BestWeek: While Investigations Continue, Calif. Tries to Rebuild Workers' Comp Fund.

OLDWICK, N.J. -- California officials are attempting to rebuild the management and operations of the state's workers' compensation fund even as criminal investigations and administrative reviews continue into alleged past mismanagement and questionable expenditures of hundreds of millions of dollars, according to a story in BestWeek U.S./Canada.

A 10 month audit of the State Compensation Insurance Fund shows an uncontrolled quasi-public corporation with more than $22 billion in assets that operated for years--perhaps decades--with little in the way of practical oversight or internal management controls. The audit had been ordered by the California Department of Insurance, which under state law regulates the fund.

Investigations into SCIF's operations began in 2006, and since then it has replaced two board members, several marketing executives, the general counsel to the board and the president. "Although State Fund has undergone transformative change, it is clear we must remain committed to this path," said Janet Frank, the new president hired to lead the battered San Francisco based company this summer, leaving her position as CNA Financial's executive vice president of North American field operations, in a statement. "We recognize there have been problems, but are pleased to have turned a significant corner on this difficult period as we move forward and continue to fulfill our important mission in California's insurance market." Frank said the audit report "will serve as a clear road map as we continue our work to bring efficiency, transparency and accountability to State Fund's operations."

Also, in BestWeek Europe:

Fears that a backlash from the subprime real estate crisis in the United States could affect art prices in London caught the attention of underwriters who must deal with a market known for volatility.

Also, in BestWeek U.S./Canada:

An A.M. Best survey of insurers with what it considers a meaningful exposure to mortgage-backed securities found that they have generally modest exposure to subprime investments that seem to be concentrated in the highest credit quality tranches.

And in both editions of BestWeek:

The Best's Global Insurance Composite Index finished the week of Dec. 13 up 3.09% from a year ago. The composite index reflects the performance of 173 insurance stocks. The week's top stocks were Gainsco, Hyundai Marine & Fire Insurance Co., Chaucer Holdings, Meritz Fire & Marine Insurance Co., and Principal Financial Group.

The bottom five stocks were Atlantic American Corp., XL Capital, Aioi Insurance Co., Nipponkoa Insurance Co., and Mitsui Sumitomo Insurance Co.

BestWeek is published by A.M. Best Co. for insurance professionals. To subscribe, please call A.M. Best's customer service department at [phone], ext. 5742, or e-mail your request to [e-mail].

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.