CALIF. STAMPING OFFICE TURNS 65

Ted Pierce, executive director of the Surplus Line Association of California (SLA) announced that Dec. 1, 2003 marks the 65th anniversary of the organization's stamping office. On this date in 1938, California Insurance Commissioner Rex B. Goodcell and

Assistant Commissioner Harold B. Haas authorized a plan in which the Commissioner would allow the surplus line brokers to make filings with a new "Stamping Office" within the SLA. Commissioner Goodcell wrote, "The establishment of the Stamping Office by the Surplus Line Association constitutes a splendid example of initiative and cooperation on the part of the Association." The SLA elected to maintain a stamping office in San Francisco for the purpose of examining and recording all filings required by the Insurance Commissioner's Rules and Regulations relating to Surplus Line Brokers or by the Executive Committee of the SLA. Today, the SLA is an organization of 650 surplus line brokers licensed by the State of California to negotiate and place insurance with

nonadmitted insurers. The Association serves as the official surplus line advisory organization to the California Department of Insurance. California Insurance Code Sec. 1780.50 et seq. With few exceptions, all California surplus line insurance policies must be filed with the Surplus Line Association of California for analysis,

regulatory compliance, record keeping and statistical reporting.

ALASKA PRIVACY REGS. TROUBLE ALLIANCE

The regulations proposed by the Alaska Division of Insurance regarding privacy of consumer financial and health information, while improved from the original proposal, are still not in sync with state law, according to the Alliance of American Insurers. Rey Becker, vice president of property/casualty for the Alliance, commended the Division for following earlier advice from the Alliance and abandoning its earlier "opt-in" approach. That approach is currently used in only four states: California, New Mexico, North Dakota and Vermont. Nevertheless, written comments submitted by the Alliance still oppose the proposed regulations, which "deviate from both Title V of GLB and from the model developed by the National Conference of Insurance Legislators (NCOIL), and endorsed by the Alaska Legislature in 2001." Becker cited the following specific issues: GLB and the NCOIL model do not apply to commercial lines. However, like the 2000 NAIC model, this version would explicitly apply to workers' compensation; GLB and the NCOIL model do not apply to third-party claimants. However, like the NAIC model, this version applies to all claimants; This version would create a consumer right of access and correction not present in GLB or the 2000 NAIC model privacy regulation; GLB and the 2002 NAIC model information safeguarding regulation apply only to information about customers (i.e. policyholders). This version would apply more broadly to information about consumers (i.e. applicants and claimants) as well. "We'd like to work with the Division to improve certain aspects of the proposed regulations, because we believe the Alaska-only approach is very counterproductive," Becker said. "These deviations from GLB and NCOIL, particularly as concern information safeguarding, run counter to the goals of regulatory modernization and uniformity, providing an unfortunate example for those urging federal regulation of the insurance industry. These additional mandates and restrictions, particularly as to information safeguarding, will serve to place insurers at a competitive disadvantage compared to banks and securities firms, that face no such federal burdens in Alaska. These additional mandates and restrictions will create costly barriers for insurers wishing to write business in the state. When taken together, these will translate into fewer choices and higher premiums for the insurance consumers of Alaska."

PAULA FINANCIAL REFINANCES DEBT

Pasadena-based PAULA Financial announced it has completed the refinancing of its outstanding debt balance of $1.8 million. The company said the new credit facility represents a significant improvement in both interest rate and principal repayment terms, and provides for the payment of shareholder dividends. It also allows for the company to make stock repurchases. PAULA Financial reported net income for the third quarter of 2003 of $0.07 per share compared to $0.02 per share for the 2002 period. Total revenue for the third quarter of 2003 was $5.2 million compared to $3.5 million in third quarter 2002. Net income for the first nine months of 2003 was $0.14 per share compared to $0.06 per share for the 2002 period. Total revenue for the first nine months of 2003 was $14.1 million compared to $9.7 million for the same period in 2002.

CALIF. FUND SEEKS RATE DECREASE

State Compensation Insurance Fund—California's largest workers' compensation insurance carrier—has filed for an average 2.9 percent rate decrease effective Jan. 1, 2004. The decrease is within the range recommended by the Workers' Compensation Insurance Rating Bureau on Nov. 3, 2003. The 2.9 percent reduction follows a rollback of the projected 12 percent increase previously requested by the Workers' Compensation Insurance Rating Bureau. "The combined impact of eliminating the pending increase and reducing rates by an additional 2.9 percent should give California employers some hope for stability in the marketplace," said State Fund President Dianne C. Oki. Executive Vice President James F. Neary cautioned that some policyholders will not see an actual rate decrease on Jan. 1, 2004, since the July 1, 2003 rate increase has not yet been applied to policies with inception dates between January and June. Rates will vary among policies due to differences in individual class experience. Experience modifications will further modify the rates of qualified policyholders, noted Neary. Oki added, "State Fund must ensure it maintains the financial resources to meet our obligations to California employers and injured workers. State Fund and other carriers are bound by California insurance law to set adequate rates. This rate filing does just that." State Fund noted that it hopes for substantial savings from current and future reform legislation and will continue to work with the Legislature and the new Governor to achieve further rate relief for employers and guarantee that workers' compensation services are delivered as efficiently as possible.

CALIF. SEES REDUCTIONS IN WC RATE FILINGS

Insurance Commissioner John Garamendi announced that workers' compensation pure premium rates filed by insurers to date are below current rates by an average 3.6 percent, a "clear sign" that the historic reforms signed into law in September will result in much needed savings for many employers. Commissioner Garamendi said that 95 carriers, about one-third of the market, have filed rates with the Department of Insurance that will take effect on Jan. 1, 2004. Those carriers represent more than 75 percent of total premiums in the market. Of those filings, 69 companies will reduce rates, 16 will keep rates at current levels, and 10 will increase rates. The list includes the State Compensation Insurance Fund (State Fund), which writes policies for more than half of the California market. It plans to reduce rates by an average of 2.9 percent. "We have

clearly turned the corner in the battle against skyrocketing premiums within the workers' compensation system," Commissioner Garamendi said. "The up escalator of increasing costs has stopped and we are now on a down escalator. But we still need to do more. We must continue with the second phase of reform." Since 1999, private carriers have increased their base premium rate filings every year. The increases by private carriers over that period ranged from 9 percent to 22 percent annually. State Fund filed for increases during that same period ranging from 9 percent to 23 percent annually. Prior to the passage of the reform legislation, the Workers' Compensation Insurance Rating Bureau (WCIRB) had recommended to the Commissioner that the advisory rate he sets for insurers be increased by 12 percent beginning in January. Pure premiums primarily represent the cost of claims, without associated costs such as profit or overhead expenses. Over the past two years, 98 percent of filing companies have adopted the proposed WCIRB pure premium rate increases, and a similar percentage would certainly have done so on Jan. 1, 2004, absent any reforms, Commissioner Garamendi said. "Without reform, employers would have certainly been saddled with another in a long series of hefty increases," he said. "But largely due to reforms we were able to erase that 12 percent increase, and cut an additional 14.9 percent from the current advisory level. This is very good news for California's employers and will mean real savings." Commissioner Garamendi noted that because of several factors, not all employers will see immediate relief. Some have policies that do not renew until July 1, some may have had accidents on work sites that will impact rates negatively, and the classification process may result in varying rate changes for others. But overall, the news is good for California, he said. "This dysfunctional, broken system has devastated employers and created a barrier to the creation of jobs for Californians," Commissioner Garamendi said. "Its problems are a peril to the state's job growth and economic future. While we are pleased, we are not satisfied. We must do more for the sake of California, our employees, and our employers."