The California State Compensation Insurance Fund received approval for the most impactful single rate decrease approved in the workers' compensation marketplace in 2017, according to an S&P Global Market Intelligence analysis.
California's state insurer of last resort is the largest writer of workers' compensation in the Golden State. It controlled 12.44% share of the market, based on direct premiums written of $1.61 billion, in 2016. But its market share has been falling over the past year, owing mainly to rate decreases. In 2016, State Fund had attributed the decline to lower new and renewal business in a soft pricing environment.

State Fund received approval for an 8% rate cut on May 25, 2017, which could result in a calculated written premium decrease of $129.0 million. It requested the rate decrease in response to a Workers' Compensation Insurance Rating Bureau of California proposal for lower advisory pure premium rates with effect from July 1, 2017, due to downward medical loss development. The WCIRB advisory pure premium rate of $2.02 per $100 of payroll reflected a 16.5% reduction from the industry average filed pure premium rate as of Jan. 1, 2017.
The WCIRB recommended further lowering the Jan. 1 advisory pure premium rate to $2.01 per $100 of payroll in another meeting. State Fund filed a request to keep its Jan. 1 rates unchanged following the WCIRB recommendation, and received regulatory approval to do so.
Berkshire Hathaway Inc. and Chubb Ltd. also received approval for multiple rate decreases in California. Both companies reduced rates twice during the year in the California workers' compensation marketplace, with units of each company featuring prominently among the notable decreases approved nationwide in 2017. Meanwhile, Old Republic International Corp. unit Old Republic General Insurance Corp. received approval for a single rate decrease of 22.40%, which took effect Jan. 1.

The sum effect of all rate changes approved in California in 2017 is a potential calculated written premium decline of $702.6 million. The collective impact of Chubb's California rate cuts was the most pronounced, as the company may experience a $159.1 million decrease in calculated written premium. S&P Global Market Intelligence calculated Chubb's weighted average rate change in the California workers' comp market as an 11.39% decrease.
Weighted average rate change is calculated by dividing collective calculated premium change by collective rate filing written premium. If a filer received approval for multiple rate filings during the year, only the latest rate filing written premium is aggregated in the denominator.
AmTrust Financial Services Inc., the third-largest California workers' comp insurer in 2016, kept rates unchanged throughout 2017. It received approval Dec. 2, 2017, to maintain its current rates with effect from Jan. 1. AmTrust had previously increased rates in many workers' comp markets in 2015 despite the prevalent soft market across the U.S.
However, the commercial lines insurer has since applied to cut rates in California on Jan. 16. If approved, AmTrust could potentially face a $10.6 million decrease in calculated written premium. AmTrust has requested that the new rates take effect from April 15.
Click here for a template providing rate changes for a select entity, state or type of insurance over a selected time period. With this template, users can also view information on each filing along with key metrics related to premiums, approval time and affected policyholders. Click here for a webinar with information on the resources SNL has available regarding rate filings. |

