S&P: Profitability not in the offing for workers' comp

"Standard & Poor's Rating Services remains bearish on this line as a significant number of negative factors have created adverse market conditions surrounding the workers' compensation industry in the U.S.," says a new report. "All signs are pointing to more unprofitable years ahead."

Citing continued high unemployment, a sluggish economic recovery, potentially higher inflation on future claims payments, adverse reserve developments, and a volatile investment environment, the ratings company predicts hard times continuing for workers' comp insurers. The information is included in a new S&P report, For the U.S. Property/Casualty Industry, Making Workers' Compensation Profitable May Be Mission Impossible.

"This industry has a dismal track record of underwriting results as illustrated by only three years of underwriting profits over the past two decades," the report notes. "Between 1991 and 2010, the workers' compensation industry statutory combined ratio was below 100 percent in 1995, 1996 and 2006."

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Part of the problem is the lack of adequate rates, analysts say. The authors note that has just begun to change.

"Despite pockets of rate increases in a few states, we believe these negative factors would lead to years of unprofitability in this line," the report states. "We also believe many P/C insurers with meaningful concentration in workers' compensation will continue to report underwriting losses in this line over the next few years, primarily arising from recent accident years, 2007-2010."

Read more at the WorkersComp Forum homepage.

February 9, 2012

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