Are you considering a merger or acquisition of another company?

Remember to consider the impact on your X-Mod in your negotiations.

I recently had a company, I will call it Company ABC, that was surprised by an invoice from their carrier for $5,488 additional premium due mid policy. They had recently acquired the assets of another small business, Company XYZ.  The new company added only $790,643 in payroll to their current policy year payroll of $25,000,000.

BUT WAIT…Company XYZ, had one closed claim of $6,797.

This claim was added to Company ABC’s X-Mod mid-term, as of the date of the acquisition. The X-Mod and was rerated by the WCIRB from 92% to 100%. - an 8-point increase.

Thus, the Carrier’s mid-term endorsement of the 100% X-Mod re-rate and the increased $5,488 premium invoiced to Company ABC for the current policy year.

Luckily, there was only one claim with the company being acquired, or Company ABC’s X-Mod could have exceeded 100%. That would have created a serious problem for Company ABC because their largest project requires an X-Mod of no more than 100%. Their largest contract could have been in jeopardy!

This one closed claim also impacts the upcoming September 2021 renewal policy from 90% to 98%.

In total, because of this acquisition with one $6,797 closed claim, the cost to Company ABC is an additional $10,000 to $15,000. This could have been part of the negotiation during the acquisition, if it had been a known factor.

Check out the Workers’ Compensation Insurance Rating Bureau’s website to evaluate the Change in Ownership Regulations that may apply to you.

https://www.wcirb.com/guide-to-workers-compensation/ownership/changes-ownership

Please contact ESM to calculate a sample X-Mod estimate using proposed payroll and loss data. This would inform you of the potential impact on your X-Mod before the acquisition.