There is hereby established a Voluntary Direct Assignment Carrier Program (the "Program"), as authorized by the Plan of Operation of the Massachusetts Workers' Compensation Assigned Risk Pool (the "Pool"), which provides that any insurer may satisfy its assessment obligations as a Pool member by accepting voluntary direct assignments of risks from The Workers' Compensation Rating and Inspection Bureau (the "Bureau"), in the manner specified in Article XIII, Section 2. of the Pool Plan of Operation.  A participating insurer must satisfy its entire assessment obligation for a particular policy year in this manner, with the exception of policy year 1993, in which an insurer's obligation may be allocated between Pool assessments and voluntary direct assignments.

Article I: Purpose and Scope of Coverage

It is the purpose of this Program to provide a mechanism for the equitable distribution among insurers of risks entitled to coverage under G.L. c. 152, § 65A et seq., as amended, subject to the limitations as set forth in Article III, Section 2. of the Pool Plan of Operation.

The manuals of rules, rates, rating plans and classifications filed by the Bureau, and approved by the Commissioner, to apply to residual market policies, shall also apply to policies issued by a carrier in its capacity as a voluntary direct assignment carrier.

Article II: Designation of Voluntary Direct Assignment Carrier

Any Pool member may apply to the Commissioner for designation as a voluntary direct assignment carrier based on selection criteria set forth in ARTICLE V, hereunder.  The Commissioner may rescind this designation for cause.

Article III: Insolvency of a Voluntary Direct Assignment Carrier

In the event a voluntary direct assignment carrier become insolvent, all risks being written by such carrier shall be assigned to a successor servicing carrier or direct assignment carrier.

Article IV: Administration of the Program

The Bureau, acting through its Residual Market Committee, unless the Governing Committee of the Bureau otherwise directs, shall administer and monitor this Program, pursuant to G.L. c. 152, § 65A et seq., as amended.  The Bureau shall each year submit to the Commissioner a report of the assigned risks for the preceding year.

The Bureau, acting on behalf of the Residual Market Committee shall have the right, through its representatives, at all reasonable times during the business day, to audit and inspect the books and records of any voluntary direct assignment carrier with respect to any policy or policies and claims thereunder coming within the purview of this Program.  In addition, the Committee shall have the power, subject to the approval of the Commissioner, to promulgate and adopt Rules of Procedure for the purpose of implementing and administering this Program.  Such rules may also be made at the direction of the Commissioner, upon reasonable notice to the Bureau and after a hearing.

Article V: Criteria for Selection and Performance Standards

Any member of the Pool may apply to the Commissioner for voluntary direct assignment carrier designation, and shall be eligible for designation as a voluntary direct assignment carrier, provided the member:

1. has and maintains, at a minimum, a Best's rating of either "A-" or NA 3 with an FPI of 8 or 9; and
   
2. has or has had for any year during the five year period immediately preceding the request to be designated a voluntary direct assignment carrier a workers' compensation voluntary market share of at least 1% in the Commonwealth of Massachusetts; and
   
3. demonstrates to the satisfaction of the Commissioner, taking into account whatever technical advice may have been requested from the Bureau, that it has the capacity to provide appropriate coverage to any risk that may be assigned to it pursuant to this program regardless of the size, industry type, and geographical location of such risk; and
   
4. has and maintains the capacity to conform to the Performance Standards applicable to servicing carriers as set forth in ARTICLE VII, Section 3 of the Pool Plan of Operation.

A voluntary direct assignment carrier's failure to maintain eligibility shall be considered by the Commissioner as cause for rescinding its designation as voluntary direct assignment carrier.  The WCRB shall inform the Commissioner if it believes a voluntary direct assignment carrier may not be maintaining such eligibility. 

Article VI: Effective Date

This Program shall become effective upon adoption by the Commissioner.

Article VII: Assignments

The Bureau will equitably assign applicants to each voluntary direct assignment carrier based on each such carrier's percentage of the total voluntary net workers' compensation insurance premiums written, as adjusted by any applicable take-out credit, for all carriers in each policy year.  Since a voluntary direct assignment carrier's percentage for the current policy year will not be available at the time assignments are being made, the most recent available percentage will be used in making assignments for the year.  For each policy year, a reconciliation process shall be undertaken to reconcile the percentage of premium assigned to each VDAC carrier for that policy year with its share of the total assignable premium for that policy year. This process shall allow for:

Intermediate Reapportionment
An optional intermediate reapportionment of pool shares may be made within two years of the beginning of the policy year.

Final Reapportionment
All policy years, including those policy years for which an intermediate reapportionment was completed, will be subject to a final reapportionment of pool shares to be made within three years of the beginning of the policy year.

Such reapportionment calculations shall be based on the current estimate of:

1. The percentage of Residual Market premium assigned to the particular voluntary direct assignment carrier for the policy year.
   
2. The target percentage for the particular carrier for the policy year.

A participation ration shall be calculated for each voluntary direct assignment carrier as follows:
(Target Percentage - Assigned Percentage) x  (Residual Market Premiums / Reinsurance Pool Premiums)

If a voluntary direct assignment carrier was assigned less than its proper share of assignable premium, as calculated by the Bureau, it shall be given a positive participation ratio corresponding to the difference.  If such carrier was assigned more than its proper share of assignable premium, it shall be given a negative participation ratio corresponding to the difference.  The appropriate off-balance shall be applied to the participation ratios of carriers who are not voluntary direct assignment carriers, so that the total of all participation ratios is 100%.

A member of the Massachusetts Workers' Compensation Assigned Risk Pool that is not a voluntary direct assignment carrier must satisfy its obligation by sharing in the results of the Residual Market business written on behalf of the Pool by Servicing Carriers, as described in the Pool Plan of Operation.  Each such member is assigned a participation ratio, which determines for that Policy Year its participation in the combined results of the Residual Market business written on behalf of the Pool by Servicing Carriers.  As used in the above formula, "Residual Market Premiums" shall be the total premiums in a Policy Year assigned to either voluntary direct assignment carriers or servicing carriers, (excluding any premiums that may have been assigned under any Mandatory Direct Assignment Program).  As used in the above formula, "Reinsurance Pool Premiums" shall be the total premiums in a Policy Year assigned to Servicing Carriers, excluding any premiums that may have been assigned under any Direct Assignment Program.

After the above reapportionments takes place, each Voluntary Direct Assignment carrier will have a participation ratio for each Policy Year and thus will share to some extent in the results of the Residual Market business written on behalf of the Pool by servicing carriers.  However, that carrier will share to a lesser extent than if the carrier had not accepted voluntary direct assignments.

Article VIII: Definitions

Definitions of terms used in this Program:

1. The term "voluntary direct assignment carrier" shall mean an insurer that has elected to receive direct assignments, in lieu of participating in the Pool, and that has obtained prior approval from the Commissioner of Insurance authorizing such form of participation.
   
2. The term "net workers' compensation insurance premiums written," wherever used in this Voluntary Direct Assignment Program, shall mean the gross direct premiums charged less all premiums (except dividends and savings refunded under participating policies) returned to policyholders for all Workers' Compensation and Occupational disease Insurance, exclusive of premiums for risks subject to the Plan of Operation of the Pool, and for risks written under Special National Defense Comprehensive Rating of Special National Defense Premium Discount Plans and under excess policies.  The term "workers' compensation insurance premium" shall also include all premium received by non-admitted carriers on policies issued by such carriers for coverage in the state if such policies are deemed to meet employer obligations under the workers' compensation statute of the state.
   
3. The term "Commissioner" shall mean the Commissioner of Insurance of the Commonwealth of Massachusetts.

Article IX: Application and Effective Date of Designation

Within fifteen (15) days after this Program has been adopted by the Commissioner, the Bureau shall provide notice and a copy of the Program to all members of the Pool.  Within thirty (30) days after the date of such adoption, a member who wishes to become a voluntary direct assignment carrier shall make application to the Commissioner for such designation with a copy to the Bureau.  The Commissioner shall review the application and approve or disapprove it in writing within forty-five (45) days of receipt with a copy to the Bureau.  If the application is approved, the member will be designated a voluntary direct assignment carrier effective July 1, 1993.  The Commissioner will not approve the application of a member with any other effective date during the year 1993.  If the Commissioner fails to act within the forty-five day period, the application is deemed disapproved.

Applications in subsequent years must be submitted to the Commissioner prior to October 1.  The Commissioner shall review the application and approve or disapprove it in writing within sixty (60) days of receipt.  If the Commissioner fails to act within the sixty-day period, the application is deemed disapproved.  If the application is approved, the member will be designated a voluntary direct assignment carrier effective January 1 of the following year.  It shall continue as a voluntary direct assignment carrier for subsequent years, unless it gives the Commissioner advance written notice of its intention to resign as a voluntary direct carrier prior to October 1 of a given year, or unless such designation is rescinded by the Commissioner for cause.