A.M.BestTV: Pricing Erosion Threatens U.S. Workers’ Compensation Line

OLDWICK, N.J.--(BUSINESS WIRE)-- This first in a series of “First Monday” episodes spotlights A.M. Best Senior Financial Analysts Gordon McLean and Brian O’Larte, who discuss how future underwriting results in the U.S. workers’ compensation segment could be hampered by rate softening. Click on http://www.ambest.com/v.asp?v=fmworkcomp1215 to view the entire program.

The next “First Monday” episodes will include a focus on how insurance industry losses from asbestos and environmental claims dropped sharply in 2014; European insurers’ strategies to look overseas for growth due to saturated domestic and difficult economic markets; and the buying trends, barriers to growth and regulatory challenges taking place in the Asia-Pacific region. “First Monday” is A.M. Best’s monthly program featuring commentary by the company's leading analysts.

U.S. workers’ compensation is a line of business closely tied to the overall economic climate with payroll fluctuations providing a key variable for insurers. A recent Best’s Special Report details how the U.S. workers’ compensation segment recorded another positive year in 2014; however, some issues remain.

“There have been a number of years of positive movement; although, the improvement could potentially be eroded should the industry return to a very competitive market,” said McLean. “This improvement in the U.S. workers’ compensation operating performance has been driven by the positive rate environment through year-end 2014.”

“Over the past nine quarters there have been positive rate increases, but at a declining rate, up until the first quarter of 2015, when there was the first negative rate decrease that continued into the second and third quarters,” said O’Larte.

In this episode, the analysts also touch on how improvements in technology have allowed companies to see and react to data quicker. They also caution that companies need to adequately price the risks they write, reserve conservatively and maintain strong balance sheet strength in order to do well.

Recent episodes of A.M.BestTV include:

• Risk Takers: Many Paths to Starting an Insurance Company: Interviews from Best’s Review Senior Associate Editors, Kate Smith, Lori Chordas and Angelo Lewis, on the cover story of the December issue of Best’s Review, titled, “Risk Takers”: http://www.ambest.com/v.asp?v=risktakers1215.
• Skipping the Desktop: Technology Upends Asia’s Insurance Markets: At the recent Pacific Insurance Conference in Manila, Philippines, attendees said the proliferation of technology in the Asia Pacific region makes social media and smart phones the best way to reach the region’s youthful population: http://www.ambest.com/v.asp?v=21215nc.
• Regulation is Driving Insurance Activity: At the annual A.M. Best Insurance Market Briefing – Europe, in London, A.M. Best Chief Rating Officer Stefan Holzberger said European insurers have been focusing on capital in anticipation of Solvency II, while insurers in the Middle East and elsewhere are responding to increasing regulatory constraints: http://www.ambest.com/v.asp?v=holzberger1115.
• Alternative Capital Showing More Discipline Than Traditional Market: At a recent panel discussion, James Vickers, chairman, Willis Re International, said year-end reinsurance renewals will likely be mixed, with rates continuing to decline but at a slower pace: http://www.ambest.com/v.asp?v=vickers1115.

A.M.BestTV covers exclusive A.M. Best information and reports, targeted topics and key developments in the (re)insurance industry every Monday, Wednesday and Friday. Sign up for alerts of episodes at http://www.ambest.com/multimedia/ambtvsignup.html. View A.M.BestTV episodes at http://www.ambest.tv.

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151207005980/en/

A.M. Best Company
Lee McDonald
Group Vice President, Publication and News Services
(908) 439-2200, ext. 5561
[email protected]

Source: A.M. Best Company

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