Arch Insurance will front a new insurance captive announced by Samuel Hale, a California employer carve-out organization (ECO) to insure its $50 million workers’ compensation risk. The captive will launch on July 1.
“We've been working toward this for the last six years,” said Michael A. DiManno, CEO of Samuel Hale. “The captive arrangement will enable us to maximize the advantages of our carve-out agreement, which drives the economics of our business.”
California has a very high rate of litigation over workers’ compensation claims relative to the rest of the country. According to the Workers’ Compensation Insurance Rating Bureau of California, the state spends as much money on the frictional costs associated with litigation as it does on wage reimbursement to injured workers – making it one of the most expensive states in the country for workers’ compensation premiums.
Carve-outs were created by the state’s Department of Workers’ Compensation to allow approved entities to handle their claim disputes through alternative dispute resolution (ADR) instead of the court system. ADR claims get settled quickly and employees get their money faster, while insurers can avoid the costs of the legal system, Samuel Hale said.
“This captive gives us a 10-year horizon on workers’ comp, which creates long-term stability for our customers in a very shaky financial climate,” DiManno said. “We now have maximum control over our program and can deploy the best cost-containment services based on our specific needs.”