SeaBright Insurance Holdings was formed in September 2003 when its management, together with private equity firm Summit Partners, executed a management-led buyout of Eagle Pacific Insurance Company and Pacific Eagle Insurance Company from their parent LMC. The acquisition covered the Eagle entities' renewal rights only and did not include their policies historical liabilities, which the company has commuted and reinsured. Also included was Kemper Employers Insurance Company (KEIC), a shell company with workers compensation licenses in 43 states and the District of Columbia, and PointSure Insurance Services, an in-house wholesale insurance broker and third party claims administrator that produced about one-quarter of the company s business in 2003. Management and Summit Partners injected capital into the company and it received a financial strength rating of "A-" (excellent) from A.M. Best, the fourth highest of its fifteen levels. In January 2005, SeaBright sold 15.3 million shares in an initial public offering, raising $81 million.
SeaBright's business is concentrated in California (more than 52% of gross premiums written), Alaska, Hawaii and Illinois (which together represent 26%) and Florida (which represents 2.2%). SeaBright currently provides multi-jurisdictional workers compensation insurance to businesses customers in the following three markets:
Maritime 15% of gross written premiums - SeaBright focuses on employers with complex coverage needs over land, shore and navigable waters. Customers in this market are engaged primarily in ship-building and repair, pier and marine construction, and stevedoring.
Alternative dispute resolution 23% of gross written premiums - Customized solutions for employers who are party to collectively bargained workers' compensation agreements that provide for settlement of claims out of court in a negotiated process. This product is currently focused on the needs of the construction industry in California.
State Act 62% of gross written premiums Coverage for benefits that employers are obligated to pay specifically under state workers' compensation laws. SeaBright primarily targets underserved states, such as California, Hawaii and Alaska.
What is workers' comp?
Workers' compensation is a statutory system under which an employer is required to pay for medical benefits and indemnity payments related to its employees' medical, disability, vocational rehabilitation or death occurring from work-related injuries or illnesses. An employer's obligation to pay workers' compensation does not depend on any negligence or wrongdoing on the part of the employer and exists even for injuries that result from the negligence of another person, including the employee.
To fulfill these mandated financial obligations, virtually all employers are required to purchase workers' compensation insurance or, if permitted by state law or approved by the U.S. Department of Labor, to self-insure. The employers may purchase workers' compensation insurance from a private insurance carrier, a state-sanctioned assigned risk pool or a self-insurance fund (an entity that allows employers to obtain workers' compensation coverage on a pooled basis, typically subjecting each employer to joint and several liabilities for the entire fund). Most employers comply with this requirement by purchasing workers' compensation insurance.
In all the states in which SeaBright does business, the benefits payable and the duration of such benefits are set by statute. They vary by state and with the nature and severity of the injury or disease as well as with the wages, occupation and age of the employee. SeaBright sets its own premium rates. In California, where SeaBright does most of its business, the Insurance Commissioner adopts and publishes advisory pure premium rates (pure premium rates are rates that would cover expected loss costs but do not contain an element to cover operating expenses or profit). However, insurers are not required to use these California advisory rates. In recent years, SeaBright has raised its rates to cover significant cost increases.