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FOR IMMEDIATE RELEASE
OLDWICK - JULY 06, 2015 08:39 AM (EDT)
Net premiums written (NPW) among U.S. state workers' compensation funds increased for the fourth consecutive year in 2014, growing 11.5% to USD 8.5 billion, the highest level since 2006, according to a new special report from A.M. Best.
The Best's Special Report, titled, "State Funds' Net Premiums Written Increased for Fourth Consecutive Year in 2014," states that collectively, the state funds' NPW equated to 18.3% of the total workers' compensation written in the United States in 2014, up from 17.4% in 2013 and a low of 15.4% in 2011, but below a high of 27.9% in 2004. The significance of state funds also is apparent in their respective state market shares. For 2014, seven of the 19 state funds had market shares of at least 50% in their respective states and each one ranked first in their state based on direct premiums written.
These state funds mainly compete for voluntary workers' compensation business while also serving as their respective state's guaranteed market. Some businesses that find it more difficult to afford or secure coverage in the voluntary market during hard-market conditions often turn to state funds. This also was likely a contributing factor to the growth of state funds over the past several years and underscores the potential role these funds can play in a geographic region's economic development.
The 11.5% NPW increase in 2014 was relatively widespread, with only CompSource Oklahoma reporting a decline in NPW from 2013. Additionally, nine of the state funds reported double-digit growth, led by the State Compensation Insurance Fund of CA's 37.9% and Hawaii Employers' Mutual Insurance Company Inc.'s 34.7% growth. Before 2011, NPW for the state funds had declined for six straight years, cumulatively by 59.6%.
The NPW increases for the state funds in years 2011 through 2013 of 7.1%, 13.7% and 15.4%, respectively, were higher than the 6.1%, 8.0% and 10.9% respective increases in the A.M. Best workers' compensation composite for these years. In 2014, while the state funds 11.5% NPW growth remained strong, it was lower than the 14.6% increase posted by A.M. Best's workers' compensation composite. This was the first time the state funds posted weaker growth than the workers' compensation composite since 2010 and is a sign that the voluntary market has become more competitive as price increases for workers' compensation insurance weakened for a second straight year.
In addition, the A.M. Best state funds composite's combined ratio in 2014 deteriorated modestly to 115.4 from 114.3 in 2013; however, of the 19 state funds, 14 had improved combined ratios, while the remaining five had combined ratios that deteriorated.
Overall, the competitive state funds have benefited from improved underwriting and overall operating performances since the end of the prior soft market in 2010 and 2011, which persisted for a number of years. Rate increases, continued growth in payrolls and more stringent underwriting and pricing actions have been evidenced in the group's improved operating performance in years 2012 through 2014, which A.M. Best believes will remain positive near term. However, longer term much will depend on the sustainability of recent operating trends, favorable levels of prior-year loss reserve development, as well as a stable macroeconomic environment.
To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=239015 .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.