At the time of the preparation of this chapter, WCF is analyzing the results of its second employee survey (see 2013 All-Employee ERM Survey). The questions in the survey were reviewed with both the IRC and the Board Risk Oversight Committee prior to the survey, and again, about half of the company's 300+ employees have responded. WCF is trying to ascertain whether it is truly developing a risk-sensitive culture and whether it has any barriers to the free expression of concerns and ideas. This desire for transparency and openness has been clearly and publicly articulated by both the president and the chairman. Analysis of the survey results, when completed, will be presented to the board.

The question of how much is enough is one WCF continues to grapple with. For better or worse, it is one in which both its regulator and its rating agency are giving specific direction as well. In the past couple of years A.M. Best has become increasingly clear regarding its expectations of the companies it is rating. Speaking at an industry conference in the spring of 2012, Group Vice President Ed Easop outlined an approach of generally matching ERM expectations to the general risk profile of the company. Where a carrier's ERM risk capabilities did not measure up to its risk profile, its rating might be notched down or capital requirements might be raised. If a carrier's capabilities matched or exceeded its risk profile, more favorable ratings treatment and lower capital requirements would be likely.

More recently A.M. Best addressed this in greater detail at its annual conference in March 2013. A.M. Best indicated that although the property-casualty industry is making progress in developing ERM programs, information gleaned from its supplemental risk questionnaires leaves little doubt that the industry has a long way to go. The rating agency also spelled out in great detail the underlying characteristics of its ERM rating levels of superior, strong, good, and weak in 17 key risk management areas. WCF will have its annual rating discussion meeting with A.M. Best in late fall 2013. It will be interesting to receive feedback in those meetings regarding the rating agency's perception of the WCF risk profile and the adequacy of WCF's efforts to date.

Since 2013, the state regulator, the Utah Department of Insurance, has not engaged WCF on this subject, but that is expected to change. As a member of the National Association of Insurance Commissioners (NAIC), it is aware of that organization's adoption in September 2012 of the Risk Management and Own Risk and Solvency Assessment (ORSA) model legislation. This model law is effective for adoption by state legislatures in 2015. Among other things, the Act requires that "An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on its material and relevant risks. This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer."[1] At this time, WCF meets the exemption requirement due to premium volume written, but the Act clearly sets out standards of best practice that should be considered.

Management has committed to, and the board expects, continued development of the ERM program and culture. This must be done to a level that matches WCF's risks and ensures it will always be able to discharge the long-term responsibilities it has to policyholders and injured workers. The depth and complexity of the ERM program will be determined through discussion and consultation between management and the board. WCF's mission is excellence.


Dan Hair is the Chief Risk Officer (CRO) at Workers Compensation Fund, located in Utah. He joined WCF in 2005 after a 25-year career with Zenith Insurance Company. As CRO, Dan is responsible for the enterprise risk management efforts of WCF and reports to the president and CEO. He works directly with the board of directors and the Board Risk Oversight Committee. Dan was educated at UCLA and USC, has an insurance operations and safety engineering background, and has taught and published in the areas of risk and risk management for years.

  • [1] National Association of Insurance Commissioners. 2012. "Risk Management and Own Risk and Solvency Assessment Model Act."
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