Oldwick, NJ -(BusinessWire)- Net premiums written (NPW) by U.S. competitive state compensation funds experienced a 7.1% increase in 2011, reversing a yearly trend that began in 2004, according to a new report from A.M. Best Co.
These state funds, which make up a significant portion of A.M. Best’s U.S. workers’ compensation composite, generally serve their respective states as a guaranteed market and typically provide coverage to companies that experience difficulty obtaining insurance in the general marketplace. Many of the funds also compete in the broader workers’ comp markets in their states.
The report, “State Funds’ Net Premiums Written, Surplus Grew in 2011; Signs of Change Ahead,” adds that a number of factors led to increased premiums in 2011, including improved premium audit adjustments; stabilization of employment and payrolls (albeit at a lower level than before the 2008-2009 recession); and a stronger pricing environment, especially as the year progressed.
Other topics discussed in the report include:
- The state funds’ calendar-year combined ratio for 2011 hit its highest level in 10 years, measuring 134.9. On an accident-year basis, the combined ratio increased less than 1 point from 2010, to 132.3.
- Despite declines in underwriting results and net investment income, the state funds as a group posted a modest operating profit of $2.4 million in 2011.
- Reforms to California’s workers’ comp system had a significant impact on the state funds’ collective results because of the size of California’s worker’ comp market.
- A.M. Best expects the state funds to continue growing at a faster pace than the rest of the workers’ comp industry. However, it remains to be seen what effects privatization of certain state funds, including Arizona and Maryland, will have on policyholders and the markets in those states.
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