LEXINGTNO (AP)
CORBIN — LEXINGTON (AP) — Kentucky’s worker’s compensation self-insurance group is running a $154 million surplus and is facing pressure to refund some of the money to policy holders.
The Lexington Herald-Leader reports that Gov. Steve Beshear sent a letter last week to the quasi-public Kentucky Employers’ Mutual Insurance company, urging it to disperse some of its surplus to struggling small businesses.
Then Senate Majority Floor Leader Robert Stivers, R-Manchester, filed legislation that would force KEMI to do the same.
“I felt it appropriate that they return some of those monies back to the people from whom they have collected them,” Stivers said. “I think they should be doing well financially, but they should not be doing so well financially that they have this type of asset.”
The agency recently reported to the Department of Insurance that it has a $154 million surplus along with a $357 million cushion required to pay current and future claims. KEMI also has an investment portfolio worth about $600 million, most of which is invested in bonds. The company takes in roughly $125 million in premiums a year.
Both Stivers and Beshear have said small businesses struggling in a bad economy would benefit greatly from dividends or a premium holiday from KEMI.
“Those individuals in these times are the ones who need a break right now,” Stivers said. “If we can get them a break on their insurance, I’m going to try to do it.”
State Rep. Robert Damron, D-Nicholasville, said House leadership would need to study Stivers’ bill.
“KEMI is a little bit independent,” he said. “For the legislature to meddle in that is questionable.”
Kentucky’s governor appoints the group’s governing board, which includes nonvoting representatives from the attorney general’s and state auditor’s offices. Other members include the secretaries of the Labor, Personnel and Finance cabinets.
Beshear has appointed three of the seven at-large members on the agency’s board, but said in a statement he felt KEMI has an independent board. He said his Feb. 25 letter to the board was the “appropriate vehicle for making this request.”
Stivers’ proposal, Senate Bill 214, would force KEMI to distribute 40 percent of its surplus back to any companies that have held policies with the group between 1997 and 2009.
The money would have to be distributed by December, and similar annual payouts would be required every year they are possible.
KEMI officials say a dividend has been considered for the past nine months, but it’s tough to gauge how much could be given back without hurting the agency’s financial standing or financial ratings.
“I don’t understand the timing of this,” said David Snowden, a Louisville businessman who has chaired the KEMI board of directors for 11 of its 15 years. “It’s almost like there has to be some kind of problem because we’re in good financial shape ... you don’t shoot from the hip on things like this.”
The Kentucky General Assembly created KEMI in 1994 after the market for workers’ compensation had collapsed, and small businesses could not find workers’ comp insurance.
KEMI got started with a $7 million loan from the state, which was repaid in six months.
KEMI has since signed up about 22,000 policyholders, many of them small, high-risk companies that had nowhere else to go. But the agency also has attracted large, low-risk companies that help the financial bottom line.
