workers ’ compensation insurance catastrophe fund
TALLAHASSEE --- Sparked by fears that businesses could get hit with a future calamity similar to the COVID-19 pandemic , a proposal would allow charging Florida businesses an additional $ 20 million annually as part of a workers ’ compensation insurance catastrophe fund .
Insurance Commissioner David Altmaier has been asked to sign off on a rule change that could lead to Florida businesses being charged a premium to cover costs of a catastrophe that results in more than $ 50 million in aggregate workers ’ compensation losses across all states .
The National Council on Compensation Insurance , which files proposed rates for workers ’ compensation insurance carriers , requested the Office of Insurance Regulation consider the change in July . The organization known as NCCI asked that it take effect Aug . 1 , but the issue is still being reviewed .
“ The exposure to catastrophic workers ’ compensation claims losses exists in Florida ,” NCCI said in a July 23 informational bulletin explaining its request . “ The COVID-19 pandemic is the most recent catastrophic event impacting the workers ’ compensation system .”
Catastrophes are considered to be infrequent events with large cumulative losses and are not predictive of the future . As a result , losses from catastrophes are not taken into consideration when developing rates .
But actuaries agree that the impacts of catastrophes should be considered and that procedures should be developed that account for such events .
NCCI filed a similar catastrophe-funding request with the Office of Insurance Regulation in 2004 , but it was shot down by then-Insurance commissioner Kevin McCarty .
Now a Tallahassee-based consultant , McCarty on Tuesday called the new filing “ responsible .”
It ’ s the responsible thing for them to address , the issue of claims arising out of COVID-19 in particular , but more generally , to anticipate what future losses might be if you believe there ’ s going to be an increase in viral bacterial pandemics ,” McCarty said .
NCCI worked with AIR Worldwide , a loss modeling firm , to look at the impact that a pandemic can have on workers ’ compensation insurance .
McCarty predicted that state officials will thoroughly vet the request , with close attention paid to the modeling system that NCCI used to determine the potential impact of a catastrophe and how rates should be adjusted to accommodate for that .
McCarty said modeling systems for homeowners ’ insurance became so controversial in the early 2000s that the Legislature created a state-supported
14 DITCHMEN • SEPTEMBER 2021