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GARDINER, Maine -- Maine insurance regulators and 33 insurers reached a settlement recently over a 1995 Maine law that sought to pay off the state's large residual workers compensation market deficit through a complex series of assessments, primarily on insurers and employers.

The Maine Workers' Compensation Residual Market Deficit Resolution and Recovery Act required that all property/casualty insurers licensed by Maine contribute $65 million toward initial funding of the state's residual market pool, regardless of whether they wrote any workers comp coverage during the deficit years (BI, Oct. 9, 1995).

The assessments were designed to pay off the deficit, estimated at $220 million in 1995, which arose when there was no active workers comp market in Maine, due partly to inadequate insurance rates.

Insurers, led by the Alliance of American Insurers, challenged the assessments in 1995, including $6.5 million in assessments on "minor carriers."

Under the terms of the settlement, the state's residual market pool expects to make staggered payments beginning in 2000 of up to $8.5 million in proportional refunds to all insurers that have paid pool assessments. In addition, 14 major insurers that helped broker the settlement will initially assign their payouts to compensate minor insurers first.

The 1995 act "was the last piece of the puzzle that stabilized the workers compensation market in Maine," said S. Catherine Longley, commissioner of Maine's Department of Professional and Financial Regulation in Gardiner, Maine. "We are pleased that any cloud that has been hanging over this law is eliminated," she said.

Rodger Lawson, president of the Downers Grove, Ill.-based Alliance, said the Alliance is pleased to have reached an agreement that "injects greater fairness into the direct assessment scheme on insurers."