Carrier Obligation to the Residual Market

 

Subscription to the National Workers Compensation Reinsurance Association NFP (NWCRA NFP) Bylaws is the exclusive means by which an insurance carrier becomes a member in the NWCRA NFP. An Association Member shares in the operating results for each state in which it participates in the Association through a quota share reinsurance arrangement with other Association Member companies.

 

If you have any questions, comments, or need additional information, please contact Customer Service at the NCCI:  (800) 622-4123 or www.ncci.com .

 

Vermont’s authority for requiring participation in the Reinsurance Pool and appointing the NCCI as Plan Administer lies in 8 VSA Chapter 128 §'s 4687 - 4696 and in the Plans as filed by the NCCI and approved by the Department of Banking, Insurance, Securities and Health Care Administration (BISHCA). Rules 4(5)(a)&(d) of the 2001 Edition of the Basic Manual speak directly to participation and assessments for Pool shortages

 

 

(Exceptions: AR)

 

(Exceptions: AK, AZ, GA, VA)

 

All insurers licensed to write and/or are actively writing workers compensation insurance in this state are required to participate in this Plan. An insurer may change its participation option once per year and must do so no later than one hundred twenty (120) calendar days before the end of the calendar year. All affiliated insurers must select the same option if allowed by the regulatory authority in the state. An insurer must satisfy its participation requirement by selecting one of the following options:

 

Option 1          

Provides for becoming a direct assignment carrier, subject to the approval of the regulatory authority and receiving assigned risk assignments directly from the Plan Administrator. Any policy issued under this option will not be eligible for reinsurance through the Reinsurance Agreement(s) among members of the Association.

 

Option 2          

Provides for subscribing to the Association Bylaws, which are attached hereto and by this reference are incorporated into and made a part of this Plan.

 

If Option 1 is selected, one insurer may be designated to accept direct assignments on behalf of all affiliated insurers. Any insurer wishing to select Option 1 must receive prior approval from the regulatory authority. Application for such approval must be made no later than one hundred twenty (120) calendar days prior to the end of any calendar year. The regulator must review the application and approve or disapprove it within sixty (60) days of receipt of the request. If the application is approved, that insurer will become a direct assignment carrier on January 1 of the year following the regulatory authority’s approval.

 

An insurer that fails to submit an application to the regulatory authority for approval as a direct assignment carrier at least one hundred twenty (120) days prior to the end of any calendar year will automatically be deemed to have selected Option 2 for the following year. If the regulatory authority fails to act on a letter of application or disapproves the letter of application for direct assignment carrier status, such insurer will automatically be deemed to have selected Option 2. During the period of time an application is pending or an appeal is pending before the regulatory authority with regard to a disapproved letter of application for direct assignment carrier status, an insurer will automatically be deemed to have selected Option 2 for the period during which approval has not been granted. If previously a subscriber to the Association Bylaws, an insurer seeking to become a direct assignment carrier must also comply with the withdrawal provision in the Association Bylaws.

 

An insurer applying to be licensed in this state to write workers compensation insurance after this Plan has been approved must make its participation election at the time it submits its application for a license.

 

An insurer that desires to become a direct assignment carrier must submit its application to become a direct assignment carrier at the time it submits its application for a license. The regulatory authority must approve or disapprove the application at the same time the license is issued. The regulatory authority or its designee shall have responsibility for determining and monitoring financial strength and enforcing levels of service or performance of a direct assignment carrier, except that when authorized by the regulatory authority, the Plan Administrator will have responsibility for monitoring and enforcing levels of service or performance of direct assignment carriers. As required by the regulatory authority, direct assignment carriers are required to meet the minimum performance standards applicable to assigned carriers under this Plan.

 

If a licensed workers compensation insurer has not made an election and the Plan Administrator is informed by the regulatory authority or any other sources that the insurer is a licensed workers compensation insurer, and upon verification, that insurer will be deemed to have selected Option 2 until the next Plan membership election, at which time the insurer may then make its own participation selection. However, if a newly identified insurer completes the application and approval process and provides all required documentation to the Plan Administrator prior to June 30, it may elect to be a direct assignment carrier for the remainder of that calendar year. If the process is not completed by June 30, the insurer will be deemed to have selected Option 2 until the next Plan membership election. An insurer will automatically be deemed to have selected Option 2 for the following calendar year when the insurer has an opportunity to make a new participation selection and fails to act upon the opportunity, such as during the annual election process.

 

Whenever participation under the Association Bylaws consists of those insurers cumulatively writing less than forty (40) percent of the total net workers compensation insurance premiums written by all insurers in this state as calculated in accordance with the preceding calendar year figures or whenever the Plan Administrator determines the capacity of servicing carriers to handle assignments made pursuant to the Rule 4-A-3 falls below a level that is adequate to handle all assignments being made, or whenever the Reinsurance Agreement(s) provided pursuant to the Association Bylaws is terminated, those insurers that selected Option 2 will, as of January 1 of the following year, automatically be deemed to have selected Option 1 for employers insured effective on or after said January 1. Under this provision all licensed insurers will automatically be deemed approved as direct assignment carriers and will not need to seek regulatory approval.

 

(Exceptions: AZ)

 

Direct assignment carriers are required to adhere to all Plan, regulatory, and statutory requirements that apply to the issuance and servicing of assigned risk policies. An approved direct assignment carrier may receive assignments for any employer eligible for coverage under the Plan. A direct assignment carrier’s reinsurance treaty exclusions are not considered when making assignments.

 

(Exceptions: AZ)

 

An insurer may terminate participation in this Plan as of the close of the calendar year in which its authority to write workers compensation is terminated. With respect to all policies in force on the effective date of an insurer’s termination, the liability of the terminating insurer will cease on the succeeding anniversary date of each such policy. Termination of participation will not discharge or otherwise affect liabilities incurred prior to the anniversary date of such policies, and the insurer will be charged or credited in due course with its proper share of all expenses, losses, and profits allocable thereof.

 

(Exceptions: AZ)

 

All insurers that elect to participate in the Plan through the Reinsurance Agreement(s) provided for in the Association Bylaws will share in the writings, expenses, servicing allowance, and losses in the proportion that the total net premiums of all members participating in the Plan in this state during the preceding calendar years bear to the aggregate direct premiums written in this state during the preceding calendar years by all insurers participating through the Reinsurance Agreement(s) except that such computations will exclude that portion of the premiums attributable to the operation of the Plan. Each insurer’s participation in the Plan will be determined on the basis of such direct premiums as reported in the most recent annual and other reports filed with the regulatory authority.

 

All insurers that have elected to become direct assignments carriers will retain all profit, losses, and expenses on business assigned to them. Assignments will be made to and among assigned carriers pursuant to procedures developed by the Plan Administrator and will provide for the equitable distribution of employers.

 

 

For more information about the Bylaws click on the link below:

 

 

For more information from the Basic Manual (2001 Edition) about Rule 4, contact the NCCI:

(800) 622-4123 or at: www.ncci.com

 

BISHCA can be contacted through Frederick M. Barrett:

(802) 828-4841 or Frederick.Barrett@state.vt.us