CIGA Implements 2 Percent Increase

The California Insurance Guarantee Association (CIGA) will impose a 2 percent increase on all polices under its some 850 member carriers effective Jan. 1, 2003.

“For the year 2003, it will be applied to all workers’ compensation policies issued in the state by all admitted carriers.” said Paul Otis, deputy executive director at CIGA. “And it will be applied to the other category of business. It includes everything with the exception of automobile, both personal and commercial, homeowners, and workers’ compensation, and it also excludes coverage for ocean marine, fidelity, surety, and financial guarantee.

“Our role is to pay covered property and casualty insurance claims, companies that become insolvent, in which we then have a statutory obligation to make payments,” said Otis.

He explained that the increase for the workers’ comp policies is mainly due to “increased claims and expenses from insolvent insurance companies.” For policies in the other category, Otis attributed the increase “mainly due to the Reliance insolvency.”

Pennsylvania-domiciled Reliance Insurance Company ceased underwriting all new and renewal property and casualty business in June of 2000. The company eventually entered into a state of liquidation under the order of Pennsylvania Insurance Commissioner Diane Koken on Oct. 3, 2001. Although once licensed to write policies in all 50 states, the company’s policies were heavily concentrated in California, among other states.

The Reliance liquidation was followed by a string of insolvencies over the past couple of years, including the recent rehabilitation of Legion and Villanova Insurance Companies.

The increase is the latest in a series of problematic moves plaguing the California insurance industry. Workers’ comp and homeowners markets are struggling to remain viable in the hard market, while reinsurance and the after-effects on the 9/11 attacks continue to ripple through the market nationwide.

“The CIGA rate increase is the result of the Quackenbush administration’s failure to guarantee insurance companies have sufficient reserves to remain solvent,” said John Garamendi, Democratic candidate for California Insurance Commissioner.

“The increase is necessary to ensure that injured workers continue to receive their health and indemnity benefits. Our goal is to address the fundamental problems in the workers’ compensation system by creating a vibrant, competitive and profitable market that can protect workers,” he added.

Topics California Workers' Compensation