With income from investments down, property and casualty insurers have been forced to rely more on income from underwriting. That meant 2002 was another year of higher premium costs.

California's 25 largest property and casualty insurers reported $40 billion in written premiums in 2002, a 19 percent increase from the $34 billion in 2001.

In California, there was an increase in the loss ratio (the measure of dollars spent on claims relative to those taken in as premiums) to 72.1 percent last year from 71.7 percent in 2001 for all lines of insurance.

Workers' compensation contributed to the declining performance, with the State Compensa-tion Insurance Fund of California posting a higher-than-avrage loss ratio of 87 percent in 2002.

Other major workers' compensation insurers, like No. 4 American International Group and No. 9 Hartford Insurance Group had loss ratios of 133.7 percent and 93 percent respectively.

Nicole Taylor


State Compensation Insurance Fund

Thanks to explosive growth from employers hit by rising workers' compensation costs and private insurer failures, State Compensation Insurance Fund took over the top spot as the largest property/casualty insurer in California. State Fund reported $5.4 billion in written premiums in 2002, a 51 percent growth rate from 2001.

The growth came while the rest of the workers' compensation insurance market imploded in 2001 and 2002 and two dozen private insurers became insolvent. As their carriers either went out of business, stopped writing new premiums or doubled their rates, employers rushed to State Fund, lured by its relatively stable rates and by its charter to offer affordable coverage. By most estimates, State Fund now holds half the entire workers' compensation premium market in California.

But the rush of new employer clients has raised concerns that State Fund might not have enough reserves to handle all the expected new claims. Last week, independent auditor PricewaterhouseCoopers said the State Fund should boost its reserves by $1 billion. State Fund officials said the fund is solvent.

After lengthy negotiations, State Fund agreed to raise its rates by at least 10 percent as of this July 1. More importantly, State Fund is limiting the inflow of new customers. Before an employer can apply for coverage with State Fund, that employer must now submit notices of "decline to offer coverage" from three separate insurance companies.

Howard Fine

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