured in connection with a guaranteed cost workers' compensation insurance policy;
b) is effected through a separate reinsurance arrangement with a reinsurer admitted in an NAIC-accredited state;
c) provides that the qualified insured may participate in the underwriting profit or risk associated with the guaranteed cost workers' compensation insurance policy issued to that qualified insured maintained in a segregated cell account;
d) contains a minimum and maximum loss participation limit;
e) discloses the reinsurance program term length;
f) discloses applicable penalties for the early termination of the reinsurance program;
g) provides an estimated schedule of payments;
h) discloses the methodology for calculating charges, deposits or other payments due; and
i) discloses any applicable arbitration provisions.
6. Becomes effective on the general effective date.
Prepared by Senate Research
February 8, 2018
GH/lb