BULLETIN: FLASH REPORT
WORKERS' COMP EXECUTIVE
Thursday, Sept. 12, 2002
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FLASH REPORT: STATE FUND COMPLETES LOSS PORTFOLIO TRANSFER

State Compensation Insurance Fund of California has completed a
$1.4 billion excess of loss reinsurance agreement that will allow
the company to bolster its surplus, something state regulators
have demanded.

The transaction reinsures all losses State Fund incurred between
1980 and 1999 up to a $1.45 billion limit.

The deal will allow State Fund to transfer a portion of its loss
Portfolio to a reinsurer, XL Financial Solutions, which is
partnering with another reinsurance company, ACE Bermuda Insurance
Ltd. The arrangement should allow State Fund to free up about $400
million, a large portion of which would be added to surplus.

The California Department of Insurance has been concerned about
State Fund's surplus, especially after its risk-based capital
dipped below the "Company Action Level" as defined by state
insurance code. Falling below that level requires an action
plan to remedy the problem, and State Fund's loss portfolio
transfer is part of this plan.

State Fund referred calls to Aon Re Worldwide, the broker, but
Aon representatives were not immediately available for comment.

last updated: September 17, 2002

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