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Workers Comp Treasury Bill Rate Link – Huge Foreign Investments

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Workers Comp Treasury Bill Relationship Continues

The Workers Comp Treasury Bill link remains strong even with higher inflation.   Let us look at why Workers Comp and other lines of insurance depend heavily on US Treasury Bills and foreign investment.

One surprise that the data always shows is that a certain foreign country invests the most in US Treasury bills.   Read on further – it is not the most obvious country.

I have written on this topic a few times.  See the bottom of the article for links to those prior articles.

Workers Comp US Treasury Bill Rate Drives Investments

Workers Comp insurance carriers have always invested very judiciously and conservatively.    Any type of insurance carrier wants the most stable investments with the highest possible return.  Insurance carriers used to invest in stocks to create a softer market.

With the short-term pandemic market crash, most large corporations – including carriers – decided to take on a more conservative investment strategy.  The T-Bill remains one of the highest rates of return for the risk involved with the investment.

A long time ago, one of my mentors said to always look at the 10-year T-Bill rate when analyzing short-term or long-term interest rates.  The 10-year is a medium-term outlook.  Check out the graph here. 

According to ycharts, (see the previous link) –  Many analysts will use the 10-year yield as the “risk-free” rate when valuing the markets or individual security. 

According to Bank Rate Monitor, the best current CD savings rate is 2.0%.  The 10- year T-bill rate sits at 2.73%.

Insurance carriers need quite a large amount of liquid assets, and CDs tend to tie up money for longer – so the risk of investment increases which decreases the desire to invest in CDs.

Workers Comp US Treasury Bill Analysis For One Carrier

One of the larger insurance carrier’s investment portfolios according to their 10-K report:

 

graph of investment portfolio workers comp treasury bill
SEC public filing

I will let the carrier’s name remain anonymous even though this is public information.

Look at the percentages closely.  Even though the carrier’s largest investment is with taxable fixed securities, the largest % of liquid assets comes under treasuries.  The 52% fixed maturities mean those investments are not liquid such as CDs and they are fully taxable.   Only 4% of investments are in equities or stocks.  If the fixed maturities were quickly sold, an early withdrawal penalty would be assessed immediately.

One can quickly see the Workers Comp Treasury Bill relationship by the ring chart.

Foreign Treasuries Investment Still Has Big Effect

A huge sell-off of  US treasuries occurred in March 2022.  The two largest foreign government investors sold a large number of treasuries.  China is not the largest holder.  Japan has a larger amount invested in US treasuries than China. Both of them together represent a large stake in the Treasuries.

See the prior articles that I wrote on this subject: (or use the search box for more info)

China and Japan Sell Off Treasury Holdings

China Sell-Off’s Effect on Insurance Companies

Election Cycle’s Insurance Effect 

Related:

Insurance Treasury Bill Conundrum – Japan Hesitates

 

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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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