-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