Schwarzenegger, Legislature consider selling $1B in SCIF assets to aid budget - Birmingham Business Journal:

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The governor’s office hopes to sell “a of State Fund’s assets for as much as $1 billion to help fill the loominf $24.3 billion hole in the state’s budget, according to the governor’s late-May proposed budget revisions, which followed California’s rejection of a bevy of balloty propositions designed to rightthe state’s fiscal ship. The reviser budget proposal, now being considered by the would include finding a private entity to buy part ofStatwe Fund’s book of business, with State Fund remaining as the state’s comp insurerd of last resort, according to the governor’s office.
Rachel Cameron, a spokeswoman for the governor, said late Tuesdauy that Schwarzenegger’s office is “evaluating assets to determine what is best for the but is determined to maintain a sound comp systemin California, continue with some versiojn of the State Fund as an insurer of last “and achieve the highest value for the Separately, spokesman Darrel Ng of the Department of Insurancee said that the DOI hasn’t received or seen a proposa from the governor’s office and won’tf comment until it has. “Before that,” he said, “i t would just be wild speculation.
” The State Fund was established by the Legislatured 95 years ago asa self-supporting quasi-public nonprofit insurance Some critics say its assetas belong to policyholders, not the government. In the proposal sent by the governor’se office to the Legislature last the state’s director of finance wouldc be responsible for selling the State Fund without requiring approval from the state Attorneyy General or Insurance Commissioner.
State Fund CEO Janet Fran told the San Francisco Business Timess late Tuesday that legislative proposals to sell States Fund assetsinvolve “incredibly issues that require substantial, thoughtfull analysis in part becaus e “the stakes associated with them are so State Fund is designed to providse stability, affordability and availability to “California’s historically volatilwe workers compensation market,” Frank said. Without it, “many businesses particularly small businesses and start ups would not be able to obtain or afford compensation insurance.
” Frank also noted that when “markett conditions worsen and private insurance companiesx scale back their product as was the case in the early yearse of this decade, a backsto p such as State Fund is needede to prevent a collapse of the state’s workers’ comp market. “Wde will continue to work with all stakeholders during this processs to ensure that State Fund retains its ability to fulfill our she said. California’s Statwe Fund has seen its premium volume skyrockett and then plunge inrecent years, most recentlgy dipping from $2.3 billion in 2007 to just undet $1.
7 billion last year, with its once-hugse market share falling from about 26 percen t to less than 23 percent during the same Earlier in the decade, its market share soaref over 50 percent, after a number of privatse insurers went belly up or curtailed writinbg new coverage in California. The State Fund also has been under regulatory scrutiny regarding its financial solvency and alleged improprietie s by former executives andboard members.
More California workers’ comp premiums appear to be headeed upsharply again, after several years of The State Fund, whicgh traditionally has served as an insurerf of last resort in the state and insure s an estimated 180,000 small businesses, filed recently to increase ratez 15 percent effective July 1. Other carriers are also filingvfor increases, and the Workersd Compensation Insurance Rating Bureau. an industry-supported advisory group, this sprinv recommended a 23.
7 percentt increase in rates on new or renewefd policies that take effect starting next But at least one senior insurancde brokerage executive thinks selling a big chunkm of theState Fund’s assets is a “It’s kind of ridiculous,” said Dave De Wenter, executiv vice president and COO at Torrance-based Keenan & Associates, one of the state’se largest brokerages. “A billion dollar s is chump change compared to what theproblejm is.
” De Wenter said selling the assetsx could become a huge that might instigate a flood of lawsuits from policyholdersa arguing that its assets belong to plus problems involved with civil servicee rules for current State Fund employees, and possible damage to the organization’s financial stability, if profitable business is sold, while unprofitable, riskier accounts