Standard & Poor’s has placed its ratings on several insurance companies with significant exposure to the California workers”comp market on CreditWatch with negative implications. These rating actions, combined with recent negative rating actions taken on Fremont General Corp. and related entities, reflect S&P’s concern about the reserve adequacy of these individual insurers.
Supporting S&P’s concerns is a recent study conducted by the Workers’ Compensation Insurance Rating Bureau of California, which indicates a gross loss reserve deficiency of $4.7 billion for the California workers’ comp market. Since the advent of California’s open rating system for workers’ comp in 1995, price competition among individual insurers has been aggressive. This has caused reserve adequacy and, consequently, operating results to suffer. The insurers placed on Credit Watch include: Zenith Insurance and several subsidiaries; State Compensation Insurance Fund; Argonaut Insurance Co.; and Georgia Insurance Co
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