Best Co. downgraded four California workers’ compensation company ratings, reflecting poor w/c market conditions in California, as well as company-specific issues.
Calabasas, Calif.-based Superior National Insurance Group was graded “B” (Fair), down from “B++” (Very Good). The rating remains under review with negative implications.
PAULA Insurance Co., based in Pasadena, Calif., was changed to “B,” down from “B++.”
Western Growers Insurance Co. of Irvine, Calif., was graded “B-” from “B+.”
Fremont Compensation Insurance Group, based in Glendale, Calif., was downgraded to “B++” from “A-.”
Fremont’s rating was removed from under review and remains in the secure range. Superior National, PAULA and Western Growers ratings are considered in the vulnerable range.
Over the past two to three years, w/c companies in California based their reserving and pricing practices on favorable loss trends of prior years and more recently low-level reinsurance arrangements, including those associated with Unicover. During this period, however, loss severity has increased, causing huge reserve deficiencies to build up. According to the California Workers’ Compensation Insurance Rating Bureau, the state’s workers’ comp market had a reserve deficiency of $3.2 billion as of year-end 1998.
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