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At the National Council on Compensation Insurance’s (NCCI) 2010 Annual Issues Symposium, NCCI CEO Steve Klingel reported that deteriorating underwriting results, combined with a record low interest rate environment, uncertainty about the economic recovery, and the long term impact of the new federal health-care law put the workers’ compensation insurance industry in a precarious position. All of these concerns rightly shine a spotlight on the workers’ compensation residual markets. Fortunately, these markets have operated well in recent years.

One of NCCI’s core functions is to act as the administrator of the state workers’ compensation residual market insurance plans and the reinsurance pools. The plans are the basic instrument through which eligible employers who would otherwise be unable to obtain necessary insurance coverage can secure workers’ compensation insurance. The plans include the state-approved rules that govern the assignment, administration, eligibility and policy issuance requirements. NCCI administers plans on behalf of insurance regulatory authorities in 21 jurisdictions.

While the plans provide the mechanism to distribute employers equitably among participating insurance carriers, the pools are a series of financial reinsurance agreements among workers’ compensation insurance companies to share in the operating results of the state insurance plans. The largest of these pooling arrangements is the National Workers’ Compensation Reinsurance pooling mechanism.

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