All workers’ compensation schemes collect funds to meet liabilities and administer the scheme. There are 2 different types of scheme funding: publicly and privately underwritten.⁴ 

In publicly underwritten schemes, a single public insurer performs most, or all, of a workers’ compensation insurer’s functions. Some schemes undertake claims management internally and some may outsource claims management to the private sector. Premiums set by the public insurer are based on actuarial forecasts of claim costs across all sectors.

In privately underwritten schemes, insurer functions are provided by the private sector, through the scheme’s list of approved insurance companies.⁵ Premiums charged by insurers are based on a commercial underwriting basis. The Northern Territory approved insurers operate with commercial independence and set their own premium rates which vary by different types of industry.

Net funding ratio

The net funding ratio is a net of outstanding claim liabilities and indicates the financial viability of a scheme. It measures the ratio of assets to outstanding claims liability and is generally expressed as a percentage. Where the ratio is over 100%, the scheme may be over funded, and where the ratio is below 100% the scheme may be under funded. For publicly underwritten schemes where there is a separate workers’ compensation fund, the scheme’s annual report identifies the assets set aside for future liabilities. For privately underwritten schemes assets are set aside to meet all liabilities, but the insurance companies do not identify reserves specifically for workers’ compensation liabilities.

Net assets

Net assets in publicly underwritten schemes are equal to the total current and non-current assets of the scheme minus the outstanding claim recoveries as at the end of the reference financial year. In privately underwritten schemes, net assets are considered to be the insurers’ overall balance sheet claims provisions. Net assets are used in the calculation of funding ratios.

Net liabilities

Net liabilities in publicly underwritten schemes are the total current and non-current liabilities of the scheme minus any amounts the scheme expects to retrieve at the end of the financial year. The liabilities in privately underwritten schemes are taken as the central estimate of outstanding claims for the scheme at the end of the financial year. Net liabilities are used in the calculation of funding ratios. Table 8.4 shows each jurisdiction’s scheme funding position as reported in their annual reports.

⁴Previous reports referred to the scheme funding as managed, central and privately underwritten. For this report, it has been changed to publicly or privately underwritten as it better reflects how schemes are funded and provides for easier comparison.
⁵Please see linked the list of approved insurance companies for the privately underwritten schemes: ACT, NT, Seacare, Tasmania and Western Australia.