Formation of the MS Workers' Compensation Assigned Risk Pool
In the early 1980's workers' compensation insurance was widely available and relatively affordable. Competition among private carriers was fierce and the residual market was experiencing a 20 percent per year decline in market share.
From 1984 to 1992, however, the workers' compensation market saw a steady and dramatic reversal of this trend. The aspect of this reversal which
came to symbolize the deterioration of workers' compensation systems throughout the nation
was the tremendous growth of the residual market.
The residual market (the term used to describe assigned risk plans and pools) is a mechanism through which employers, unable to find coverage elsewhere, may obtain workers' compensation insurance. Nationwide, this segment of the workers' compensation market
grew from 5.5 percent in 1984 to over 28 percent in 1992. Coverage written through this market is afforded by private insurance carriers via reinsurance arrangements which typically allocate underwriting results based on a carrier's prorata share of the voluntary market in a particular state. Prior to 1993, the underwriting losses in the residual market
were staggering.
Mississippi was not immune from this phenomenon. Quite the contrary, by the end of 1991, Mississippi was one of a handful of states whose workers' compensation system was on the verge of collapse. The residual market accounted for more than 40 percent of the premiums written by private insurance carriers and nearly 30 percent of the total workers' compensation written in the state. Assessments to cover residual market underwriting deficits were costing carriers 25 cents of every voluntary premium dollar written.
House Bill 1091, passed during the 1992 legislative session, contained major reforms designed to restore sanity to Mississippi's workers' compensation system and revitalize the private insurance market-place. With the passage of this legislation, the responsibility for providing oversight of Mississippi's residual market was moved from the Workers' Compensation Commission to the Department of Insurance and the Commissioner of Insurance was directed to establish the Mississippi Workers' Compensation Assigned Risk Plan. To further enhance the Commissioner's ability to address Mississippi's residual market dilemma, the Bill authorized the establishment of the Mississippi Workers' Compensation Assigned Risk Pool as the reinsurance mechanism for the Mississippi Plan.
The Commissioner is the ultimate authority for all aspects of Plan and Pool Administration, as well as, the management of Servicing Carriers.
The Mississippi Plan and Pool were established and began operation on January 1, 1993.
The reorganization of Mississippi's residual market has produced very favorable results.
