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Expected Has Come To Pass With Hardening of Insurance Markets


Workers Comp Insurance Markets Likely Hardening

The Hardening of Insurance Markets occurred for Workers Comp recently.  The old soft market is no longer with us. I was very surprised that it took this long for the market to harden.

Graphic of Insurance Markets Icon

This includes Workers Comp insurance and all other insurance coverages.

In the last two years, the insurance markets have seen:

  • An increase in catastrophe losses
  • Collapse of liquidity
  • Disappearance of excess capital
  • Quite a few major insurers are in trouble due to catastrophic investment losses – AIG being the most notable.

All of the “dark clouds” have resulted in the demand for highly rated, secure insurers being greater than the supply.

The insurance companies need to raise rates to refill their bank accounts. With the economy in place, insurance carriers have not and cannot institute any type of alternative types of insurance or coverages. Risk financing is not a viable option, as the capital markets have dried up for the most part.

What may be the start of the perfect storm for insurance carriers and employers? Many companies will seek to offset the effect of higher insurance rates by taking larger retentions, either by self-insuring or placing more risks in a captive. Any move to increase retention will be one of desperation rather than careful analysis.

Hand Emphasizing Insurance Markets Risk Management Icon

Unfortunately, some of these companies increasing their retention will find themselves incurring greater losses that they cannot afford. Of course, with a professional risk management program in place to minimize and prevent losses, companies might escape unharmed.

The next part of the perfect storm is that increasing retention is a great way to release internal capital. The other side of the coin is that these same companies will cut their risk management staff to the bone. In my opinion, risk managers are needed now more than when the insurance markets soften. When there is so much money at risk, who better to watch over the risks than a qualified risk manager?

The final part of the perfect storm is when the employers turn all of their risk management programs over to a broker. This may work in some situations, but as I have said often, the employer and their staff understand their business much more precisely than any outside party.

Many employers that have experienced skyrocketing Workers Compensation costs and wish to find an alternative way to cover all of their insurance risks after letting their broker administer their risk management functions have recently contacted us.

I estimate the hard market will be in place very long-term, as there are so many parts of the “Perfect Storm” for risk management that are already in place.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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