Workers' Compensation Assigned Risk Pool

TO:

FROM: Judith S. Lohman, Principal Analyst

RE: Workers' Compensation Assigned Risk Pool

You asked how companies are placed in the workers' compensation assigned risk pool (ARP), what criteria determine which employers are in the pool, and who decides.

Companies are not “placed” in the ARP by anyone. They must apply for ARP coverage. In order to be eligible to receive it, they must meet two criteria: (1) they must be eligible for workers' compensation insurance and (2) they must have tried and failed to buy insurance in the open market. These eligibility criteria are set out in state law.

The ARP is administered by the National Council on Compensation Insurance (NCCI), which takes employer applications for ARP coverage and assigns them to individual insurers in proportion to their share of the total workers' compensation insurance market in the state.

Connecticut law requires that all employers either prove that they have the financial ability to pay workers' compensation directly to employees with compensable injuries or that they buy insurance to cover their workers' compensation liability (CGS § 31-284 (b)). But some employers cannot buy workers' compensation in the open market. There can be many reasons for this. Insurance companies may be unwilling to insure a certain business because the work its employees do is very risky or because the company has poor safety record, or even because the company is too small.

Connecticut law allows workers' compensation and other kinds of property and casualty insurers to make agreements for apportioning among themselves those companies who are “in good faith entitled to, but are unable to procure . . . insurance through ordinary methods” (CGS § 38a-670).

The workers' compensation ARP is such an agreement, approved by the insurance commissioner, that assigns risks attributable to such companies among workers' compensation insurers in proportion to their overall shares of the workers' compensation market in the state. Premium rates for ARP coverage are calculated and approved separately from other workers' compensation premiums.

According to Walter Bell of the Insurance Department, fewer than 12% of all Connecticut employers are in the ARP.

The ARP is administered by NCCI, the nationwide rating organization that assists in establishing workers' compensation insurance rates in Connecticut. Companies cannot obtain insurance from the ARP unless they apply for it. Companies submit their applications for ARP coverage to NCCI. As part of the application, they must list the insurers from whom they tried to buy coverage and which rejected them. (A copy of the ARP application is attached.)