Vancouver-based Barrett Business Services Inc. has entered into a loss portfolio transfer (LPT) agreement to effectively remove all outstanding workers’ compensation claims obligations for claims incurred on its fronted insurance program between Feb. 1, 2014, and Dec. 31, 2017. This transaction reduces BBSI’s outstanding workers’ compensation liabilities by approximately 27%.
The LPT results in the immediate removal of $116 million of outstanding claims liabilities from BBSI’s balance sheet along with a corresponding reduction in restricted cash and investments. The transfer price of the LPT was approximately equal to the book value of the claims liabilities with no material gain or loss on the transaction. BBSI has no exposure to unfavorable claims development on these years, but the agreement allows for potential participation in future favorable development.
BBSI also announced the renewal of its fronted program effective July 1, 2020. The renewed program includes a reduction in loss retention from $5 million per occurrence to $3 million and a multiyear commitment until 2022. As a result of the LPT and BBSI’s overall continued favorable claims experience, third-party collateral requirements have also been reduced significantly. These reductions will result in a one-time increase in unrestricted cash and investments at June 30, 2020 of approximately $48 million, with additional cash flow benefits to be realized throughout the program term.
