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WC Second Injury Fund: South Carolina Jeri Boysia Companion P&C Presented at CAS Spring Meeting June...
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Transcript of WC Second Injury Fund: South Carolina Jeri Boysia Companion P&C Presented at CAS Spring Meeting June...
WC Second Injury Fund: South CarolinaJeri BoysiaCompanion P&CPresented at CAS Spring MeetingJune 15-18, 2008
WC SIF: South Carolina Background and History of the SC SIF
2003 Limitation2007 Dissolution
Actuarial Considerations Following SIF Law Changes Impact on Reserving Impact on Pricing
The Future and The End of the SC SIF
Background and Historyof the SC SIF
SC SIF Financial Mechanics Fund reimburses insurers for “second injuries” Assessments for paid recoveries levied based on
carriers paid loss levels (not premium) Creates an unfunded liability, and Statutory accounting requires assessment on paid plus
anticipated recoveries to be expensed Prior to 7/1/07, asset requirement set at 175% of
Fund payouts Carrier Assessment = (Carrier % of State Paid Loss) *
175% of SIF disbursements LESS SIF net assets
SC SIF Practical Issues
Loss costs are reduced Expenses are higher Is there a cost to the system? What are the benefits? Recovery efforts handled by carrier or outsourced Results vary by carrier
Winners and losers Some disregard recovery potential completely
SC SIF Assessment History
$0
$100
$200
$300
Mill
ions
FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005
FY 2005 assessment spiked to $253M Estimates of unfunded liability were significant What caused this sudden growth?
SC SIF Timeline
2003 law change (effective 6/25/03)Redefined eligible claimFear that SC SIF may be dissolved (discussed
during 2005 reform efforts) Reimbursements skyrocketed in 2005
leading to a record assessment 2007 WC Reform Act (S. 332) dissolved the
SC SIF
Qualifying ClaimPrior to 2003 Law Change Employee has a pre-existing injury Reimbursement for subsequent injury which
results in medical cost substantially greater because of the pre-existing injury (or would not have occurred w/o pre-existing injury)
Employer knowledge of pre-existing injury not required
Qualifying ClaimAfter 2003 Law Change Employee has a pre-existing injury Reimbursement for subsequent injury which
results in medical cost substantially greater because of the pre-existing injury (or would not have occurred w/o pre-existing injury)
Employer must have knowledge of pre-existing injury at the time the employee was hired
2007 WC Reform Act (S. 332) No arthritis or “other” claims with date of injury on
or after 7/1/07 No claims with date of injury on or after 7/1/08 Last day to submit notice of new claim is 12/31/10 All data re: claims must be submitted to the Fund
by 7/1/11 Last day for Fund to accept a claim for
reimbursement is 12/31/11
2007 WC Reform Act (S. 332)
Other key dates:7/1/07: changed assessment calculation;
reduced asset requirement from 175% to 135%
7/1/13: Fund is terminated and remaining obligations transferred to Budget and Control Board
Actuarial Considerations Following 2003 Law Change
What is the impact of SIF recoveries on your company’s loss history?
Could be significantly different than industry results
Are you separately accounting for received and anticipated recoveries? Or…
Are your losses (e.g. triangles) net of recoveries?
Separate treatment relatively straight forward; focus on the latter.
Estimated Impact of 2003 Law Change
Distribution of Reported SIF Claims by CY
83% 74%60% 63%
22%
70%
0%
20%
40%
60%
80%
100%
120%
2000 2001 2002 2003 2004 2005 2006
AY (CY,CY-1,CY-2) AY (CY-3) AY (CY-4)
Estimated Impact of 2003 Law Change (Cont)
AY 00-02 (Ave recovery normalized for exposure
changes; base year)
1.00
AY 2003(partial year)
0.47 -53%
AY 2004 0.15 -85%
AY 2005 0.18 -82%
AY 2006 0.20 -80%
Impact of 2003 Law Change on Loss Development Factors
12-Ult 24-Ult 36-Ult 48-Ult 60-Ult
Net of Recoveries Gross of Recoveries
+47%
+27%
+15%+8%
+4%
Impact on Reserving
Development Methods Adjustment to Loss Development Factors
Loss Ratio Methods Adjustment to Loss Development Factors Adjustment to Expected Loss Ratio
Bottom Line: Losses will increase Magnitude will vary by carrier
Caution re: industry loss development factors
Impact on Pricing
Long Term No significant impact on pricing Carrier accountability factor might lower cost
Short Term – timing issue Loss cost multipliers might need to be adjusted
downward prior to increase in loss costs Impact to loss costs will be slow to emerge Carriers are better equipped to estimate impact earlier
(they have the data available)
The Future and The End of the SC SIF
Projected Impact of 2007 Law Change
AY 00-02 (base year)
1.00
AY 2003 0.47 -53%
AY 2004 0.15 -85%
AY 2005 0.18 -82%
AY 2006 0.20 -80%
AY 2007 ??? ???
AY 2008 ??? ???
AY 2009 0.00 -100%
Impact of These ChangesOn Reimbursements
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Mil
lio
ns
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
FY 2008 as of 4/30/08
Impact of These ChangesOn Assessments
$0
$50
$100
$150
$200
$250
$300
Mil
lio
ns
FY2000
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
Questions?