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US Treasury Sell Off By China and Japan – Effect on Work Comp Markets

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Insurance and Workers Comp Markets Anchor Investment Concern

How can Workers Comp markets sustain any effect from China selling off US Treasuries?  Check my earlier articles on this very subject at this link

Take a look at this chart from the Feds on to see if this situation is true.   

US Treasury nuclear symbol dollar sign
Wikimedia Public License Cannedcat

 I was going to include the chart, but the resolution would not be that great for viewing.   If you want to skip this financial analysis and see the Workers Comp info, scroll down to the next heading.    

One caveat to skipping this section is that all interest rates use these figures as part of the basis for mortgage, credit cards, and loan rates on personal loans. 

While searching through economic-type articles, I came across one of those BUY GOLD articles and ads saying that China is selling off more US Securities than in a long time.  China is replacing the Treasuries with gold.   Please excuse the marketing page for gold, but the article has great analytics. 

I then decided to look to see if the #2 holder of US Treasuries had sold them off over the last year,   Yes, Japan, the #2 holder of US Treasuries had also sold them off in the last 12 months. 

US Treasury Holdings China and Japan

The reason (actually opinions) why China and Japan are selling them off can be found at Bloomberg Asia in the late evening hours (East Coast Time).    Actually, I watch it sometimes as the “outside looking in” viewpoints on US financial news can be eye-opening. 

Here are the numbers:

  • China – $62 billion sell-off
  • Japan – $24 billion sell-off

Usually, the US Treasuries are replaced with US stocks, which means the money did not leave the country.  When our two largest holders of treasuries are not shifting the money, but pulling it back into their own countries,  that may be something to track at least every year. 

You may look a the whole market and notice an increase in US Treasuries.   That is exactly true,   Then again, if you have ever sold anything and you tell your boss that sales are down with your top two customers, that would be a bad scene. 

Insurance Carriers Investments – US Treasuries 

If one looks at the SEC filings by insurance carriers, there will always be a section on investments.  Carriers love to dabble in the stock markets.  However, the safer investments – Bonds, Treasuries, Cash, etc. usually hold most of the investment risk.   Insurance carriers are usually invested in conservative investments.  

When the two main investor countries start to sell off their investments, the yield will usually decrease.    The chart below shows the drop from a safe yield of 3.25% to 2.6%.   This chart is up to the minute from one year ago.    

US Treasury Chart 10 year chart
Provided by Yahoo Finance

If insurance carriers cannot make a profit on investments, where would they go to make investment returns for their shareholders?   How about a premium increase?  I am not saying that would happen.   Sometimes common sense rules, though.   

Bottom Line on US Treasuries and China or Japan

The rates are not solely responsible for any type of premium increase on Workers Comp as we know from articles on this blog that many variables have an effect.   Look at the US Treasury sell-off as a driver, not the sole variable. 

 

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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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