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While workers compensation insurer premium growth shows “that the worst of the recession has passed,” the insurance market for injured-employee coverage “remains in a worrisome state,” NCCI Holdings Inc. reported Thursday.
Overall, the workers compensation market is “conflicted,” the Boca Raton, Fla.-based rating and statistical research organization reported in its annual “State of the Line” market analysis.
Insurers' net workers comp written premium nationwide increased 7.4% to $36.3 billion during 2011, the first increase since 2005. From 2006 to 2010 workers comp insurers' premium had declined a total of 27%, NCCI reported.
But while the increased premium volume is a positive development, “for the third straight year, workers compensation holds the distinction of having the highest combined ratio of all the major commercial lines,” NCCI said.
The line's calendar-year combined ratio for private insurers reached 115% in 2011, holding steady from a year earlier.
“Workers compensation, because of its direct connection to employment and the labor markets, has been the property/casualty line most significantly impacted by the continued difficult economic environment,” NCCI chief actuary Dennis Mealy said in a statement. “Combined ratios remain at unsustainably high levels, and investment returns are not sufficiently high to generate operating returns near the cost of capital.”
Yet even though NCCI sees a challenging environment for a “market that is conflicted as to its forward trajectory,” the industry remains well capitalized for the future, NCCI reported.
Among other findings, NCCI also reported that private insurers' reserves continued a modest deterioration for the fourth consecutive year with an estimated $11 billion deficit at year-end 2011.
And so far in 2012, loss costs have generally increased, largely due to a significant jump in California, but also because of factors present in other states, such as longer claim durations and upward pressure on claim frequency.
Despite an increasing number of aging U.S. workers, older employees have had a smaller-than-expected effect on workers compensation loss costs, according to NCCI Holdings Inc.