Note 3 – Workers’ Compensation Claims

The following table summarizes the aggregate workers’ compensation reserve activity (in thousands):

	Three Months Ended
	March 31,
	2017		2016
Beginning balance
Workers' compensation claims liabilities	$	312,537	$	255,675
Add: claims expense accrual
Current period		35,275		31,155
Prior periods		2,914		848
		38,189		32,003
Less: claim payments related to
Current period		1,132		1,271
Prior periods		23,464		21,264
		24,596		22,535

Add: Change in claims incurred in excess of retention limits		103		—

Ending balance
Workers' compensation claims liabilities	$	326,233	$	265,143
Incurred but not reported (IBNR)	$	162,760	$	132,879

The Company is a self-insured employer with respect to workers' compensation coverage for all of its employees (including employees co-employed through our client service agreements) working in Colorado, Maryland and Oregon, except as described below. In the state of Washington, state law allows only the Company's staffing services and internal management employees to be covered under the Company's self-insured workers' compensation program.

Effective January 1, 2015, the Company stopped maintaining a certificate to self-insure in the state of California, and it now obtains individual policies from Chubb Limited (“Chubb”) for all California-based clients along with clients in Delaware, Virginia, Pennsylvania, North Carolina, New Jersey, West Virginia and the District of Columbia. The arrangement with Chubb, known as a fronted program, provides BBSI a licensed, admitted insurance carrier to issue policies on behalf of BBSI. The risk of loss up to the first $5.0 million per claim is retained by BBSI through a reinsurance agreement. Chubb assumes credit risk should BBSI be unable to satisfy its indemnification obligations.

As part of its fronted workers’ compensation insurance program with Chubb, the Company makes monthly payments into a trust account (“the Chubb trust account”) to be used for the payment of future claims. The balance in the Chubb trust account was $299.6 million and $277.1 million at March 31, 2017 and December 31, 2016, respectively. The Chubb trust account balances are included as a component of the current and long-term restricted cash and investments in the Company’s condensed consolidated balance sheets.

At March 31, 2017, the Company recorded an asset of $11.3 million related to a payment remitted to Chubb on March 24, 2017 but not deposited into the Chubb trust account until April 2017. This amount is included in other assets in the condensed consolidated balance sheet.

The states of California, Maryland, Oregon, Washington, Colorado and Delaware required us to maintain specified investment balances or other financial instruments totaling $135.0 million at March 31, 2017 and December 31, 2016 to cover potential workers’ compensation claims losses related to the Company’s current and former status as a self-insured employer. In addition to restricted cash and investments held to satisfy these requirements, at March 31, 2017, we have provided surety bonds and standby letters of credit totaling $128.8 million, including a California requirement of $123.3 million.

The Company provided a total of $326.2 million and $312.5 million at March 31, 2017 and December 31, 2016, respectively, as an estimated future liability for unsettled workers' compensation claims liabilities. Of this amount, $9.2 million and $9.1 million at March 31, 2017 and December 31, 2016, respectively, represents case reserves incurred in excess of the Company’s retention. The accrual for costs incurred in excess of retention limits is offset by a receivable from excess insurance carriers of $9.2 million and $9.1 million at March 31, 2017 and December 31, 2016, respectively, included in other assets in the condensed consolidated balance sheets.