In its latest Financial Update Newsletter, the Florida-based rate-making organization says calendar year 2012 is poised for improvement over 2011 results.
"Calendar year 2012 is on path for a second year of growth in net written premiums for workers' compensation," according to the report. "Current estimates for 2012 net written premiums are at $35.2 billion, which represents 9 percent growth over 2011." The information is based on private carrier reported direct written premium and the "historical relation between direct and net written premium over the past decade."
Carrier direct calendar period losses incurred, direct earned premium, and the historical relation between direct and net losses and premium led to the positive news about the combined ratio. The net combined ratio for workers' comp is estimated to be 113 percent, a slight improvement over the 115 percent for 2011. "This projection for 2012 would be the first decline in the combined ratio since 2006."
While rates/loss costs were "flat" for 2011, they are increasing for 2012, "ending the seven-year period of nearly 26 percent declines," the newsletter says. However, the more significant year-to-year changes were largely driven by California, and based on approvals so far, "rate and loss cost changes will not be a materially contributing factor to 2013 results."
The report also looked at the residual market, which had its first growth in premiums in six years in 2011. While the initial indications show that growth continuing to nearly $800 million, or a 53 percent increase over policy year 2011, "the level continues to remain low relative to historic levels."
Data reported through the first six months of 2012 indicates the combined ratio for the residual market decreased for policy year 2012, from 120 percent to 116 percent. However it remains "near the top of historic levels."
Finally, the report projects the underwriting loss in policy year 2011 for NCCI-administered residual market pools will deteriorate. However, the results are typical for the last decade and are "well below the debilitating levels of the early 1990s."
Read more at the WorkersComp Forum homepage.
November 26, 2012
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