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TMCNet:  Fitch: California Workers' Compensation Insurance Still Poor

[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 claims frequency.

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 state.

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.

Applicable Criteria and Related Research: California Workers' Compensation Insurance Dashboard

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=747800

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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