New York moved aggressively Friday to deal with the chronicproblem of failed group self-insured trusts, issuing $370 millionin bonds that will be used to assist businesses on the hook forfailed trusts fulfill their obligations to their injuredworkers.

The New York State Workers' Compensation Board (WCB) will usethe bond proceeds to purchase insurance policies that will pay theclaims of injured workers.

Ellen Melchionni, president of the New York InsuranceAssociation (NYIA), voiced strong support for the decision.

Problems for group self-insured trusts first surfaced when theeconomy started going downhill in 2008. Workers' compensation andstate officials have estimated the cost of dealing with the failedtrusts could be as high as $800 million.

Melchionni says NYIA has been advising lawmakers for years thatthe group self-insured trusts were underfunded and that this crisiscould not be avoided. She says the bond sale "is a last ditcheffort to solve the calamity of these quasi-regulatedtrusts. 

"These policyholders chose to buy into a system that was cheapand did not have the protection of the guaranty funds. Now they arepaying the price," Melchionni says.  

Under New York's plan included in the 2013 state budget, thebusinesses liable for the trusts will reimburse the WCB for thecost of these "assumption of liability policies" over 10 years, atlow interest rates.

Gov. Andrew Cuomo says that by the end of the year, the WCB willfinalize the insurance-policy purchase on behalf of the two largestdefaulted group trusts, the Healthcare Industry Trust of New Yorkand the Healthcare Providers Self Insurance Trust.

Cuomo says additional proceeds can purchase insurance policiesfor group trusts that refused to meet their claim obligations andwhose claims the WCB now administers. The Business Relief Act of2013, part of the new state budget, authorizes up to $900 millionin bonding capacity.

The bonds were issued through the Dormitory Authority of theState of New York, and received AAA credit rating from Moody's,Standard & Poor's and Fitch, according to a statement fromCuomo. The lead underwriters were Siebert Brandfort Shank andGoldman Sachs. The bonds are free of New York State and citytaxes.