CIGA Losing Money Covering Workers’ Comp Claims

The California Insurance Guarantee Association, which pays workers' compensation claims when private insurance companies "go broke," is running out of money, the Orange County Register reports. CIGA is now spending $42 million a month, more than what it paid for any entire year in the past, to cover claims left over after Superior National Insurance Group, once the state's "premier private workers' comp insurer," was seized by state regulators last May because it was "financially unstable." As an emergency fund, CIGA is financed by a 1% surcharge on every workers' comp policy written -- amounting to about $70 million or more each year. But this amount may not be sufficient at the current spending rate. Therefore, CIGA is supporting a bill that would "restore stability to the fund" by raising the surcharge to 2%. Larry Mulryan, CIGA's executive director, said, "With the (added) 1%, combined with investment income, we can barely make it, with some borrowing." The Register reports that private premiums dropped when the industry was deregulated in the 1990s, which allowed insurers to charge "enough to cover the cost of doing business" but ended up "stress[ing] insurers" (Howard, Orange County Register, 4/21).