Guides
Assigned risk and residual markets for workers' comp
How the workers' comp residual market works when no voluntary insurer will write you: who qualifies, what it costs, how plans differ by state and how to exit.
The workers' comp residual market, often called assigned risk, is the state-sanctioned safety net for employers that cannot buy a policy from a private insurer in the regular (voluntary) market. Because most states require coverage, every state needs a place where a late-paying roofer or a business with a poor loss record can still get a legal policy. How that place works, and what it costs, depends on the state.
Who ends up in the residual market
Insurers choose which risks to write. The usual reasons an employer is declined voluntarily:
- A high experience modification rate after a run of lost-time claims.
- A hazardous class code (roofing, tree work, some manufacturing) that few carriers want at the premium available.
- A new business with no history, or a business that was previously cancelled for nonpayment or an unpaid audit bill.
- A business that is too small for many carriers to bother with, with a payroll of a few thousand dollars.
- A prior insurer that went out of business or left the state.
NCCI says its serviced residual market share "has been declining since 2014 and remains at about 5%," according to Insurance Journal's May 14, 2026 report on NCCI's annual State of the Line. For comparison, NCCI's 2020 summary put the share at 5.3% (Business Insurance, June 17, 2021). In most states the voluntary market is soft and the plan is small. In states with a tight market or heavy-hazard industries, it can be much larger. The percentage varies widely by state. Your broker can pull your state's figure.
How it works
The typical process follows these steps:
- You need proof of a failed search. Most plans require the applicant to apply first in the voluntary market and be declined (some states ask for a number of declinations or require the agent to attest that coverage could not be placed). Rules differ by state, so ask your agent which declination form applies.
- A licensed agent submits the application. Many plans accept applications only through licensed agents or brokers who are registered with the plan. In some states, the agent receives a commission on plan business, set by the plan.
- The plan assigns you. Depending on the state, you are either assigned directly to a servicing insurer that issues and administers the policy, or the plan places you with a participating carrier whose losses are shared by all carriers through a pool.
- Premium is set by plan rules. The plan uses the same payroll-based method as the voluntary market (see how workers' comp premiums are calculated), with state-approved rates and often a surcharge or a minimum premium. A business with a mod above 1.00 pays more.
- You pay a deposit up front. Many plans demand a down payment of a substantial part of the estimated premium, with installment terms spelled out in the plan's manual.
The policy form is the same: the NCCI workers' compensation and employers' liability policy WC 00 00 00 in most states, or the state bureau's own equivalent. Statutory benefits to injured workers are not affected by how you got the policy.
Who runs the plans
There is no national assigned risk plan. Each state decides.
| Arrangement | What it means | Example |
|---|---|---|
| NCCI-administered plan | NCCI runs the plan for the state's insurers and handles assignments, and in many states reinsurance pools are shared among insurers | NCCI reported services in 31 jurisdictions for 2020 and 30 for 2022; confirm your state |
| State's own bureau or plan | A state rating bureau or board runs the plan | California's plan is run through WCIRB; Pennsylvania's through PCRB; New York's through NYCIRB; verify each with the bureau |
| State fund as insurer of last resort | A government-chartered fund must accept anyone who is turned down | State Compensation Insurance Fund, New York State Insurance Fund and similar funds in other states |
| Monopolistic state | The state fund is the only seller, so there is no residual market at all | Ohio, Washington, North Dakota, and Wyoming for required employers; see Monopolistic state funds: workers' comp in ND, OH, WA and WY |
| No assigned risk pool | A state fund insurer of last resort takes the place of a pool | Texas: Texas Mutual must accept risks that tender premium, so Texas has no NCCI assigned risk pool (Texas) |
Several of the rows above reflect plan structure that we have not re-verified against each bureau for 2026, so use them only as orientation and confirm with your state agency or the plan website. workers' comp and benefits requirements by state lists each state's agency.
Cost: why it is usually higher
The plan is designed to be a place of last resort, not a bargain. Rates in the plan are generally set at or above voluntary market levels, and a business classified there often has a mod over 1.00, a hazardous class, or both. Some states add a surcharge or apply a different rate table. Others have a voluntary-market-linked "take-out" credit program for carriers that remove business from the plan. Check the plan manual for your state. The best price comparison is a quote from the plan against what your agent can get in the voluntary market this month, because the market can change within a year.
If you end up in the plan, expect:
- A deposit premium rather than the pay-as-you-go option (see pay-as-you-go workers' comp: how it works and who it suits), though some plans allow installments.
- Mandatory premium audits, with an extra charge if you do not cooperate. See premium audits: how they work and how to prepare.
Hypothetical example
Say a roofing contractor in a state with a plan loses its voluntary carrier after two serious falls in three years pushed its mod to 1.45. Four carriers decline it, and the agent files the plan application with declinations. The plan assigns a servicing carrier. The contractor pays a deposit and the policy is bound. Over the next year it adds a safety program, trains crews on fall protection and drops its two worst-performing crews. At renewal, with the claims one year older but still on the mod, it works with a broker to approach carriers that write roofers and moves back to the voluntary market in year two or three, when the older claims age out of the experience period. That timeline is hypothetical, but it reflects how mods work: the experience period ordinarily uses policies starting 21 to 57 months before the rating effective date (NCCI, ABCs of Experience Rating), so a bad year stays on the mod for three years. See The experience modification rate (EMR) explained.
How to get out of the plan
- Pay on time and cooperate with the audit. A history of nonpayment keeps you stuck.
- Fix the claims drivers. A written safety program, return-to-work practices and hazard fixes change what an underwriter sees.
- Verify your class codes. Misclassification can inflate premium. See workers' comp class codes and why they matter.
- Check the mod worksheet for errors. NCCI lets employers dispute mod items through its dispute resolution process.
- Ask your agent to remarket at renewal and 90 days before. Many carriers will not look at you until you have a clean loss run.
- Consider other structures, such as a PEO. See PEOs and workers' comp: co-employment explained for the trade-offs.
Key takeaways
- The residual market (assigned risk) exists so every employer can buy required workers' comp. It is run state by state, not nationally.
- NCCI described its serviced residual market share as about 5% in its 2026 State of the Line, with the share declining since 2014.
- Plans are for employers declined by the voluntary market, and an application usually requires a licensed agent and proof of the declinations.
- Expect higher rates, larger deposits and strict audit rules, and work to get back to the voluntary market by fixing losses, class codes and mod errors.
- Ohio, Washington and North Dakota have no residual market because the state fund is the only seller, and Wyoming has none for extra-hazardous employers; Texas relies on Texas Mutual as insurer of last resort instead of a pool.