Looking out for business ... A report from the Alaska State Chamber of Commerce--the Voice of Alaska Business.

• Position: Alaska Insurance Guaranty Association

What will happen to Alaskan businesses that, in good faith, bought workers compensation insurance from a company that went out of business leaving $60 million in unpaid claims? The reality is, these businesses may end up paying for the claims even though they paid for the insurance.

Fremont Indemnity Company, which handled around 27% of Alaska's workers compensation insurance in 2001, was declared insolvent last July. While Fremont has not actively written policies for over two years, they still represent $60 million in outstanding claims of 500 injured workers from over 30 employers in Alaska. Fremont also handled claims for policies written by Industrial Indemnity Company of Alaska.

The Alaska Insurance Guaranty Association (AIGA) was formed by Alaska statute to, among other things, pay claims of insurance companies that become insolvent. AIGA's funds come from assessments based on a percentage of insurance premiums written in Alaska. However the magnitude of the Fremont insolvency far exceeds the resources of AIGA. As of November 2003, AIGA's assessment on workers compensation premiums generated approximately $4.2 million. The liquidator handling Fremont's case for the State of California has loaned AGIA $5 million, knowing that they will be repaid after Fremont's liquidation.

Obviously, AIGA's $9.2 million in assessments and loan won't cover $60 mill ion in claims, and neither will any other insurance. Injured workers aren't working and need to pay their bills; their employers have already paid for workers comp insurance and may be faced with paying claims on top of that. This could be devastating, not only to workers and employers in this situation, but for all businesses in Alaska.

Workers compensation insurance laws in Alaska need to be changed. When you take into consideration the 21.2 percent (on average)...