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Pegged as an outlier in the lagging commercial insurance sector, the U.S. workers compensation market is on track for a fifth consecutive year of underwriting profits in 2019 despite recent weakening in market fundamentals, according to a report released Tuesday by Fitch Ratings Inc.
The industry's statutory combined ratio fell to 86% in 2018, and has averaged 93% annually since 2015, according to the report. Meanwhile, regulatory rate filings over the past year show that underwriters are reducing prices in nearly all states and data from the Council of Insurance Agents & Brokers show workers compensation renewal rates have declined for the last 17 quarters, according to Fitch.
Other highlights in the report include:
"The workers compensation segment is known for past periods of volatility, but recent experience represents an unprecedented level of underwriting success," Gerry Glombicki, director of insurance at Fitch Ratings, said in a statement. "However, all good things eventually come to an end, and these (favorable) underwriting profits are not sustainable in the long term in light of competitive forces, recent price deterioration and potential for future claims trend deterioration."
Workers compensation remains a profitable line of business for U.S. commercial insurers and is contributing to a stable outlook for the sector, according to a report by A.M. Best Co. Inc.