FRANKFORT, Ky. (March 2, 2010) – The Governor’s office announced in a statement released earlier today that Kentucky Gov. Steve Beshear is asking the state’s largest workers’ compensation insurer to consider returning some of its $147 million surplus as a premium reduction or dividend to the small businesses it insures.
Kentucky Employers’ Mutual Insurance (KEMI) was created by the General Assembly as part of the workers’ compensation overhaul in 1994 and provides workers’ compensation insurance to more than 20,000 policyholders across the state. In a letter sent to KEMI last week, Gov. Beshear applauded the group’s success, and reasoned that the resulting surplus should be shared among the small businesses that purchase policies from the insurer.
“While most businesses in our state have struggled over these last few years, it appears that KEMI is faring very well financially,” Gov. Beshear wrote. “I think it’s appropriate and prudent for your organization to consider providing some relief to our struggling Kentucky businesses in these unprecedented fiscal times. Until we find ways to create opportunities for businesses to grow and put people back to work, we will not realize the benefits of an economic recovery.”
Gov. Beshear’s letter outlines the state statute that authorizes the board of KEMI to declare a dividend and distribute it in the form of premium discounts, dividends, or a combination of both to its policyholders.
Gov. Beshear did not recommend a target amount to be distributed, and recognized the need for KEMI to keep a certain amount of money in reserve to maintain competitive business practices. However, the Governor wrote, “it appears that the current level of surplus is clearly in significant excess of what is necessary to maintain that standard.”
The Governor asked that KEMI immediately consult with the Kentucky Department of Insurance to review its surplus levels to determine an appropriate level of dividends for policyholders.
The Lexington Herald-Leader reports that KEMI President and CEO Roger Fries said KEMI has been in discussions since last fall about taking the very action Beshear proposes. Fries indicated the KEMI board could take action by this summer or early fall.