ORLANDO, Fla. — The state of the workers compensation insurance market is “encouraging,” with the line's combined ratio improving by 6 percentage points and premium volume up 9% in 2012, NCCI Holdings Inc. said Thursday.

The combined ratio's drop to 109% in 2012 “is significant” and “is a positive shift that has moved us well along on the tightrope,” NCCI President and CEO Stephen J. Klingel told the organization's 2013 Annual Issues Symposium in Orlando, Fla.

It was the first time since 2006 that the workers comp combined ratio improved, said the Boca Raton, Fla.-based workers compensation ratings and research organization.

Last year when insurers' calendar year combined ratio stood at 115%, Mr. Klingel called the workers compensation insurance market “conflicted.” But positive information now shows a market headed in the right direction, he said.

“This year I am no longer conflicted,” Mr. Klingel said. “This year after looking at all the numbers, there is no doubt in my mind that I am calling this an encouraging market.”

Lost time claim frequency dropped an estimated 5% during 2012, having returned to its historical long-term downward trend. During 2010, frequency increased to 10.8%, but then recorded a 3.9% decrease in 2011 as the economy slowly recovered from the Great Recession.

Clearly, 2010 represented an aberration in claims frequency, Mr. Klingel said.

The rate of growth in medical severity also is slowing, and “in 2012 severity only went up by 3%,” Mr. Klingel said.

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Meanwhile, nationwide workers comp net premium volume rose 9% to $35.2 billion during 2012, NCCI's chief actuary, Dennis Mealy, said during NCCI's “State of the Line” presentation.

The increase was driven by payroll increases, state loss cost changes and insurers tightening discounts offered to policyholders, Mr. Mealy said.

Despite the positive trends, certain issues remain a concern, Mr. Klingel said.

A 109% combined ratio is not good enough given shrinking investment returns, he said.

Additionally, insurers experienced a $13 billion reserve deficiency for 2012. That number had been growing by $1 billion annually, but shot up $2 billion last year, Mr. Klingel said.

“It is a concerning trend,” Mr. Klingel added.