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ACCIDENT FUND DIRECTOR RESUMES BID FOR PRIVATIZATION

 LANSING, Mich., July 21 /PRNewswire/ -- The executive director of the Accident Fund of Michigan yesterday began the second stage of the campaign to win legislative approval for the proposed privatization of the state-owned fund.
 E.L. Cox made his pitch to the House Committee on Business and Finance, where the Senate-passed enabling bills are pending. He told the committee that Gov. John Engler hired him in 1991 to prepare the then-troubled Accident Fund for privatization.
 The former insurance executive said he agreed to take the job because he believes that privatization of the Fund is in the best interest of the state and is sound public policy.
 The buyer would be required to create a Michigan-based insurance company and to retain the more than 400 civil service employees of the Fund for at least one year after the transfer of ownership to the buyer. The employees were brought into the civil service system in 1990 after the state took over the disputed ownership of the Fund after a 12-year legal battle.
 If the sale is successful the Accident Fund would be the nation's first state-owned workers' compensation fund to be transferred from government to private ownership.
 State officials have declined to reveal their estimate of the commercial value of the 81-year-old Fund, the largest provider of workers' compensation insurance in Michigan. They say that to do so would inhibit bids that otherwise might be higher than the estimate. Interested bidders were required to demonstrate their ability to perform at or above the minimum bid level of $100 million. Presumably the final sale price will be driven appreciably higher in the bidding. A number of major insurance companies already have indicated they will bid if the Fund is put on the market.
 Under the terms of the enabling legislation the proceeds of the sale will go into the state's "rainy day" budget stabilization fund. The 17-year-old fund currently is at a near-record low with only $61 million on deposit. At its peak in 1989 it held $419 million.
 In addition to that budget boost, the state will get a new, tax- paying, job-providing domestic insurance company at work in the economy. Cox said the time is right for the sale because the Fund is back in good financial form following heavy losses not long after its takeover by the state. He also said that the rich and fiercely competitive workers' compensation insurance market in Michigan is ripe for ambitious new entries and will be even more attractive when the state is no longer among the competitors.
 Cox questioned why the state-owned fund is still in the market, competing for business that should be going to private sector competitors.
 He noted that before the state takeover in 1989 the Fund operated as a competitive business free of state influence. "The circumstances creating the losses of 1990 and 1991 could reoccur," he said. "Selling the Fund removes any temptation to force market results."
 "Selling it generates a large financial gain and creates a new Michigan business. Privatization of the Fund is good public policy. It is the right thing to do and the right time to do it."
 The Fund was established by the Legislature in 1912 to ensure the availability of insurance for the newly enacted workers' compensation law. Led by the Fund and the demand, private insurers got into the business and began competing hard in the new market. Last year about 220 carriers wrote WC premiums in Michigan.
 -0- 7/21/93
 /CONTACT: Peter Wadel, 517-342-4200, Ext. 609, or Jack Burdock, 517-342-4200, Ext. 561, both of the Accident Fund of Michigan/


CO: Accident Fund of Michigan ST: Michigan IN: SU:

SB-MK -- DE011 -- 3912 07/21/93 11:42 EDT
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Publication:PR Newswire
Date:Jul 21, 1993
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