Best Co.’s year-end review of carriers with concentrated exposure to the volatile California workers’ comp market culminated in the downgrades of State Compensation Insurance Fund of California, Zenith National Insurance Group and Argonaut Insurance Group. Best is particularly concerned about specialty monoline writers, given their business concentration in this difficult market, exposure to significantly under-priced business written in 1998 and 1999, and rapid deterioration in workers’ comp claim severity trends. The downgrade of the State Fund reflects the continued deterioration of the fund’s operating performance and aggressive premium growth in the volatile California market. The fund, which holds a 25 percent share of this market, has exhibited very weak underwriting results, as evidenced by an average combined ratio of 142 over the past five years. The resulting business concentration led to operating losses in 1998 and 1999, and further losses are expected, although the fund has exhibited more stable reserve trends than its competitors.
Topics California
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