The liabilities of the icare NSW workers’ compensation scheme increased in the second half of last calendar year compared to the previous six months, as the insurer continued to work on a performance improvement program in an environment headwinds.
Insurers’ nominal liabilities increased to approximately $22.2 billion as of December 31, from $20.1 billion as of June 30, on an accounting basis. Assets increased from $19.82 billion to $20.74 billion, giving a funded ratio of 93%.
On an insurance basis, assets stand at $20.7 billion and total liabilities are estimated at $18.06 billion, giving an insurance ratio of 115%, according to a report by valuation of the nominal insurer’s liabilities which summarizes an independent actuarial valuation of Finity.
The insurance ratio was 122% as of June 30, according to a previous report, while the Nominal Insurer capital management policy aims for a “Zone A” insurance ratio above 130%.
The insurance ratio reflects liabilities calculated using discount and inflation assumptions that reflect the expected long-term investment returns for the plan, rather than the risk-free rate.
“This ratio reflects the need to manage financial risks over a longer time horizon, the expected return on investment assets and the different level of capital required compared to the private sector,” the report said.
A NSW Government spokesman said the nominal insurer has been hit by inflationary pressures on wages, a significant rise in psychological claims, covid and volatile investment markets.
“Despite these headwinds, the nominal insurer remains in a strong position to meet all of its financial obligations, with an insurance ratio of 115%,” the insurance spokesperson said.NEW.com.au.
The insurer is working to implement the recommendations of 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 the progress made in the implementation of the multiannual programme.
Promontory says in its latest report released last week that icare has made significant progress and seen a positive shift from the planning phase to ensuring results.
Challenges include staffing and filling key positions in an environment where market demand for roles such as risk specialists is high, and ensuring effective prioritization of projects.
“I am proud of the progress we are making on this important reform and remediation program, and it is good to see Promontory recognizing our good work,” said icare CEO Richard Harding.
“We agree that the next important step is to continue prioritizing initiatives so that those with the greatest impact receive the attention they require. We have the team in place to deliver on commitments.
“Positive and lasting change does not happen quickly or easily. We understand this and are absolutely committed to the work we do.