Two top leaders resigned Friday from State Fund, a quasi-governmental agency that sells more than $1billion a year in workers’ compensation insurance, after overseeing a major restructuring of the organization’s bureaucracy.
Tom Rowe resigned as State Fund’s chief executive, and Dan Sevilla resigned as chief financial officer.
Fund spokeswoman Jennifer Vargen wouldn’t offer an explanation for their departures but said the resignations were voluntary.
The agency, formally known as the State Compensation Insurance Fund, isn’t well known but often plays a major role in California’s workers’ comp insurance market. It typically becomes the “insurer of last resort” when private carriers exit the state, as they did when costs soared and the market began imploding a decade ago. During that period, State Fund’s annual premiums zoomed from $1billion to $8billion, Vargen said.
After former Gov. Arnold Schwarzenegger signed a reform bill that reduced workers’ comp costs, the market turmoil subsided and private insurers moved back in. State Fund’s business began shrinking, and “we really had more staff than we needed,” Vargen said. Annual premiums have fallen back to around $1billion.
Since Rowe joined the organization in 2009, staffing has been reduced by 40percent, and some offices have been closed. The fund, based in San Francisco, employs 4,400 workers.
“The executive team has done an outstanding job laying the foundation for State Fund’s future,” board chair Lawrence Mulryan said in a prepared statement. “Many difficult decisions have been made and much progress has been achieved to reduce our size, increase our efficiency and productivity and improve our transparency and accountability.
“It hasn’t always been easy, but change was necessary,” he added.
The downsizing was accompanied by some controversy. In 2011, the fund agreed to pay up to $50million in severance packages for state workers who volunteered to leave the organization, even though it wasn’t required by civil service rules. The payments were made as part of an agremeent with Local 1000 of the Service Employees International Union, which had criticized State Fund for the way it was handling the downsizing.
The agreement reflected “the board’s commitment to doing the right thing for employees facing layoff,” Vargen said at the time.
Because State Fund runs on customer premiums, the payouts didn’t cost taxpayers any money.
In its announcement Friday, State Fund said general counsel Carol Newman has been named interim CEO. The fund’s chief investment officer, Pete Guastamachio, is the interim chief financial officer.