Workers’ Compensation Excess Carrier Discussion

At the 2015 SIIA Workers’ Compensation Executive Forum, representatives from leading workers’ compensation excess insurance carriers discussed market conditions and what workers’ compensation self-insurers should expect in the year ahead with regard to policy pricing and availability. The panel consisted of: Richard Bird, Chief Operating Officer from Midlands Management Corporation; Scott Keller, Senior Vice President from Arch Insurance Company; and Seth Smith, Senior Vice President Workers’ Compensation Underwriting from Safety National. Duke Neidringhaus, Senior Vice President with J.W Terrill, Inc., moderated the panel.

Question: What do you see as the current state of the excess workers’ compensation marketplace?

Answers: There is increased competition in the excess workers’ compensation marketplace from companies who are newer to the space. Several larger companies have dropped the line in the last 10 years because of its long-tail nature.

Question: What are you seeing in the reinsurance marketplace for excess workers’ compensation?

Answers: There does not appear to be new capital entering this marketplace and, if anything, the treaty reinsurance marketplace is shrinking. Treaty reinsurers are looking to invest capital in lines of coverage that have a shorter tail.

Question: How have smaller companies been able to stay profitable in the excess workers’ compensation space  when larger carriers have pulled out of the line due to losses?

Answers: Those larger companies who dropped out tended to have lower SIRs and loss ratios and less oversight over TPAs. They were also overly optimistic on their reserving, which impacted pricing. Their focus was asset accumulation and making up for underwriting losses on the investment float. When the investment environment deteriorated, they faced significant losses from the line and eventually exited it. One other problem with the large carriers is that they were viewing excess workers’ comp as more of a throw-in to get other business without underwriting for the potential exposures.

Question: Why do accounts tend to move from one carrier to another?

Answers: There can be many factors that drive employers to market their account. The top factors are pricing, self-insured retentions, and services.

Question: How can accounts differentiate themselves to carriers?

Answers: The more data the better.  The standard is a 10-year loss run but, if you can provide more, do it.  Tell your story; What are you doing to improve your loss histories? What changes have you made in response to previous large losses?  What are you doing to mitigate losses?

Question: Approximately 20% of the excess workers’ compensation marketplace is in California.  What are your biggest challenges in California?

Answers: Public entity presumption claims are a challenge in many states but this is especially true in California where the presumptions are well established and keep expanding.  Employee concentration is also a significant concern in California due to earthquake exposure.