Employers with large concentrations of employees will find an increasingly difficult workers’ compensation market in 2014 as insurers have begun underwriting policies that contemplate coverage without the financial protections afforded by the federal Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), Marsh said in a new report.
Barring Congressional action, TRIPRA will expire on Dec. 31, 2014, and the uncertainty over its reauthorization has resulted in higher rates and less capacity for employers.
Not only are insurers less willing to underwrite risks with large employee concentrations, some are setting policy expiration dates on 2014 programs to coincide with the anticipated expiration of TRIPRA, effectively pushing the challenges created by the uncertainty on to insurance buyers, Marsh said in its latest Marsh Risk Management Research briefing: Pending TRIPRA Expiration Impacts Workers’ Compensation Industry.
“Several factors have motivated insurers to seek higher workers’ compensation rates and premiums over the last 24 months, including higher claims costs, historical unprofitability and a continued weak interest rate environment,” said Christopher Flatt, Workers’ Compensation Center of Excellence leader, Marsh. “These issues are now being compounded by the uncertainty around TRIPRA’s reauthorization, which is contributing to an already challenging market.”
“The state-regulatory nature of workers’ compensation prevents insurers from excluding terrorism-related losses, so the only way they can reduce their terrorism exposure and protect their assets is to limit the amount of capacity deployed and raise rates. Starting the renewal process early and providing insurers with a differentiated view of the insured’s terrorism risk profile can help better manage a potentially challenging renewal,” Flatt added.
In the report, Marsh notes that providing underwriters with the highest quality of employee-accumulation data to run in their catastrophe models, including for example, the total number of employees working during peak shifts and the percentage of the workforce in the field or telecommuting, will help to ensure carriers have an accurate view of the risk they are considering.
In addition, employers with large concentrations of workers should be prepared to provide insurers with additional detailed information including: employee marital/dependency status; physical security of the building; how access to the building is controlled; management policies around workplace violence, weapons, and employee screenings; and emergency response and crisis management plans and procedures, Marsh noted in the report.