Archive for Industry News

Governing Committee Votes for Mid-Year Filing

Governing Committee Votes for Mid-Year Filing:

Oakland, CA April 6, 2016 – Citing lower medical loss development, as well as indemnity and medical severities that continue to emerge below expectations, the insurer and public members of the WCIRB Governing Committee who were in attendance voted unanimously today to authorize the WCIRB to submit a mid-year pure premium rate filing to the California Department of Insurance (CDI).

The filing will propose a July 1, 2016 average advisory pure premium rate of $2.30 per $100 of payroll which is -10.4% lower than the corresponding industry average filed pure premium rate of $2.57 as of January 1, 2016 and 5.0% less than the Insurance Commissioner’s approved average January 1, 2016 advisory pure premium rate of $2.42.

The Governing Committee’s decision was based on the WCIRB Actuarial Committee’s analysis of insurer loss and loss adjustment experience as of December 31, 2015, which was reviewed at public meetings of the Actuarial Committee held on March 22 and April 5, 2016.

The Actuarial Committee noted that allocated loss adjustment expense in the post-SB 863 environment is emerging higher than projected and the count of liens increased sharply in 2015. In addition, cumulative trauma claims continue to increase, particularly in the Los Angeles region. Despite these upward pressures on system costs, the Governing Committee believed that lower frequency, lower medical severity and favorable loss development warranted a reduction in the industry average pure premium rate as of July 1, 2016.

The WCIRB anticipates submitting its filing to the CDI by April 11, 2016. The filing and all related documents will be available in the Publication and Filings section of the WCIRB website ( and the WCIRB will issue a Wire Story once the filing has been submitted.

Documents related to the Governing Committee meeting, including the agenda and materials displayed or distributed at the meeting, are available on the Committee Documents page of the WCIRB website (

BHHC Alert: New CA Workers Compensation Claim Form & Poster Required

Have you heard? Effective January 1, 2016:
California will require use of its revised
Workers Compensation Claim Form & Poster

As a courtesy to our valued customers, please be advised that as of January 1, 2016, California will require use of the newly revised Workers Compensation Claim Form & Notice of Potential Eligibility (DWC 1) and use of the newly revised Notice to Employees--Injuries Caused by Work Poster (DWC 7). Please click below to download each form.

Did you know?
BHHC offers
Claims Kits by State online!
Click here to view the library and download your state's claim kit

Still have questions?
Contact Customer Care at (888) 495-8949

Copyright © 2015 Berkshire Hathaway Homestate Companies, All rights reserved.

Own an older building? You should be familiar with Building Ordinance!

Building Ordinance Coverage:
What’s Your Responsibility?

Your building is covered for a limit of $1 million. The building was partially damaged (60%), in a fire. Local ordinances require upgrading to the current building code when damage or renovations exceed 25% of the building and also require the demolition of the undamaged portion of the building. In this case, the total cost for demolition, debris removal, and increased cost of reconstruction totaled $1.5 million. You do the math! What went wrong?
Building Ordinance Coverage

Building ordinance coverage provides three basic coverages: A. loss to the undamaged portion of the building, B. demolition and removal of the undamaged portion of the building and C. any increased costs of repair or construction due to enforcement of building codes. This coverage needs to be added to the policy as the basic form provides minimal coverage for the enforcement of any ordinance or law. The value of Building Ordinance Coverage is to provide coverage for these costs.

Coverage A: Loss to the Undamaged Portion of the Building

This portion of the coverage responds when a covered loss triggers application of ordinance or law relating to a partial damage to a building. If the undamaged portion of the building is rendered unusable, or condemned, by an ordinance, and has to be torn down, a total loss of the building is incurred.

Local jurisdiction will require the undamaged portion be demolished when the loss crosses the “major damage” threshold as defined by the jurisdiction. This is when the jurisdiction considers the building beyond safe repair due to age, condition, or previous compliance with building code. Jurisdictions normally use state law to decide when this point of major damage has been breached, so definitions can vary.

Coverage B: Demolition Cost Coverage

This coverage applies only to the demolition and debris removal of the undamaged portion of the building. It is important for you to know the costs within the local construction market for demolition of a building and removal of all debris from the site and at what point will the jurisdictional authorities require the building to be torn down, in order to establish an adequate limit for this coverage.

Building Journal offers a very useful tool to quickly estimate the cost of residential and commercial demolition projects in over 160 U.S. cities:

Keep in mind the valuation date of the data, and that this doesn’t include the cost of addressing any special hazards, such as asbestos, lead, etc.

Coverage C: Increased Cost of Construction

This coverage is for making the building compliant with any building codes that have been adopted since the building was originally constructed. Ordinances, requirements, and building codes originate from many sources: local, federal or state. The emphasis is on local codes, as local jurisdictions are charged with enforcing building code compliance.

Proper Building Limit is the Key

To develop an adequate building limit, you must consider not only the replacement cost, but also the additional costs of building ordinance coverages B & C. Discuss these with the insured to identify all ordinances that have been implemented since the building was constructed. This may require a conversation with the governing local jurisdiction. When Building Ordinance Coverage is selected, Sequoia Insurance includes the needed limits as part of the total building limit, instead of identifying specific limits. The advantage of this method is that it allows flexibility for the insured in the event that any of the coverages A, B, or C have been underestimated. The insured has the full building limit to apply to all reconstruction activities. This is managing the risk. This is Risk Management.

Cybersecurity Becoming #1 Concern for General Council and Directors


Smoking in apartments in San Diego could be outlawed

SAN DIEGO – A San Diego City Council committee wants the City Attorney’s Office to evaluate a possible ordinance under which an apartment-dwelling smoker could be punished if someone else in the building objected and possibly evicted if the smoker did not stop.

The Smoke-Free Housing Task Force pitched the idea to the council’s Public Safety and Neighborhood Services Committee, which forwarded the idea to lawyers for the city.,0,7398786.story?track=rss

D&O Executives: Some Professional Lines Harden

Buoyed by a rising economy, but facing pressures of low investment rates, professional liability insurance rates are beginning to harden, according to featured speakers at the Professional Liability Underwriting Society’s D&O Symposium.

“It’s not a hard market yet, but it’s headed in that direction for the first time since 1999,” said Jay Gelb managing director of Barclays Capital, who spoke Feb. 8 at a panel.

David McElroy, president of financial and professional liability products for Arch Insurance, said when the economy grows, so does business. “We are completely tethered to the economy,” McElroy said.

When companies see their assets rising, they buy more insurance, said Brian R. Meredith, managing director of UBS Securities. “What drives sales is gross domestic product,” he said.

Insurers are paying more attention to pricing and underwriting because interest rates, and investment income, are so low, Meredith said.

That wasn’t always the case. McElroy said from 2003 to 2007, “if you were breathing, you made money.”

But with investment returns hovering at about 3%, companies have to write more profitable business to reach their financial goals today, he said.

For instance, a 95 combined ratio in 2004 would have resulted in a 15% return on equity. To get that same 15% ROE today, companies have to produce a combined ratio of 87 to 88, McElroy said.

“It’s difficult to translate that knowledge from the CEO to the underwriting level,” McElroy said.

Gelb agreed that companies used to be able to win a 10% ROE, “just by showing up. You just can’t do that anymore.”

He said for every 1% decrease in investment income, companies must make up 2.5 points in their combined ratio.

But, he warned if companies maintain a too conservative approach in their investing, it could lead to missed opportunities.

Eric J. Andersen, chief executive officer with Aon Risk Solutions, Aon’s U.S. retail arm, said the market is a dichotomy. Insurers will push hard for price increases on renewal business, but tend to be more competitive on new business that they are trying to woo away from other carriers.

“As long as that gap exists, it is a soft market. But for the first time, in the fourth quarter, we actually started to see that gap narrow,” Andersen told Best’s News Service after the panel.

Even though D&O is a single product, it’s divided by segments, he said. For instance, private or nonprofit companies still find insurers competing for their business, but large public companies are finding the market more difficult.

While there may be 50 or 60 companies in the D&O marketplace, for very large Fortune 500 companies, the market has narrowed to just five to 10 players, Andersen said.

For difficult segments such as financial institutions and pharmaceutical companies the market is even smaller.

But there’s more competition in the excess layers, as companies from Bermuda, London and the United States are looking to capture market share, Andersen said. “The primary market has already firmed; the excess market is now catching up,” he said.

Insured companies are more likely to diversify their insurance by turning to multiple carriers today, Andersen said.

“It’s what we call the AIG effect,” Andersen said. “People learned in 2008 that you need a couple of good relationships instead of one big one. You need to spread out, diversify.”

Every recent very hard market1986, 1992 and 2001was formed after a number of insurers fell into insolvency said Michael C. Sapnar, president and CEO of Transatlantic Holdings.

“It’s never just one event,” Sapnar said during the panel discussion. “And it has to be companies that have holes in their balance sheets.”

While the number of financial impairments of property/casualty companies continues to accelerate, A.M. Best’s analysis shows the primary cause of impairments was a combination of deficient loss reserves and inadequate pricing.

P/C impairments increased to 28 in 2011 from 21 in 2010, according to an A.M. Best special report. That includes 10 additional 2010 impairments recorded since A.M. Best published its 2010 study last year. P/C impairments have been on a steady upward trend since the record low of five impairments in 2007, which represents the fewest number of impairments in the 43 years that A.M. Best has done its impairment study (Best’s News Service, Feb. 2, 2012).

Another challenge facing the industry today is the growing sophistication and accessibility of information. Clients may know about losses elsewhere, but don’t feel responsible to pay more for their own insurance as a result, Andersen said.

“It’s made it hard to spread risk,” Andersen said during the panel. “You’re not going to find U.S. businesses willing to pay for losses in Thailand.”

Arch Insurance Group’s subsidiaries currently have Best’s Financial Strength Ratings of A+ (Superior). Transatlantic Holding’s subsidiaries currently have Best’s Financial Strength Ratings of A (Excellent).

A video with excerpts from interviews with Eric Andersen of Aon Risk Solutions and David McElroy of Arch Insurance is available at

Average Filed WC Premium Rate Climbs 2.8%

Insurance Commissioner Dave Jones last fall called for California workers’ comp insurers to cut their 2012 pure premium rates by 3% to an average of $2.30 per $100 of payroll. But reports from the field and the rate filings by the carriers themselves indicated that this would not be the case and yesterday afternoon the California Department of Insurance (CDI) confirmed it.

The Department says that instead of a 3% decrease, the average pure premium rate in California is actually up 2.8% from last year. That equates to an average rate of nearly $2.44 per $100 of payroll, according to CDI spokesman Byron Tucker.

Read the Full WCEXEC Article Here

Governor signs Wage Theft Protection Act of 2011: EMPLOYER ACTION REQUIRED

Governor Brown has signed into law AB 469 (Chapter 655, Statutes of 2011) known as the Wage Theft Protection Act of 2011. Click here for the full TEXT of the Bill. The provisions of the Act become effective January 1, 2012. Labor Code section 2810.5 was added by the bill which requires that all employers must provide each employee at the time of hire with a written notice that contains specified information and must be provided in the language the employer normally uses to communicate employment-related information to the employee. The Section requires that the Labor Commissioner make available a template that complies with the requirements of the notice.

Here is the English version of the notice. PDF of Employee Notice Other languages are available on the Department of Industrial Relations website here.

Carlsbad Business Journal Now Available Digitally!

One of our favorite local publications, the Carlsbad Business Journal, published by the Carlsbad Chamber of Commerce, is now available in digital form. Check it out! Carlsbad Business Journal Online

CA State Fund Declares a $50 Million Dividend to Policyholders

State Fund Press Release, “We are pleased to announce a $50 million dividend to qualifying policyholders in the form of a premium credit.  This is approximately 5.2 percent of estimated annual premium for the 2011 policy year.”  For more information, follow the link! STATE FUND DIVIDEND PRESS RELEASE