Oldwick, NJ -(BusinessWire)- The workers’ compensation market has likely entered a soft market phase based on a declining trend in price increases that began in 2013, according to a new special report from A.M. Best.
The Best’s Special Report titled, “State Funds’ Net Premiums Written Increased for Fifth Consecutive Year In 2015,” cited rate declines in the first quarter of 2015 that have persisted through the second quarter of 2016, in tandem with the more competitive environment in property/casualty commercial lines in general.
This conclusion was drawn as part of A.M. Best’s annual report on the state workers’ compensation funds sector. Net premiums written (NPW) within this segment increased for the fifth consecutive year in 2015, growing 2.4% to $8.6 billion, the highest premium level since 2006, according to the report.
Although underwriting leverage measures for the competitive state funds composite are at low levels and indicate solid capitalization, the report cites concerns going forward such as the recent declining trend in workers’ compensation pricing, the prolonged low interest rate environment, the potential for less favorable reserve development and the uncertainties relating to potential workers’ compensation legislation and health care reform.
State funds mainly compete for 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 was likely a contributing factor to the growth of state funds over the past several years.
Collectively, state funds’ NPW equated to 18% of the total U.S. workers’ compensation premium in 2015, flat in comparison with 18% in 2014, but above a low of 15% in 2011. The significance of state funds also is apparent in their respective state market shares. For 2015, seven of the 18 state funds had market shares of at least 50% in their respective states and each one ranked first in its state based on direct premiums written.
To access a copy of this special report, click here: AM Best: State Funds’ Net Premiums Written Increased for Fifth Consecutive Year In 2015.