Quarterly report pursuant to Section 13 or 15(d)

Workers' Compensation Claims

v3.8.0.1
Workers' Compensation Claims
3 Months Ended
Mar. 31, 2018
Text Block [Abstract]  
Workers' Compensation Claims

Note 3 – Workers’ Compensation Claims

The following table summarizes the aggregate workers’ compensation reserve activity (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Beginning balance

 

 

 

 

 

 

 

 

Workers' compensation claims liabilities

 

$

363,517

 

 

$

312,537

 

Add: claims expense accrual

 

 

 

 

 

 

 

 

Current period

 

 

39,052

 

 

 

35,275

 

Prior periods

 

 

(6

)

 

 

2,914

 

 

 

 

39,046

 

 

 

38,189

 

Less: claim payments related to

 

 

 

 

 

 

 

 

Current period

 

 

1,133

 

 

 

1,132

 

Prior periods

 

 

22,535

 

 

 

23,464

 

 

 

 

23,668

 

 

 

24,596

 

 

 

 

 

 

 

 

 

 

Add: Change in claims incurred in excess of retention limits

 

 

(21

)

 

 

103

 

 

 

 

 

 

 

 

 

 

Ending balance

 

 

 

 

 

 

 

 

Workers' compensation claims liabilities

 

$

378,874

 

 

$

326,233

 

Incurred but not reported (IBNR)

 

$

217,492

 

 

$

162,760

 

 

 

 

 

 

 

 

 

 

Ratio of IBNR to workers' compensation claims liabilities

 

 

57%

 

 

 

50%

 

The Company is a self-insured employer with respect to workers' compensation coverage for all of its employees (including employees co-employed through our client service agreements) working in Colorado, Maryland and Oregon, except as described below. In the state of Washington, state law allows only the Company's staffing services and internal management employees to be covered under the Company's self-insured workers' compensation program.

The Company obtains policies from Chubb Limited (“Chubb”) for all California-based clients along with clients in Delaware, Virginia, Pennsylvania, North Carolina, New Jersey, West Virginia, Idaho and the District of Columbia. The arrangement with Chubb, known as a fronted program, provides BBSI a licensed, admitted insurance carrier to issue policies on behalf of BBSI. The risk of loss up to the first $5.0 million per occurrence is retained by BBSI through a reinsurance agreement. Chubb assumes credit risk should BBSI be unable to satisfy its indemnification obligations.

As part of its fronted workers’ compensation insurance program with Chubb, the Company makes monthly payments into a trust account (“the Chubb trust account”) to be used for the payment of future claims. The balance in the Chubb trust account was $399.7 million and $380.6 million at March 31, 2018 and December 31, 2017, respectively. The Chubb trust account balances are included as a component of the current and long-term restricted cash and investments on the Company’s condensed consolidated balance sheets.

As of March 31, 2018, the Company recorded an asset of $12.1 million related to a payment remitted to Chubb in March 2018 but not deposited into the Chubb trust account until April 2018. This amount is included in other assets in the condensed consolidated balance sheets.

The states of California, Maryland, Oregon, Washington, Colorado and Delaware required us to maintain specified investment balances or other financial instruments totaling $84.7 million and $96.8 million at March 31, 2018 and December 31, 2017, respectively, to cover potential workers’ compensation claims losses related to the Company’s current and former status as a self-insured employer. At March 31, 2018, the Company provided surety bonds and standby letters of credit totaling $84.7 million, including a California requirement of $70.2 million.

The Company provided a total of $378.9 million and $363.5 million at March 31, 2018 and December 31, 2017, respectively, as an estimated future liability for unsettled workers' compensation claims liabilities. Of this amount, $2.9 million and $3.0 million at March 31, 2018 and December 31, 2017, respectively, represent case reserves incurred in excess of the Company’s retention. The accrual for costs incurred in excess of retention limits is offset by a receivable from excess insurance carriers of $2.9 million and $3.0 million at March 31, 2018 and December 31, 2017, respectively, included in other assets on the condensed consolidated balance sheets.