Florida Workers’ Compensation Joint Underwriting Association Board of Governors approves administrative raises, hears operational update

During its meeting yesterday, December 6, 2011, the Florida Workers’ Compensation Joint Underwriting Association (“FWCJUA”) Board of Governors (“Board”) heard operational updates and approved numerous committee recommendations — including proposed raises for administrative staff and the submission of amended bylaws to the Florida Office of Insurance Regulation (“OIR”).

The Board heard report summaries and approved an array of recommendations from the Audit Committee, the Executive Committee, the Investment Committee, the Rates and Forms Committee, the Reinsurance Committee, and the Operations Committee. 

After approving minutes from eight different meetings that occurred between September 27, 2011 and November 30, 2011, the Board heard a Legislative update, followed by individual Committee reports.

An attorney for the FWCJUA explained that legislative counsel monitors workers’ compensation bills as they winds its way through the Legislature but noted that the FWCJUA generally does not get involved in lobbying.   He said the FWCJUA is tracking eight bills, of which only a few are substantive.  The top three follow:

• HB 4085, which seeks to abolish the position of Workers ‘ Compensation Administrator and repeal all related provisions
• HB 511,which revises requirements for determining the amount of reimbursement for repackaged or relabeled prescription medication
• HB 307, which redefines term “employee” for purposes of workers’ compensation and revises requirements relating to election of exemption from coverage to include applicability to members of limited liability companies

The Board next approved its 2012 meeting schedule for the following dates:

1.       February 23, 2012 — 1:00 p.m.  Quarterly meeting via teleconference

2.       June 13, 2012 – 10:00 a.m.  Quarterly meeting via teleconference

3.       September 12, 2012 – 10:00 a.m.  Annual membership and Quarterly meeting via teleconference

4.       December 12, 2012 – 10:0 a.m.  Quarterly meeting via teleconference

Board members then unanimously approved revisions to the FWCJUA’s bylaws, most of which are cleanup measures, according to the FWCJUA’s attorney.   One specific change includes discontinuing the role of Program Manager as a senior manager of the FWCJUA.  The change was made because the position has been vacant since January 2007, said FWCJUA Executive Director Laura Torrence.

The Board also approved raises for administrative staff as recommended by the Executive Committee earlier this week.  The raises include a 5.25 annual increase for the Operations Manager, and a  six percent annual increase for the Executive Director, both effective January 1, 2012.

In other business, the Board:

• Approved the recommendation by the FWCJUA Investment Committee to liquidate two Lehman Brothers bonds with a total value of $365,000. The bonds had been downgraded below an “A” rating and remained in the FWCJUA’s portfolio as authorized investment policy exceptions

• Voted to continue holding a CitiGroup Inc. bond, which is also out of compliance based on the Moody’s Baa1 rating, as well as the Amgen 4.85 percent bonds, which were downgraded by Moody’s

• Approved a one-year extension of Milliman’s engagement to provide actuarial services to the FWCJUA. Milliman won the engagement most recently in 2008 for a three-year term, with two one-year extensions. Ms. Torrence said Milliman offered to extend its engagement for the second year with no increase in fee for the 2012 reserve analysis and rate review for January 2014.

• Approved the following 2012 reinsurance program, as recommended by the Reinsurance Committee:
  • Reinstatement at 100 percent, and a $10,000,000 Maximum Any One Life (“MAOL”);
  • Purchase the $10,000,000 excess of $10,000,000 catastrophe layer on a per-occurrence basis with one reinstatement at 100 percent, and a $10,000,000 MAOL;
  • Purchase the $5,000,000 excess of $5,000,000 layer on a per occurrence basis with one reinstatement at 100 percent;
  • Purchase the $4,000,000 excess of $1,000,000 layer on a per occurrence basis with a reinstatement pattern of “1 free, 1 @ 50 percent, 1 free;” and
  • Terminate all existing reinsurance coverages on a cut-off basis effective December 31, 2011.

• Approved the 2012 FWCJUA Business Plan and Forecast. During the November 29, 2011 Operations Committee meeting, Ms. Torrence had explained that one of the biggest changes to the list of key activities for 2012 was the amount of money that was spent on Tropics Web enhancements. The original cost was $100,000 but the FWCJUA staff was able to reduce the cost to $28,219 through the procurement process, she said.

• Approved a revised telecommuting policy that will provide the Executive Director greater flexibility in allowing an employee to use remove supplemental computer access.

Ms. Torrence then told the Board that the FWCJUA Staff had filed revised rates with the OIR on November 14, thus effectuating the overall average premium level decrease of 9.7 percent, effective January 1, 2012, and applicable to new and renewal business.

It was also noted that Dave Webber will serve as the FWCJUA’s Controller as of December 26, 2011.

Mr. Webber than gave the FWCJUA’s financial report, stating that the year-to-date dollar change on the organization’s balance sheet showed a negative $4.5 million change, largely due to a dividend payment.

“You will see among the categories where we are shifting from our longer term investments into a shorter term and even cash, and that really is largely the result of the lack of reinvestment opportunities,” Mr. Webber stated.

In the surplus lines category, the change from year-end is down about $5.5 million, largely due to the dividend declaration and payments to be processed in the Third Quarter, Mr. Webber explained.

A review of the income statement indicates the FWCJUA has $6.7 million of written premium as of September 30, 2011 versus $3.9 million dollars as of September 30, 2010, he added.

He said growth continues through the Third Quarter.  Net incurred losses are about $400,000 more than they were a year ago, largely result of the current accident year, having a larger earned premium base.

The balance sheet shows an operating loss of $5.6 million for the nine-month period in 2011, Mr.  Webber stated.

The budget variance for the past nine months shows the FWCJUA is ahead more than $1.7 million on a written premium basis than a year ago, he pointed out.  

General and administrative expenses are under budget by $182,583, he reported.   Income before dividends shows a $415,000 loss — attributable to a million dollar retention on the one claim that was not anticipated, Mr. Webber said.

He then reviewed the investment portfolio, saying that both the index and actual returns have dropped off dramatically.  He characterized the view for the 2012 budget as “pessimistic” in regards to investment income, significantly less than 2011.  It is the result of low yields in marketplace for high grade securities, he said.

He said the FWCJUA remains financially sound.

“I think we are in good shape,” Mr. Webber stated.  “We have actuarially sound rates. We are losing investment income opportunity but that is not business we are in.  We have a very solid portfolio from a credit perspective.  I think we are in good shape — lots of surpluses to sustain a couple of little bumps.”

With no further business before the Board, the meeting was adjourned.

 

Should you have any comments or questions, please contact Colodny Fass.

 

 

To unsubscribe from this newsletter, please send an email to Brooke Ellis at bellis@cftlaw.com.