2012 Annual Report - Racing NSW

INSURANCE
WORKers COMpensation
Racing NSW is a specialised insurer licensed under the provisions
of the Workers Compensation Act 1987 (NSW) (“the Act”) to
provide workers compensation insurance to certain employers
(racing clubs and licensed trainers) in the NSW Thoroughbred
Racing Industry.
Additionally, Racing NSW administers the run-off of claims
under the former self-insurance licence which covered employees
of Racing NSW prior to 30 June 1998.
The Racing NSW Insurance Fund (“the Fund”) has been
managed internally since 1 July 2006. All claims management,
injury management, financial and administrative functions of the
Fund are performed by an in-house team.
The object of the Fund is to provide affordable insurance to
participants and deliver industry-specific claims, injury and risk
management services to assist employers and injured workers in
what is a unique and inherently dangerous industry.
2011/12 Financial Performance
The Fund experienced a $1.44 million profit for 2012. This result
effectively extinguishes the loss of $1.5 million experienced for the
2010/11 year and is largely attributable to the following factors:-
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Natalie Tipping
General Manager –
Insurance
There was a 5% decrease in the incidence of new claims
compared with the previous claim year. It is also pleasing to
report that no claims were received during 2011/12 which
could be classified as catastrophic;
Investment income rose by approximately $300,000 compared
to the 2010/11 performance;
Payments made for medical and related expenses were almost
exclusively confined to treatment incurred during the 2011/12
year. This differed from the experience during 2010/11 when
a large number of payments for medical expenses related to
treatment incurred during prior years;
Significant reductions were experienced in legal expenses and
payments to other external service providers;
Continuing improvements were achieved in return to work
outcomes which led to the earlier finalisation of many claims
and helped contain claims costs.
In reversing the financial performance of the 2010/11 year, in
2011/12 the Fund returned to financial neutrality which contained
premium costs for the Fund’s employers.
The actuarial central estimate of Racing NSW’s outstanding
workers compensation claims liability as at 30 June 2012 is $33.6
million (net of reinsurance recoveries and including an allowance
John Galvin
General Manager –
Workers Compensation
for claims handling expenses).
The estimate of the outstanding claims liability includes an
allowance for future inflation of claims payments (at 4.00%
p.a. – down 0.5% from 2011) and is discounted (at 3.6% p.a.
– significantly reduced from 5.35% in 2011) to allow for future
investment income earned between the valuation date and
expected payment date.
These external economic influences adversely impacted the
actuarial valuation with the actuaries reporting that lower discount
rate increased liability by $4.6 million.
The impact of these external influences was offset by of a raft
of changes to NSW workers compensation legislation which is
anticipated to reduce the Fund’s future exposure.
These legislative changes were estimated to decrease liability
by $7.1 million. Further relief was obtained from the reduction in
the inflation rate which was estimated to reduce overall liability
by $1.1 million.
The net provision for outstanding claims liability inclusive of
20% prudential margin as at 30 June 2012 is $40.3 million (0.25%
increase of $100,000 from the 2011 provision of $40.2 million).
The actuarial provision of outstanding claims liability at 30 June
2012 was $3.4 million lower than the projected estimate of $43.7
million from the 2011 actuarial valuation.
Summary of Actuarial Estimate of
Outstanding Claims Liabilities
Estimate of
Liability as at
30 June 2012
($m)
Projected
Estimate of
Liability as at
30 June 2012
(2011
Valuation)
($m)
Estimate of
Liability as at
30 June 2011
($m)
Projected
Estimate of
Liability as at
30 June 2013
(2012
Valuation)
($m)
Net Central
33.6 36.4 33.5 36.5
Estimate 1
Risk Margin 6.7 7.3 6.7 7.3
Outstanding
40.3 43.7 40.2 43.8
Claims Provision 2
1 Including claims handling expense and net of reinsurance and
other recoveries
2 Including risk margin of 20% of the net central estimate
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Racing NSW Annual Report 2012