Comp Residual Market Gains Analyzed

Jim Nau, general manager of residual markets for the National Council on Compensation Insurance in Boca Raton, Fla., said the estimated figure for workers comp premium in the residual market for 2001 is about $500 million, a far cry from the early 90′s when the marketplace had "a major problem" with over $4 billion in workers' comp premium in the residual market.

"Compared to prior years, it's not that big," he said, referring to the current figure. Still, the present growth pattern needs to be watched carefully, Mr. Nau said.

Comparing NCCI administered accounts for 2000 and 2001 reveals the number of residual market policyholders has risen 37 percent and premium is up over 90 percent, he said.

But that amounts to a 5 percent share of the workers' comp market unlike in 1992, when the residual share was 25 percent.

Currently, "we're seeing larger accounts coming in looking for coverage," he reported.

Mr. Nau noted that with a rise in premium rates commencing in 2000, residual growth had been underway well before the market-shaking events of 9/11 sent workers' comp costs on a tear.

The residual growth rate since then hasn't changed and "there's been no spike of activity we can identify," he said.

Monte Almer, president of the New York Compensation Insurance Rating Board, said the New York State Insurance Fund, the state's carrier of last resort presently provides 33 percent of the workers' comp coverage in the state.

Mr. Almer noted that the fund writes more than residual business. In his view, the percentage while increasing "isn't anything enormous. I don't think it's extreme numbers, but that could change over time. When renewals come due later this year we expect a swing upward."

He said he had heard comments from some carriers that they might leave the workers' compensation marketplace because, "they are concerned they won't find reinsurance, but some have found it and others are considering what to do when renewals come up. The information is sketchy at best."

Many insurers, according to Mr. Almer are waiting to see if the federal government comes through with legislation to provide a backstop for terrorism losses.

Nancy Schroeder, National Association of Independent Insurers assistant vice president for workers' compensation, said while insurers whose major line is workers' compensation will not leave the marketplace she understands from their questions that multiline carriers are considering abandoning the field.

"I know they are evaluating it. They are looking at overall results and the terrorism reinsurance situation."

Ms. Schroeder said if carriers did take action it would probably be a quiet move to stop writing the line, not a sudden withdrawal by 15 companies and "agents will know about it before I will."

In Milwaukee, Ralph M. Herrmann, president of the Wisconsin Compensation Rating Bureau said over the last few years there has been "a significant increase" in new business entering the Wisconsin assigned risk pool.

The pool recorded $11.6 million in new business in 2000 and $25.8 million in 2001. For January of 2001, the pool took in $3.7 million compared with almost $6 million for the first month of this year.

Mr. Herrmann said the assigned risk rates are identical to those charged in the voluntary market.