Credit crisis to blame, carrier says; latest of three groups impacted
CALIFORNIA – A workers’ compensation self-insurance pool of vintners has become the latest victim of the credit crisis.
The Vintners and Independent Producers Self-Insurance Program, which includes Seghesio, Schug and Rombauer among 27 other wine members, submitted a request to close the group early this month.
“It’s a shame because it was set up to be a great long-term solution,” said Peter Seghesio, a board member for the group and chief executive officer and winegrower for Seghesio Wineries Inc.
“Early on the savings were tremendous because rates were just crazy, but then the market caught us in the back half of the program and savings were just not as great.”
It is the third group managed by administrator Compensation Risk Managers of California to ask for a closure in the last two months, according to the state agency that regulates the groups.
“Self insurance is fairly new anyhow, and it’s difficult to tell if it’s just the vintners or the industry in general,” said Jim Ware, an official with the Department of Industrial Relations Office of Self Insurance.
“But we’ve never had anyone close two groups in one month.”
He said California requires groups to finance claims at a higher than normal actuarial projection, which makes funding the programs difficult compared with other states. A spokesman for the administrator, which is a division of umbrella CRM Holdings, said the group chose to discontinue operations after failure to receive bond financing.
“The primary reason was they could not secure an uncollateralized surety bond, with the credit market how it is right now, and without one they cannot grow,” said spokesman Peter Barden.
“It made sense to shut it down while it was still solvent.”
The board for the vintners group, created just four years ago, said it officially closed the program Dec. 1 but does not expect to receive state approval until Feb. 1 or later.
A 113-member auto dealer group and another plastics manufacturers program, both administered by CRM, also asked the state to close recently.
Last year, CRM was forced to stop administering self insurance in New York after it was accused of under-reserving for claims.
Before a group can officially dissolve, the state must audit all claims and ensure reserves can pay them. All members are also required to prove they have coverage from another carrier.
CRM manages three other self-insurance groups in California, including those for health care, building contractors and bankers, but the company said it does not plan to close them at this time.