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Workers Comp Markets May Be Heavily Affected By This

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Workers Comp Markets May Depend On China’s Banking Situation (Really)

The Workers Comp markets in the US have many ratios and market forces that show a soft market.  However, (not to be gloom and doom) one of the least discussed or analyzed market forces (as related to insurance) is China’s bank possible future banking crisis or at least a correction of the money markets in the second largest world economy.

xiamen workers comp markets china skyline pic
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I have written a few articles on China as an influence on the Workers Comp market.   In 2016 a China banking crisis was a concern.   Two years ago, a large selloff  of  China  Treasury Securities  became a concern.   Some of the money markets in the US were affected overall.  The Insurance markets were minimally affected in 2015.

One would think the economy in China would have leveled off by now.   Last week, I came across this article, on China’s runaway debt problem.   Their debt ratio is 260% of their Gross Domestic Product (GDP).    Check out the two charts in the article and the warning from China’ s  Central Bank.

The country that  finances a huge amount of US debt is China.  What happens if China decides to dump or call in that debt?   A quick Google search brought up an article on how much debt the US Government owes to China.   China actually owns 30% of all US foreign debt.   Wow!   China even wants to replace the dollar with its currency the yuan as the world currency.  Ouch!   No, really, that is one of their goals.

The country that holds the world’s currency automatically has a leverage.  The saving grace right now is the current return on the stock market.  Do not fool yourself to think that insurance companies invest only in 100% low return safe investments.  That is just not true.

Xiamen workers comp markets BRT-Railway
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The workers compensation carriers want to maximize their return on incoming insurance premiums and investments such as annuities.

Think with me on this one, what happens to the workers’ comp markets if the insurance carrier’s #1 foreign investor and the US economy’s #1 investor has a money crisis.   Of course they will repatriate their funds causing the investments in insurance carriers and the stock market to drop.  If the stock market drops, then insurance carriers cannot reap the profits as they have been able to recently.

A double whammy to the insurance carrier investments and to the stock market where insurance carriers invest heavily would result in the carriers becoming much pickier on who they underwrite.  Carriers being picky will result in a hard market.

I will monitor China’s money markets to see if they are going to affect the workers comp markets.

 

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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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