A draft report to the Stakeholders' Task Force about the potential restructuring of Pinnacol Assurance includes a recommendation from Gov. John Hickenlooper to move the proposal forward by seeking policyholder approval and beginning legislative discussions.
The restructuring proposal, which was given by Pinnacol to the governor on Nov. 3, would establish a more competitive "level playing field" for workers' compensation insurance in Colorado and provide substantial resources for statewide economic development, education and injured worker programs.
"On balance, and after extensive review by the technical team and input from the Task Force, the Governor believes that the benefits of the proposed restructuring more than outweigh the risks for both policyholders and the public," the draft report to the Task Force says. "In addition, because the restructuring is subject to approval by the legislature and Pinnacol's policyholders, the Governor is comfortable recommending that the restructuring proceed into the legislative process."
The Task Force was convened by the governor to offer advice on Pinnacol's restructuring proposal. The full Task Force met three times to discuss the risks and benefits to the various stakeholders of Pinnacol's proposed restructuring, and individual Task Force met with legal and financial advisors retained to evaluate the proposal.
The Task Force will meet again on Tuesday morning.
"The Task Force has played a very important role in helping the Governor's Office identify and shape consideration of a wide array of issues related to Pinnacol's proposal," the draft report says. "While we expect that individual Task Force members will have their own valuable perspective on the Governor's recommendations, the Governor deeply appreciates the "sounding board' role of the Task Force to date."
The governor's recommendation includes changes from the proposal he received from Pinnacol in November. The key differences are:
* Par amount of preferred security is increased from $340 million to $350 million;
* Pinnacol provides an additional $22 million for an Injured Workers Fund;
* Pinnacol pays a $13.6 million dividend to the Futures Fund annually in advance rather than quarterly in arrears (this effectively allows the Futures Fund to begin operating a year early);
* Pinnacol provides a meaningful "floor" to the value of the security;
* Pinnacol pays its pro-rata share of the State Guaranty Association liability ($5.8 million) in cash upfront;
* Pinnacol's executive equity compensation is limited to terms approved by the Governor and Division of Insurance; and
* Pinnacol remains a non-exclusive provider of workers' compensation insurance of last resort and pays premium tax on such "last resort" business.
The proposed restructuring is contingent upon several factors, including adoption of enabling legislation from the Colorado General Assembly, approval by Pinnacol's Board of Directors and approval by Pinnacol's policyholders.