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Will China US Treasury Sell Off Affect Insurance and WC Markets?

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China US Treasury Sell-Off Possible In 2020

The China US Treasury relationship cannot be ignored when covering any type of financial market.   This is not a gloom and doom prediction.  The China US Treasury holdings are easily tracked due to the US Treasury’s  foreign holders page.    

graphic of red arrow china us treasury decrease rate
(c) 123rf

One needs to pay attention to the macro-economy instead of just looking at insurance and rating bureau calculations and estimates. 

China did have a  previous banking crisis that is still in effect today.

China has dumped 24 billion in Treasury notes in the last year.   That is only a 1.5 % shift.   That was not too alarming.   Japan also sold off the same % of Treasury holding over the last year.

This Wall Street Journal article from yesterday caught my attention (wow-factor).   The chart is astounding from a very well written article.   As the article points out

“To contain the selloff, the Peoples Bank Of China has been buying yuan and selling dollars to prevent the yuan from weakening beyond around 6.40 per dollar, according to the people.”   

Treasure Of China US Treasury At Safety Glass
Wikimedia Commons – Antoine Taveneaux

A very important point in the article –

The 10-year yield settled at 2.061% Wednesday, compared with 2.173% at the end of 2014 and 3.03% at the end of 2013. Yields fall as prices rise.  

Another internal pressure is the Fed Rate increase- 64% of economists surveyed say there will be an increase by the Fed in December.   Another upwards price pressure to make yields fall.

Insurance carriers, self-insured groups, and even captives (onshore or offshore) have to find the safest yield for a return on investment.   Treasury bonds, notes, etc. are among the safest on the planet.  They are the good-sleep-at-night investments.

When  core investment yields fall the difference must be made up somewhere – ergo- premiums.   A market hardening may not occur whatsoever.   Then again,   more than one major variable (foreign investment + Fed Rate) are two figures to keep track of in your WC  and insurance jobs.   Employers should look at this figure for many reasons including future WC insurance rates.

Will the China US Treasury relationship cause an increase in Workers Comp premiums?   No, not that one variable would cause an increase, however, it is one of a few that would cause a shift in US yields.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt 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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