Companies Turning to Captives to Ease Rising Workers' Comp Costs

NU Online News Service, July 18, 12:00 p.m. EDT

As the workers’ compensation line continues to experience poor underwriting results and strong momentum toward rate increases, more companies are turning toward forming captives to combat rising costs, a Marsh executive says.

Speaking today during a Webinar to discuss the Marsh Global Insurance Market Quarterly Briefing, Jonathan Zaffino, leader of Marsh’s U.S. Casualty Practice, noted that workers’ comp. remains one of the few casualty lines still experiencing a significant pull on rates. This line, he notes, “has experienced another difficult year in 2011” with a combined ratio of 115, the worst seen since 2001, and the third straight year the line has led all commercial lines with the highest combined ratio.

Indemnity and medical costs continue to rise, he adds, and this, along with poor investment earnings, “leads to a relatively bleak picture” for workers’ comp., says Zaffino.

Julie Boucher, Marsh’s Americas leader in Captive Solutions Practice, says the broker has seen more use of captives to mediate the escalating costs of workers’ comp. She says companies are using captives in a range of ways to control costs, from covering a company’s deductibles to insuring the company’s entire workers’ comp program.

She notes that, according to Marsh’s benchmarking report, 20 percent of the firm’s captives have workers’ comp in their insurance programs, ranked third behind property (35 percent), and general third-party liability (32 percent).

Speaking broadly about the casualty market in general, Zaffino says that the “tug of war” that underwriters seemed to be engaged in during early 2011—as they tried to strike a balance between underwriting performance and market appetite and competitiveness—is giving way to an environment of stability.

At the mid-point of 2012, says Zaffino, most casualty lines “remain stable, excluding certain industry groups with unique issues.”

Underwriters, he notes, are taking longer to complete renewals as they apply their guidelines more carefully. Overall, he says the market is “tentative,” but for most clients, stability should reign for the remainder of the year.

Zaffino advises policyholders to start the renewal process early and put a strategy in place aimed at obtaining the best terms.

“Options do indeed exist,” says Zaffino, adding that having the time to find options is critical to secure coverage a client needs.


Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Union used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.