PALM SPRINGS, Calif. — Property/casualty insurance premiums increased 4.4% last year and are expected to climb through next year as insurance markets are hardening, speakers said during Captive Insurance Cos. Association's conference.

Thomas Holzheu, Armonk, N.Y.-based head of economic research and consulting in North America for Swiss Re America Holding Corp., said low interest rates and sluggish investment income have hurt insurer profits. As a result, insurers have pushed for higher rates and exposure growth has backed up the hardening market, he said.

“There's momentum toward an increasing rate in pretty much all major lines of business,” said Mr. Holzheu, who said he expects the trend to continue into 2014. “That's good news.”

Reserve releases have supported insurers' performance in recent years, but their reserves are expected to be underfunded for future property/casualty claims, Mr. Holzheu said. He cited a report from reinsurance brokerage Guy Carpenter & Co. L.L.C. that showed accident years from 2011 to today would have deficient reserves.

“It's not whether, but only when, it will turn to adverse development,” he said in noting that the reserve trend likely will prompt rising reinsurance casualty rates.

Administering workers compensation claims for group captive funds was addressed in a separate session at the CICA conference in Palm Springs, Calif.

Ron Arthur, vice president and claims manager for American Contractors Insurance Group Inc. in Dallas, said the organization's captive has kept its workers comp costs down through “aggressive” claims management for its 40 construction industry members and by being selective about its membership.

The contractors group purposely has kept its roster small in order to manage the risks taken on by the captive, which covers workers comp, auto and general liability coverage. Each of the captive's members has in-house staff that manage safety, claims and risk management, and the captive has internal staff who play similar roles for the contractor group's members.

“They're in our program because they want control of the claims,” Mr. Arthur said of the captive members, which have an average experience modification rate of 0.63. “Particularly on the workers compensation side, they have very strong and proactive safety programs; and as a result of that, we minimize the overall number of claims.”

The contractor group pays the first $5 million in losses and expenses on any comp, auto or liability claim, and members must have a minimum retention level of $520,000 on losses and expenses. Those requirements have allowed 98% of the organization's claims to remain within the captive's retention levels, Mr. Arthur said.

Representatives from San Marcos, Calif.-based RehabWest Inc. explained how the managed care firm has helped keep American Contractors' workers comp medical costs down through pharmacy management. Sharon Douglas, the CEO, said companies should watch for red flags that show opioids are being prescribed inappropriately to workers, resulting in high prescription costs.

Warning signs include ongoing opioid use without any functional improvement for the injured worker, excessive dosages that can result in accidental death and opioids that are prescribed after the acute phase of an injury.

“The opioids are meant to control pain early on very quickly, not for someone six weeks post-injury,” Ms. Douglas said.

Ailene Dewar, vice president of sales and client services, said RehabWest has had success with reports showing how a patient's treatment has evolved to include dangerous prescriptions. The reports have been used to negotiate with claimant attorneys to guide the worker toward less dangerous treatments, and sometimes inspired claimants to seek a different course of medical care.

“In many cases, when the injured worker actually gets a copy of the report and reads it and finds out the detrimental effects to him or her, then they're more interested in talking about change,” Ms. Dewar said. “Their physician hasn't been telling them what's going on in their case, and why all of their subsequent problems are from the opioids they're taking.”

About 450 people attended the March 10-12 conference in Palm Springs, Calif. Next year's conference is set for March 9-11, 2014 in Scottsdale, Ariz. For more information, go to www.cicaworld.com.