Applied Underwriters Petitions NJ Regulators for Confirmation of Captive Reinsurance and its Use in its Widely Accepted Workers’ Compensation Format

Petition Would Protect NJ Businesses and Employees
Action Holds Potential Implications for Reinsurers, Captives Nationwide

New York, N.Y.—A Petition filed March 4th against New Jersey’s Department of Banking and Insurance seeks confirmation from State regulators that the State’s existing insurance laws do enable captive insurance formats to continue to function as established, for the benefit of businesses and their employees, notably a program for Workers’ Compensation insurance offered by Applied Underwriters, one of the petitioners.

The action holds that regulators have misinterpreted the longstanding, essential role that reinsurance plays in a widely used workers’ compensation insuring format and has attempted to restrict the program in direct violation of section 531 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which precludes state insurance regulators from rewriting the terms of an out-of-state reinsurance contract. The Petition requests confirmation that Applied’s program is a valid captive reinsurance arrangement under New Jersey law and should be affirmed at a time when the format’s desirability among businesses is growing as a preferred risk transfer vehicle among Applied’s many New Jersey based clients and their employees. The Petition protects the clients of independent agents who have implemented the Applied programs as a sound, wise choice, an alternative to “off the shelf” policies in which the buyer has little influence on costs and little benefit from favorable outcomes. 

Applied’s Petition sets forth the generally accepted definitions and standard, permitted uses of reinsurance as employed in its format and underlines the potential damage that the undue tampering or undoing of the enabling regulations would visit upon New Jersey businesses and their employees, according to Shand Stephens, partner, DLA Piper, LLC, attorney for Applied. Mr. Stephens noted that Applied, a national A+ rated Workers’ Compensation insurance provider, offers policies to businesses of all sizes that reward business owners by providing participation in the favorable financial and pricing outcomes resulting from their observation of best practices in workplace safety.

According to Mr. Jeffrey Silver, General Counsel for Applied based in its Omaha Operations Center, Applied’s basic captive format, which dates back conceptually to the 1950’s and is typical of the thousands of captives in operation successfully in every jurisdiction including New Jersey, has received increasingly wide acceptance among business leaders across the nation who prefer to take greater responsibility for their workplace safety standards and operations and thus opt to self-fund the primary portion of their costs up to a relatively high limit, where reinsurance is then invoked in cases of extreme loss. Mr. Silver stated: “This mechanism is highly prized in New Jersey and across the country, since it gives business owners a sound alternative to passive insurance structures and it stabilizes costs. The success of our programs underscores the effectiveness of loss control and the sought-after approach we have adopted in caring for injured workers, from our first-of-its-kind in house pharmacy to our in-house doctors, nurses and client care professionals who work diligently for our insured clients and their injured staff members”.

“We believe,” he concluded, “that business owners and managers should be enabled to insure their enterprises in this manner and we intend to fight to continue to optimize workplace safety practices in New Jersey and in the other states in which we provide coverage. Our Petition advances that cause.”

Applied Underwriters®, founded in 1994, designs and provides business services and insurance solutions to meet the real world needs of every size business nationwide. Rated ‘A+’ (Superior) by A.M. Best, Applied offers optimal coverage through independent agents and brokers across America.  Applied is recommended consistently as the preferred workers’ compensation insurance provider to best manage businesses’ risks through innovative and unique products, providing sound alternatives in an often flatly redundant market. Applied enjoys one of the highest customer retention rates in the industry­—over 90%—and is known for its promotion and realization of best practices in worker safety.

Through its EquityComp® product, Applied continues to offer larger insureds the potential to realize significant savings over other market competitors. Applied is a key resource in the large risk market segment offering both EquityComp® and JumboGC® coverage in all states and all areas, with multi-state risks seamlessly insured.

For more information on Applied visit: www.auw.com.