CALIFORNIA WORKERS’ COMPENSATION CARRIER GOES INTO RUN-OFF

Paula Insurance Co, the underwriting unit of California-based Paula Financial, has ceased writing workers’ compensation business, owing to adverse claims development for accident years 1997 to 1999. The company is taking a $37m charge against fourth-quarter 2001 earnings for an addition to prior-year reserves, thereby reducing its risk-based capital to below statutory requirements. Paula Financial will administer the run-off of the unit. Paula Insurance CEO Jeff Snider said that the group had been seeking new financing since the second half of last year, but found capital to be scarce and expensive due to the “reinsurance stability following September 11, uncertainty about the California environment ... the apparent ripple effect of Enron on actuarial conservatism” and the recent increase in workers’ compensation benefits in the state.