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MARINA DEL REY, Calif. -- It's virtually a buyers' market for workers compensation these days.

Several new guaranteed-cost products are making it possible for employers to walk away from past workers comp liabilities. And small employers in Ohio are finding strength in numbers by banding together to self-insure their workers comp insurance as a single group.

"There are a number of interesting products that have evolved not only in recent years, but in recent months," said Jeff Pettegrew, vp-insurance and risk management for Walnut Creek, Calif.-based Western Staff Services. Mr. Pettegrew spoke to a group of risk managers attending the Business Insurance Workers Compensation Conference in Marina del Rey, Calif.

Indeed, "guaranteed cost now is very available with limited downside risk," agreed Robert B. Hill, president of Professional Underwriters Corp., a program manager based in Wayne, Pa.

And several insurers, such as Travelers Corp., have introduced hybrid guaranteed-cost products that can apply to virtually every situation.

Employers that have been doing a good job of tracking their workers compensation experience and would like to stabilize their future cash flows should consider today's new guaranteed-cost products, Mr. Hill advised. "If you want to control your losses, a standard carrier is the best selection," he said.

Another popular option for getting out from under past losses is the portfolio risk transfer, which allows an employer to transfer its workers comp risk to an insurer for a premium.

"Up to 1998, we saw a total of three portfolio risk transfers," he said. "In the last 60 days, we've seen six. There's a lot more quoting activity as people look at these guaranteed-cost mechanisms."

Travelers recently introduced products enabling employers to close past workers comp liabilities while at the same time getting a better handle on current and future claim costs.

For example, Travelers' new Loss Development Buyout Option gives employers the option of converting their paid-loss retro plans into guaranteed-cost plans, explained William C. Malugen, regional vp in Walnut Creek, Calif., for Travelers Property Casualty. The option buyout price, based on an actuarial and financial analysis of reserves, is determined on the sale date, he said.

If projected costs are greater than the amended option price, an employer can exercise the option and close the year on its books. Otherwise, the employer is responsible for paying the claims as it has in the past, Mr. Malugen explained.

Another new Travelers product, called the TravShare Work Comp Program, is a quota-share arrangement that provides excess-of-loss coverage for workers comp similar to the way medical stop-loss coverage kicks in for health plans.

Travelers also has introduced a Collateral Choice plan, which provides an alternative to the traditional collateral options. Instead of requiring collateral in the form of money markets, letters of credit or surety bonds, the employer's funds are held in trust in Smith Barney mutual funds.

While the program provides a more flexible way to collateralize workers comp obligations, the client assumes market risk. As a result, the program requires employers to put up 110% of the actual amount needed to secure their obligations, according to Mr. Malugen.

However, if the market goes up, as it has for the past several years, the employer can make money on its workers comp collateral, he pointed out.

Another alternative approach to workers comp risk financing has been in play in Ohio since July 1991.

Group rating of workers comp insurance has produced "tremendous savings" for small employers in that state, according to Darin R. Haines, manager of the Council of Smaller Enterprises. "In 1996, group rating saved those 80,000 companies over $175 million," he said.

Before group rating, small employers' only other option was to purchase coverage from the Ohio Bureau of Workers Compensation, considered the largest monopolistic state fund in the country.

"If we look at the demographics of Ohio's employers, you'll find that roughly 70% of all Ohio employers are what we would call 'base rated' in Ohio. Basically, what that means is that those employers are statistically too small to be rated on their own experience," Mr. Haines explained.

Employers that participate in group rating must belong to bureau-approved sponsoring organizations, such as the Council of Smaller Enterprises, he said. Once the bureau approves the formation of a group, it rates the experience of its members collectively "as if the group were one large company," Mr. Haines explained. "That's how we're able to achieve reduced rates."

Today, approximately 80,000 employers are receiving coverage via 360 sponsored groups, "so, really, almost a third of Ohio employers are covered through a group plan," Mr. Haines estimated.

Mr. Pettegrew moderated the discussion.