Rhode Island Gov. Donald Carcieri has vetoed a bill that would have permitted the state’s largest workers compensation insurer, Beacon Mutual, to restructure and expand into other states.
Carcieri blasted the legislation as “insider legislation” that would dramatically change the state’s workers compensation system and relieve Beacon Mutual of much of its public purpose and oversight.
Beacon Mutual writes about 90 percent of employers in the state. As an insurer of last resort, it is restricted in its ability to reject risks.
Beacon Mutual had asked for the right to get out from under some state regulation it currently is subject to as a nonprofit insurer and the state’s insurer last resort. It sought to end its nonprofit status and expand into other states in exchange for giving up its tax exemption and its exclusion from the state’s guaranty fund.
But Carcieri and his administration, including the state insurance department, vehemently opposed the move.
“It would privatize the company, transforming it from a ‘nonprofit public corporation’ into a for-profit private company. As a public-purpose company, Beacon currently has an obligation to operate in a fashion that is transparent to the people of Rhode Island. This legislation would strip that public oversight, obscuring Beacon’s operations from public view,” Carcieri said in a statement made available to Insurance Journal.
Carcieri said he was concerned that costs to Rhode Island businesses might go up if Beacon’s plan were approved. “If Beacon is permitted to expand outside Rhode Island and its management is not as successful in competing in those new markets as it predicts, the out-of-state losses could affect our own workers’-comp market. A failure by Beacon to profit in other states could drive up rates for Rhode Island businesses. Why should Rhode Island employers place at risk the reserves that they have built up at Beacon to pay losses from out-of-state businesses?”
Carcieri accused legislators of sidestepping serious debate over the legislation and called for more study of any changes to the workers compensation system. “Instead of a well-studied proposal that would benefit the people and businesses of this state, we seem to have on our hands another example of the Rhode Island insider network plying its trade at the State House,” Carcieri charged.
Last year, Beacon Mutual started a subsidiary, Castle Hill Insurance, in order to enter other states. However, because they have doubts about whether it is allowed under its state charter to write outside Rhode Island, other states have been reluctant to license Castle Hill.
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