icare liabilities rise, improvement plans move ahead

Liabilities for the icare NSW workers’ compensation scheme increased in the second half of last calendar year compared to six months earlier as the insurer continues work on a performance improvement program amid headwinds.

Nominal Insurer liabilities increased to an estimated $22.2 billion as of December 31, rising from $20.1 billion at June 30, on an accounting basis. Assets increased to $20.74 billion from $19.82 billion, giving a funding ratio of 93%.

On an insurance basis, assets are $20.7 billion and total liabilities are estimated at $18.06 billion giving an insurance ratio of 115%, according to a Nominal Insurer liability valuation report that summarises a Finity independent actuarial assessment.

The insurance ratio was 122% at June 30, according to a previous report, while the Nominal Insurer capital management policy targets a “Zone A” insurance ratio of more than 130%.

The insurance ratio reflects liabilities calculated using discount and inflation assumptions that reflect expected long-term investment returns for the scheme, rather than the risk-free rate.

“This ratio reflects the need to manage financial risks across a longer time horizon, the expected return on investment assets and the different level of capital required compared to the private sector,” the report says.

A NSW Government spokesperson says the Nominal Insurer has been impacted by wage inflationary pressures, a significant increase in psychological claims, covid and volatile investment markets.

“Despite these headwinds, the Nominal Insurer remains in a strong position to meet all its financial obligations, with an insurance ratio of 115%,” the spokesperson told insuranceNEWS.com.au.

The insurer is working to implement recommendations from the McDougall review, which reported in April last year on icare’s governance and performance, and it has engaged independent consultants Promontory to report quarterly on progress in delivering the multi-year program.

Promontory says in its latest report released last week that icare has made considerable progress, and it has seen a positive shift in moving from the planning phase towards ensuring outcomes are delivered.

Challenges include staffing and filling key roles in an environment where market demand for roles such as risk specialists is high, and ensuring effective prioritisation of projects.

“I’m proud of the progress we’re making in this significant program of reform and remediation, and it’s good to see Promontory recognise our good work,” icare CEO Richard Harding said.

“We accept that the next important step will be to continue to prioritise initiatives so that those most impactful are afforded the requisite attention. We have the team in place to fulfil the commitments.

“Positive and lasting change does not come quickly or easily. We understand that and are absolutely committed to the work we’re doing.”