Some of the challenges facing the industry last year with regard to workers’ comp insurance (decreased capacity, NCCI’s changes to its experience rating plan and potential expiration of the Terrorism Risk Insurance Program Reauthorization Act) are no longer materially impactful in 2015. Here’s what’s to expect this year. On the whole, this year should bring about favorable change to the staffing industry workers’ compensation landscape.
Markets: Old and New
As announced in late 2013, Liberty Mutual began non-renewing its staffing book of business. That process will continue into early 2015 until Liberty Mutual is fully out of the staffing industry. Additionally, Freestone Insurance (f/n/a Dallas National) was placed into liquidation effective Aug. 15, 2014. Moreover, Tower Group has been downgraded by A.M. Best to the point at which it has now been sold to AmTrust.
PREMIUM CONTENT: US staffing forecast
Lost in the “public” spotlight, however, is that while these market changes were occurring, other carrier/programs were being developed specifically for the staffing industry. This additional capacity should help staffing company’s claw-back rate, based upon their own underwriting merits, reversing the trend of receiving market-driven rate increases.
NCCI Split Point: 2015 Numbers
Effective 2013, NCCI (and its participating 38 states) approved a revised rating plan to increase the split point – the dollar threshold used by NCCI to divide individual losses into primary or “frequency” and excess or “severity” layers. The pre-2013 split point level was $5,000 with increases phased in over the next three years as follows:
- » $10,000 in 2013
- » $13,500 in 2014
- » $15,000 plus two years of inflation adjustment in 2015
It’s estimated that only 15 percent of staffing organizations will incur an increased experience modification factor in 2015 as a direct result of the revised split rating methodology. Thereafter, “normalcy” begins to settle in on this topic.
TRIA: Renewed
The Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIA) expired on Dec. 31, 2014, but was reauthorized 12 days later (for six additional years). The intent of TRIA is to provide stability for a viable insurance market – especially in higher risk areas. Many of the larger, stock insurance carriers have been underwriting terrorism for the past decade and, for the most part, could have provided terrorism coverage without a Sunset Provision. The reauthorization of TRIA is especially helpful for the smaller carriers and underwriting programs.
Outlook: Sunny
The workers’ compensation market is broadly showing signs of improvement. The fact that the workers’ compensation combined ratio was 101 in 2013 (a seven-point decrease from 2012 and 14-point decline since 2011) shows the market is returning to a state of “balance”, according to NCCI.
The remainder of 2015 should be favorable for the staffing workers’ compensation industry. Roughly 25 states have published workers’ compensation rate reductions, TRIA has been reauthorized (for six years), and meaningful discussions with at least two national workers’ compensation carriers are underway for staffing specific programs to be released in 2015. The increased confidence, greater stability and additional capacity will bode well for those staffing organizations who elect to reevaluate their workers’ compensation strategy in 2015.
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