Sector Watch: The price of premiums

While competitive pressures are pushing rates and premiums down for many property and casualty insurance providers, two specialty suppliers, SeaBright Insurance Holdings, Inc. (Nasdaq: SEAB) and Tower Group Inc. (Nasdaq: TWGP) are continuing to post robust growth due to their niche focuses. 

Seabright Insurance Holdings specializes in niche products such as maritime workers insurance, alternative dispute resolution (ADR) insurance and State Act workers compensation insurance. It is licensed to sell insurance in 45 states and distributes its products through independent brokers and wholesalers. 

SeaBright is growing premiums faster than the overall market because of its focus on specialty segments of the workers compensation insurance market. Although workers compensation is a huge market (generating premiums of $46 billion annually), premiums declined last year because of competitive pricing. Premium growth is forecast at only 1.5% in 2007, the slowest growth since 1998.

This company is one of only a handful of insurance providers authorized to write maritime coverage under the USL&H Act, a federal law covering longshoremen injured in shipyards and vessel unloading areas. SeaBright is also authorized to provide coverage under the Jones Act, a federal law protecting seamen and offshore workers injured through employer negligence and under OCSLA, which covers maritime workers on off-shore drilling platforms.

In addition, SeaBright is one of a few select insurance companies that provides coverage to employers subject to collectively bargained workers compensation agreements. These agreements, also known as ADR programs, reduce litigation costs by using informal arbitration rather than litigation to resolve disputes. ADR programs are prevalent in California. In addition, SeaBright provides coverage under State Act workers compensation laws, which vary from state to state. SeaBright focuses mainly on State Act workers compensation customers in California, Alaska, Illinois and Hawaii. 

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