Workers Comp Treasury Bill Rate Link – Huge Foreign Investments

The Workers Comp Treasury Bill link remains strong even with higher inflation.   Let us look at why Workers Comp and other lines of insurance depend heavily on US Treasury Bills and foreign investment.

One surprise that the data always shows is that a certain foreign country invests the most in US Treasury bills.   Read on further – it is not the most obvious country.

I have written on this topic a few times.  See the bottom of the article for links to those prior articles.

Workers Comp US Treasury Bill Rate Drives Investments

Workers Comp insurance carriers have always invested very judiciously and conservatively.    Any type of insurance carrier wants the most stable investments with the highest possible return.  Insurance carriers used to invest in stocks to create a softer market.

With the short-term pandemic market crash, most large corporations – including carriers – decided to take on a more conservative investment strategy.  The T-Bill remains one of the highest rates of return for the risk involved with the investment.

A long time ago, one of my mentors said to always look at the 10-year T-Bill rate when analyzing short-term or long-term interest rates.  The 10-year is a medium-term outlook.  Check out the graph here. 

According to ycharts, (see the previous link) –  Many analysts will use the 10-year yield as the “risk-free” rate when valuing the markets or individual security. 

According to Bank Rate Monitor, the best current CD savings rate is 2.0%.  The 10- year T-bill rate sits at 2.73%.

Insurance carriers need quite a large amount of liquid assets, and CDs tend to tie up money for longer – so the risk of investment increases which decreases the desire to invest in CDs.

Workers Comp US Treasury Bill Analysis For One Carrier

One of the larger insurance carrier’s investment portfolios according to their 10-K report:

SEC public filing

I will let the carrier’s name remain anonymous even though this is public information.

Look at the percentages closely.  Even though the carrier’s largest investment is with taxable fixed securities, the largest % of liquid assets comes under treasuries.  The 52% fixed maturities mean those investments are not liquid such as CDs and they are fully taxable.   Only 4% of investments are in equities or stocks.  If the fixed maturities were quickly sold, an early withdrawal penalty would be assessed immediately.

One can quickly see the Workers Comp Treasury Bill relationship by the ring chart.

Foreign Treasuries Investment Still Has Big Effect

A huge sell-off of  US treasuries occurred in March 2022.  The two largest foreign government investors sold a large number of treasuries.  China is not the largest holder.  Japan has a larger amount invested in US treasuries than China. Both of them together represent a large stake in the Treasuries.

See the prior articles that I wrote on this subject: (or use the search box for more info)

China and Japan Sell Off Treasury Holdings

China Sell-Off’s Effect on Insurance Companies 

Election Cycle’s Insurance Effect 

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.

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