Funding for Retained Workers ' Compensation Exposures

The self-insured workers' compensation market has grown dramatically over the past five years. An employer faces costs and benefits when evaluating the decision to retain or self-insure part of its workers' compensation. This paper outlines several methods that can be used to establish funding levels for an entity which retains its workers' compensation exposure. We have included a discussion of methods appropriate to establish the funding level when the potential self-insured maintains an adequate database. In addition, for an employer with more limited data, we present three alternative methods for estimating the required funding level. We also discuss: -Benefit and cost considerations involved in self-insuring; -Regulatory requirements associated with self-insuring; and -Funding level consideration. We believe that the concepts outlined in this paper can assist an entity in: Structuring a self-insurance program (or deciding whether to self-insure; and Funding for a self-insurance program. Finally, the paper may be helpful to the actuarial or risk management analyst confronted with these issues for the first time. Workers Compensation, Loss Development, IBNR