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Liberty Mutual Holding Co. followed through on its announced plan to reduce its workers compensation exposures and reported lower comp premiums for 2014, which one expert said raises the question of whether the insurer plans to leave the market.
Liberty Mutual this week reported that its voluntary workers comp net written premiums declined 14% last year to $2.15 billion.
Also this week, the National Association of Insurance Commissioners put Liberty Mutual in the No. 4 spot among workers comp insurers last year, down from No. 2 in 2013 and No. 1 for at least the previous five years.
Travelers Cos. Inc. was the No. 1 comp insurer last year, according to NAIC data.
The 2014 results could “heighten” concerns policyholders had about Liberty Mutual's deal with Berkshire Hathaway Inc.'s National Indemnity Co. to cover U.S. workers comp, asbestos and environmental liabilities, said Paul R. Walker-Bright, a partner and insurance recovery attorney at Reed Smith L.L.P. in Chicago.
The multibillion-dollar reinsurance transaction was announced last July with a retroactive effective date of Jan. 1, 2014.
“If Liberty Mutual is looking to get out of the workers comp market, if it's not an area that's growing for them, then the incentive would be to treat the workers comp claims the way that they've treated the asbestos and environmental long-tail claims,” Mr. Walker-Bright said. “To the extent (policyholders) had concerns when the deal was announced, let's put it this way, I don't think those concerns would be allayed necessarily to any extent given the results that have just been reported.”
“Over the past several years, Liberty has strategically reduced its exposure to workers compensation by targeting underperforming accounts that were contributing to unacceptable results,” Paul Condrin, president of Liberty Mutual's commercial insurance strategic business unit, said Thursday in an email. “As a leading provider of commercial insurance today, we continue to be a strong market for workers compensation insurance where our claims and loss prevention expertise and customer service focus provide value and superior outcomes to our customers.”
Despite lower workers comp premiums last year, Liberty Mutual's total net premiums written reached $36.28 billion, up from 3.3% from the prior year, and the insurer's combined ratio improved from 99.7% to 97.5%.
Insurance Information Institute Inc. President Robert Hartwig said when the workers comp market's combined ratio reached 115% about five years ago, insurers raised rates, tightened underwriting and reduced exposures.
While investment returns and regulations can affect workers comp insurers, “if labor markets continue to improve in the (United States) in 2015 as they're expected to, that's going to provide a strong tail wind for workers comp insurers in terms of growth this year,” Mr. Hartwig said.
Travelers Cos. Inc. was the largest workers compensation insurer in the nation last year, followed by Hartford Financial Services Group Inc. and American International Group Inc., according to market-share data released by the National Association of Insurance Commissioners.