Workers Comp ClaimPossible changes to a New York special fund could leave workers’ compensation insurers under-reserved, an industry executive has warned.

The concern involves an unusual feature of the Empire State’s workers’ compensation law known as the reopened case fund, according to Julia Stenberg, an assistant vice president and actuary at CNA insurance companies. Sternberg said a proposal to close the fund could create a reserve deficiency among New York workers’ compensation writers.

Stenberg offered her comment at the Casualty Actuarial Society’s ratemaking and product management seminar held recently in Huntington Beach, Calif.

The issue emerged as part of reforms to the state budget. The best-known part of the proposal would create bonds to pay off losses from failed self-insured compensation plans. But Stenberg said that attention should also be focused on the end of the reopened case fund.

In New York, cases that reopen three years after an insurer made what it thought was final payment (and seven years after the original accident) can be turned over to a reopened case fund, which is run by the New York Compensation Insurance Rating Board (NYCIRB). Employers pay an assessment that covers these claims.

Under the proposal, the fund, created in 1933, would close on Jan. 1, 2014. Insurers would remain responsible for any reopened claims.

The closing creates an actuarial issue, Stenberg said. Since these reopened claims were handled by NYCIRB, the losses aren’t included in an insurer’s claims experience.

To handle pricing, data collected by the NYCIRB will be available to rating bureaus, so rates can be properly adjusted. However, insurers won’t have that information, so their loss estimates will likely be understated. Stenberg estimated the deficiency to be between $1 billion and $2 billion.

“It’s something important to consider if [an insurer has] exposure there or your clients have exposure there,” Stenberg said.