NU Online News Service, May 24, 2:22 p.m.EDT

Maryland state officials will no longer be able to dip into thestate's workers' compensation fund beginning next year afterlegislation was signed into law changing the status of the fund toa non-profit corporation.

Beginning Oct 1, 2013, the Injured Workers' Insurance Fund willchange its name to Chesapeake Employers' Insurance Co. and become anon-profit corporation providing workers' comp insurance toMaryland employees as it has in the past, the IWIF says in astatement.

Gov. Martin O'Malley signed the legislation creating thenew company on Tuesday.

"This action will position us for continued success in servingthe workers' compensation insurance needs of Maryland employers,"says Thomas Phelan, president of IWIF in a statement. "Thelegislation will protect IWIF's surplus and will allow us to remainfinancially strong. In addition, there will be no change for ourpolicyholders and the insurance agents with whom we partner."

Dennis Carroll, IWIF executive vice president and generalcounsel, says the change became necessary after the state'sattorney general determined that the state had the right to accessthe insurer's surplus fund because IWIF is a state entity.

In 2010, the state transferred $4 million out of the insurer'ssurplus and last year, the state took $50 million to help close itsbudget gap.

As the state's insurer of last resort, the fund neededprotection, says Carroll, and only by becoming an independentcorporation could its surplus be protected.

He says the company will remain limited to workers' comp with noplans to venture into other markets.

"We're satisfied to remain as the comp insurer of last resort,"says Carroll.

The IWIF has current assets totaling $1.7 billion. Carroll saysthe insurer remains in strong financial health with a $335 millionsurplus, adding that the $50 million transfer has not impaired thecarrier.

Aside from the name change, the IWIF's existing nine-memberboard will become the directors of Chesapeake. The governor willcontinue to make appointments to the Chesapeake board.

The IWIF is the largest provider of workers' comp insurance inthe state with more than 23 percent of the market, according tofigures from SNL. The second largest provider of workers' comp inthe state is Hartford Financial with more than 14 percent.

The IWIF was created in 1914 as the Maryland State Accident Fundand has operated solely from premium and investment income, notusing state funds.