Industrywide, insurers have not been turning an underwriting profit on workers' compensation for construction. Hampered by medical inflation and low investment returns, insurers are having to raise rates in the traditionally long-tail line, Conroy said.
"There just isn't a place for the insurance industry to invest the money over that time horizon," he said. "That stresses the top line price, which you need to get the right kind of return."
While no one would call the market hard, it is "firming," Conroy said. "We're seeing maybe a slight up-tick after the long slide of the last several years," Conroy said.
The economy has been tough on the construction industry, which in turn, has meant less premiums for insurers, he said. "Contractors have an exposure base that's either based on payroll or annual sales revenue ... on that dimension, demand has been down," Conroy said. "The construction industry fell furthest and fastest, and the unemployment is way above normal unemployment."
Competition among carriers is stiff, he said. "You have a lot of capacity out there chasing the available premium," Conroy said.
But things are picking up, Conroy said.
There are bright spots in the industry, he said, including green building initiatives, growth in the power sector and needed improvements to infrastructure.
Prior to his new position, Conroy was responsible for underwriting large construction risks for Liberty Mutual Commercial Markets. These risks had annual insurance programs valued at more than $1.5 million. Before joining the Boston-based insurer in 2003, Conroy held a variety of senior construction risk underwriting, surety and loss control positions.
Liberty Mutual's newly consolidated construction underwriting operation lets agents and brokers "access our specialized knowledge of construction risk and local decision making throughout commercial markets’ account-size spectrum,” notes Conroy, senior vice president and chief underwriting officer for construction, Liberty Mutual Commercial Markets.
Liberty Mutual is the largest writer of workers' comp insurance in the United States, according to BestLink.
In October, Edward Keane, a senior financial analyst at A.M. Best, said it's unlikely that workers' compensation writers will see that line of business turn around anytime soon, despite large-scale workers' compensation reform bills enacted in several states this year (Best's News Service, Oct. 10, 2011). Keane said the deterioration that workers' compensation insurance has seen during the past two years will continue at least until mid-2012, unless the economy makes a dramatic improvement before then.
For 2011, A.M. Best is projecting a 121.5 combined ratio. Last year, the combined ratio for the line was 118.1%.
In November, Liberty Mutual Group said it completed its acquisition of Irish property/casualty insurer Quinn Insurance Ltd., and plans to expand its offering of insurance products in both personal and commercial lines.
Boston-based Liberty Mutual Group is the third-largest property/casualty writer in the United States, after State Farm Group and Allstate Insurance Group, based on 2010 net written premium, according to A.M. Best data.