Charles C. Dockery, Donor - Page 4

                                         -4-                                          
               An aggregate stop loss reinsurance agreement subjects                  
          Crossroads to liability for workers' compensation claims above a            
          preestablished "retention percentage".  The retention percentage            
          is the point at which Crossroads' liability on a reinsurance                
          contract matures.  For example, if a self-insurer fund collects             
          $10 million in premiums and Crossroads' reinsurance agreement               
          provides for an 80-percent retention point, the primary carrier's           
          losses would be limited to $8 million, and Crossroads would pay             
          all claims exceeding $8 million.                                            
               Self-insurer pools are formed under State law as an                    
          alternative to conventional insurance.  Members of trade                    
          associations can form, and pay premiums to, pools owned by the              
          members (rather than to an insurance company).  Any profits are             
          returned to the members.                                                    
               "Unpaid claims", commonly called reserves for unpaid losses,           
          are an insurer's estimate of the amount expected to be paid in              
          the future to settle claims reported and incurred.                          
               Workers' compensation reinsurance is "long-tail" insurance             
          coverage because of the length of time before a reinsurer's                 
          obligations mature.  Crossroads may not know if it had losses for           
          aggregate stop loss workers' compensation reinsurance until 3 to            
          4 years after a policy year because it may take that long for               


               2(...continued)                                                        
          of insurance policies.  See Trans City Life Ins. Co. v.                     
          Commissioner, 106 T.C. 274, 278 (1996).                                     




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011