Here is a copy of a follow up email to a question session put on by the Oklahoma Insurance Commissioner. So far, I have not received any answers except to say these are all good questions. Email follows:
I attended the workshops and other things that have been presented on the new law(s). I will throw out a few things that I think will be important for rule making. The rules and how the rules are applied will have a huge impact on directing our clients into the programs. You are charged with overseeing the financial side, which is by far the largest influencer for insurance and risk management transactions. Here are a few questions I wrote down during the meeting. I asked a few there and was asked to follow up on them, so here we go:
• What type of financial statements will be accepted? These break down into compilation, review, and Audit. Most larger companies already do audits but smaller companies may not always do this. With a compilation or review, there is much less assurance from the CPA as to the accuracy of the information presented.
- Some policies I am told are pay on behalf and some are reimbursement policies. Will this affect the financial requirements for the companies?
- Will OID regulate forms or rates for the “Oklahoma Option” policies?
- What constitutes a “Captive”? There are group captives along with single parent captives. There are also domestic, foreign, and alien. What will be looked at here?
- Will there be an AM Best rating requirement for the carriers?
- Will you ask for loss information to determine and security or insurance requirements?
- Bonds are almost never used for security anymore because of the risk to the bonding company. They usually require security also. Will you be using the federal treasury listing requirements to make sure a “no name” bonding carrier does not supply a bond?
- How will deductibles/retentions offset any security requirements or financial statement requirements?
To me there will most decidedly be a loophole created somewhere. As a first draft, this is almost unavoidable. That loophole will most likely be where you see the most activity. For instance if you go self-insured and have to put up a large amount of capital in security, that might be less attractive. If you allowed that same company to buy a reimbursement policy that was less than the letter of credit and then required no security, that might push them into that market. I was told at the State Chamber meeting that if you bought a reimbursement policy, you would not have to put up any security. If this is the case, this would seem to be the first loophole. Without qualifying what makes up that policy, limits, deductible, etc, I don’t see how this broad statement could be accurate. Although I am for a free market system, if this is set up wrong, there could be injured workers and no money to pay their medical bills. I look forward to having a dialog with your department moving forward. Thanks for the opportunity to weigh in on the new market early in the process.