Premium Growth: Top 25 Workers’ Compensation Companies

Workers’ compensation direct premiums written (DPW) for calendar year 2007 exceeded $46 billion. This represented a slight decline from year-end 2006’s $47.2 billion. However, using 2003 as a reference point, DPW was $37.6 billion. The 2007 DPW represents an increase of 23 percent over 2003. Over the same period, the Top 25 carriers increased their direct premiums volume from $13.8 billion to $18.9 billion, an increase of 38 percent. The Top 25 grew at the expense of the other 696 carriers writing business. Companies outside the Top 25 recorded an increase of only 15 percent over the period 2003 to 2007, from $23.9 billion to $27.4 billion.

A review of the 2007 DPW of the Top 25 indicated that workers’ compensation insurance was an attractive line of business. American Home Assurance maintains its No. 1 position, while Zurich American remains poised to move up from No. 2. In fact, based upon the results reported for the first quarter of 2008, Zurich American and Liberty Insurance and others each had a stronger first quarter than American Home Assurance. This observation could be somewhat distorted by seasonality in the distribution of business written throughout the year.

With 721 carriers competing for nearly $47 billion in annual premium, one might think that there is sufficient dollar volume to sustain the appetites of each competitor. However, over the period 2003 through 2007, the marketshare of the Top 25 grew from 36.6 percent to 40.8 percent. In other words, 3 percent of the carriers wrote 41 percent of the premium.

During 2008, I expect the composition of the Top 25 to change. Specifically, Brickstreet Mutual’s relative position will begin to decline. This does not necessarily reflect poorly on Brickstreet. Recall that on Jan. 3, 2006, Brickstreet Mutual opened its doors. This marked its transition from a near-bankrupt state agency to a private enterprise offering workers’ compensation to West Virginians. Brickstreet had the state of West Virginia’s workers’ compensation insurance market to itself through June 2008. In July 2008, the West Virginia workers’ compensation insurance market opened to private carriers. Although year-end 2008 results will shed more light on the transition, 2009 will be the first full year of a competitive marketplace.

In a competitive workers; compensation insurance environment, employers and meritorious claimants benefit from innovative risk management, return-to-work programs and effective claims handling. Let us hope that employers evaluate these criteria as well as the relative cost of workers’ compensation insurance when they make their selection of an insurance carrier.