Privatized Workers' Comp Succeeding in West Virginia
Taking West Virginia's workers' compensation system private on Jan. 1, 2006, is turning out to a very good decision. BrickStreet, a mutual insurance company founded on that date to offer comp coverage will pay a $40 million note payment as scheduled on July 1, President and CEO Greg Burton announced recently. The company reported $185 million in earnings in 2007.
BrickStreet also asked the West Virginia Offices of the Insurance Commissioner for approval to pay an extra $50 million to $60 million to reduce the company's debt to the state, which loaned BrickStreet $200 million at its creation in the form of a surplus note. "While we must make sure our decisions are based on sound actuarial practices, paying of the surplus note early is beneficial to everyone," Burton said. "Once the note is completely paid off, as a mutal insurance company, we may be able to return a portion of the profits to policyholders in the form of dividends. And early payoff of the note can eliminate the Old Fund liabilities of the state faster, which improves our overall business climate."
The current interest rate on the note is 1.5 percent, but it will increase to the prime rate on Jan. 1, 2009. Plus, the company is currently tax exempt, but it will begin paying a 35 percent tax rate in 2009. As the state's market opens to competition on July 1, 2008, BrickStreet will experience higher underwriting costs and will not be able to sustain its current profit levels, according to the company. Information for companies interested in providing comp coverage when the market opens is available at the West Virginia Offices of the Insurance Commissioner's Web site, www.wvinsurance.gov.