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Directors:
Stephen P. Gennett,
Chair
Carolinas Associated
General Contractors
Dewey R. Preslar, Jr.,
Vice Chair
Food Lion, LLC
Robert Glaser,
Secretary/Treasurer
N.C.
Automobile Dealers Assn.
Sharon Brinson
Weyerhaeuser
Delphine
D. Goines
Duke University
Diane
Harrington
Progress Energy
Robert
Johnson
Century Furniture
Industries, Inc.
Tia
Schweikert
Lowe’s Companies, Inc.
Carla
J. Stevens
WakeMed
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Dear Member Self-Insurer:
I am pleased to report on a successful year for
the North Carolina Self-Insurance Security Association (“Security
Association”). On behalf of the Board
of Directors, we want to thank all of the member self-insurers for your
outstanding commitment, interest and participation in the transition to the
Association Aggregate Security System (“AASS”).
Transition to the Aggregate Security System
In October 2006, North Carolina Commissioner
of Insurance Jim Long approved the implementation of the AASS, formerly known
as the Collateral Replacement Program.
As you are aware, the AASS replaced the prior system of individual
security deposits with the purchase of aggregate security for the workers’
compensation liabilities of all member self-insurers. Each member self-insurer now pays a portion
of the cost of the aggregate security based on its credit rating and its
pro-rata share of the aggregate workers’ compensation liabilities.
Participation in the AASS was mandatory for all eligible self-insurers.
On December 1, 2006, the Security Association
successfully launched the initial AASS that now covers 139 member
self-insurers with approximately $510 million of aggregate collateral. Each
member self-insurer was required by statute to cover 100% of their
outstanding liabilities. Each member
self-insurer paid their pro-rata share of the AASS based on that
calculation. All member self-insurers
participating in the AASS paid their respective assessments in a timely
manner.
Four member self-insurers were ineligible to
participate in the AASS either because of inadequate credit ratings or
because of filing a petition in bankruptcy.
[For a complete discussion of the 2006-2007 AASS please visit the
Security Association website at www.ncsisa.org.]
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In early 2007,
as contemplated by the Implementation Plan, the North Carolina Department of
Insurance released the individual security previously posted by member
self-insurers that participated in the AASS.
The Security Association continues to evaluate the aggregate portfolio
as part of its due diligence and management of the Security Fund. No additional assessments of member
self-insurers were needed in 2006.
The
Security Association has also worked with many member self-insurers to
identify their respective self-insured subsidiaries to the North Carolina
Department of Insurance and provided parental guarantees for each subsidiary
with North Carolina employees.
The
2007-2008 AASS will close on December 1, 2007. Notices for the 2007-2008 AASS assessment
will be provided to all member self-insurers in October 2007.
Member Insolvencies
During
2006, only two member self-insurers, Dana Corporation and Delta Woodside
Industries, Inc. filed for bankruptcy protection. However, the Security Association was involved
in the ongoing bankruptcy proceedings of Collins & Aikman Corporation and
Interstate Brands Corporation. During 2006, claims from these insolvencies
were not transferred to the Security Association. Nevertheless, the Security
Association continues to work in the bankruptcy proceedings of both former
member self-insurers because it is anticipated that certain claims may be
transferred in 2007.
The
Security Association has also been actively involved in the activities of
certain self-insurance funds including American Yarn Spinners, which was
liquidated by the North Carolina Department of Insurance in 2005. During the course of the year, the Security
Association addressed claims transferred from former member self-insurers,
including but not necessarily limited to: American Yarn Spinners
Self-Insurance Fund, Burlington Industries, Inc., Dominion Yarn Corporation,
Pillowtex, Inc., Pie Nationwide, Preston Trucking Company, Inc., SCT Yarns,
Vintage Enterprises Inc., and WestPoint Stevens, Inc. A complete list of member self-insurer
insolvencies with active claims is detailed on the Security Association
website.
Attached
is a summary of the Security Association audited financial statements for the
years 1999-2006. Please note that the
Security Association financial statements are now stated on an accrual basis
for 2005 and 2006 and its liabilities for those years are based on an
actuarial report that includes incurred but not reported (“IBNR”) liabilities
for insolvencies that have resulted in claims against the Security
Association. The Security Association
has endeavored to aggressively pursue recoveries from insolvent member
self-insurers as well as oversee investments subject to the approval of the
State Treasurer. Accordingly, Security
Association assets increased at the end of 2006. A copy of the Security Association 2006
audited financial statements are available upon request.
Board of Directors
Pursuant
to the Plan of Operation, the Security Association will expand its current
Board of Directors from nine to eleven members. Board member, Dewey R. Preslar of Food Lion
is Chairman of the Nominating Committee that is reviewing candidates for
Board positions. If you are interested
in serving or want to recommend a candidate for the Board of Directors,
please contact Mr. Preslar on or before June 1, 2007 at:
Food Lion, LLC
P.O. Box 1330
Salisbury, NC
28145-1330
drpreslar@foodlion.com
704-633-8250
Again, thank you for your continued support of the self-insurance
industry. As always, on behalf of the
Security Association Board of Directors, we welcome your insight and
participation.
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