Emergence of California Cumulative Trauma Claims and Legislative Advocacy
California's unique treatment of cumulative trauma (CT) claims, allowing post-termination filings and remote hearings, has led to a significant rise in frequency, especially in older accident years.
The increase in CT claims is driven by broader legislative and procedural changes, including COVID-era remote hearings and attorney involvement.
Management is actively involved in legislative reform efforts, with California's Insurance Commissioner urging legislative action to address the trend.
The company has implemented internal strategies such as pricing, risk selection, and claim management to mitigate the impact of rising CT claims.
A full actuarial reserve study is planned for Q3 to better understand and reflect the trend, with over $50 million of favorable reserve development moved to more recent accident years.
Industry-wide Reserve Development and Social Inflation Impact
Selective highlighted ongoing industry-wide reserve increases, with nearly $10.5 billion added in 2024, nearly half for pre-pandemic years.
Selective's reserve actions are driven by recent, immature accident years, especially in longer-tail lines, indicating a focus on recent paid emergence patterns.
Management emphasized that their reserve development reflects the quality of initial loss picks and that they respond quickly to loss emergence, contrasting with industry trends.
The company believes the pressure on casualty reserves is industry-wide, driven by social inflation, particularly affecting bodily injury claims.
Selective's portfolio has a higher exposure to construction and longer-tail lines, which may influence their reserve development and social inflation sensitivity.
Dafinchi