|[May 06, 2014]
Fitch: California Workers' Compensation Insurance Still Poor
NEW YORK --(Business Wire)--
The California workers' compensation (WC) insurance market continues to
experience substantial underwriting losses, but Fitch Ratings expects
that further premium rate increases, coupled with effects of recent
market reforms, will modestly improve results in the near term.
California is the nation's largest WC insurance market, with
approximately 20% of countrywide 2013 direct written premiums in the
line. It is also historically one of the more volatile-performing
markets, exhibiting past periods of large underwriting losses.
The California Workers' Compensation Rating Bureau (WCIRB) projects an
accident year combined ratio of 113% in 2013. While results remain at
subpar levels, the combined ratio has improved by nearly 30 percentage
point improvement since 2010.
Reduced underwriting losses are largely tied to material recent price
increases, coupled with relative stability in indemnity and medical
claims costs from historical experience, offset by moderately higher
Workers' compensation prices are expected to continue to increase in the
future. The WCIRB's advisory pure premium rate increase at Jan. 1, 2014
was 6.7%. Coupled with modest anticipated benefits from reforms
emanating from Senate Bill 863, which was enacted in September 2012,
market underwriting results are likely to improve in 2014, but a shift
to an underwriting profit may prove elusive. Potential changes in loss
severity, particularly related to medical costs, are the leading source
of uncertainty that could forestall future combined ratio improvement.
Poor industry performance in the California WC insurance market has ed
to a shift in market share as the market's leading writer, The State
Compensation Insurance Fund, continues to lose market share while
companies including Berkshire Hathaway Inc, Amtrust Financial Services
Group, and Employers Holdings Inc. expanded their premium bases in the
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article, which may include
hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com.
All opinions expressed are those of Fitch Ratings.
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