NAIC Report On WC Carveouts Offers Oversight Recommendations
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Regulators are recommending that workers' compensation carve-out business should be open to life and health insurers provided they have the know-how and can properly disclose how they conduct the business.
High up on a list of recommendations made in a recently released report by the National Association of Insurance Commissioners is a suggestion that any business be conducted at a high attachment level, or the dollar amount at which business starts to be ceded to a reinsurer, unless a company can demonstrate to its regulator that it has considerable expertise in reinsuring this kind of business.
A survey conducted by interested industry parties reporting to regulators that preceded the report suggested that carve-out programs generally have attachment levels of $500,000, and the attachment levels for pools and facilities are usually $1 million or higher for the majority of accounts written by life companies responding to the survey.
Other suggestions made by the underwriting and reinsurance pools working group include a recommendation that each state determine whether workers' compensation carve-outs are allowed and then incorporate into its legal framework additional provisions needed to allow life and health insurance companies to reinsure this business.
Additionally, the report suggested that workers' comp carve-outs be considered an 'occupational accident' so that it would grant a life and health insurance company the specific authority to reinsure it.
Another recommendation stated that a demonstration of due diligence should be required.
