NV Group Closure Another Result of Economy, Competition

The Nevada Restaurant Self-Insured Group is winding down at the end of the year after deciding it is no longer financially practical to continue taking on risks, a product of the economy.

One of the oldest self-insured groups in Nevada, the decision will force more than 1,700 employers to find a new source for workers' compensation insurance, some who have been covered by the group since it was founded in 1995.

The move by the group, according to Joe Burgess, senior vice president of CHSI, which administered the group in Nevada, is to avoid the chaos that has followed groups in Oregon and California, which saw declining memberships and increasing risks, causing the groups to fail and seek legal redress for unpaid assessments.

The Nevada group's membership has declined from more than 4,500 members in 2005 to a little more than 1,700 in September 2011, reflective of the state's economy which is based almost exclusively on the hospitality and construction industries.

Bottom line, there is insufficient market upon which to spread the risk of those in the group - a basic tenet of insurance.

In addition, competition in Nevada's workers' compensation market is holding down premiums at the moment, with average premiums in 2010 of $2.13 per $100 of payroll, making self-insured groups less attractive to employers.

The closure of the group is likely a smart short term move, as this economy is such a bear that many who follow such things believe that it will be years before there is any meaningful recovery.

But word on the street is, at least anecdotally, that the regular market is hardening and rates have hit bottom and are trending upwards - at a time when payroll is down putting additional pressure on the market.

Self-insurance is always a give and take, the costs weighed against what the commercial market can provide and the relative freedom of management afforded in such programs. Smaller employers, those typically represented in self-insurance groups, are more sensitive to market shifts than larger employers because they don't have the resources to smooth out the ride.

Certainly shuttering while still operational is better than the alternative, as demonstrated by actions against group members in California and Oregon to recoup millions of dollars in unpaid assessments.

"They're going to take the existing book of claims and run them off, bringing the group to a close," Burgess told WorkCompCentral. "It's the difference between saying we're going to close because the market is not right or we're going to keep going until we have to file for bankruptcy."workers compensation, work comp, injured worker