A.M. Best Special Report: Despite Favorable Pricing Trends, Profitability
Challenges Persist in U.S. Workers’ Compensation Sector
OLDWICK, N.J. -- November 12, 2012
The U.S. workers’ compensation line of business, which has faced significant
challenges in recent years, received a respite in 2011 as employment and
payrolls stabilized and overall net premiums written (NPW) increased by 10%,
according to an A.M. Best Co. special report. The report, titled “Despite
Favorable Pricing Trends, Profitability Challenges Persist,” also found that
overall underwriting results for the aggregated workers’ comp line (as
reported by those companies and state funds that have completed and filed the
Insurance Expense Exhibit with A.M. Best) improved slightly, as the combined
ratio declined to 117.8 in 2011, from 118.1 the previous year.
The premium growth of 10% in the workers’ comp line in 2011 outpaced that of
U.S. commercial lines, which saw a reported 4% increase in NPW for the year.
In addition, the rise in NPW for the workers’ comp line comes after five
consecutive years of NPW declines, from 2006 through 2010, when a combination
of competitive pricing, a series of consecutive rate increases (often related
to statutory reforms), poor employment and challenging macroeconomic
conditions put significant pressure on the sector.
However, A.M. Best expects that profitability for the workers’ comp line will
be challenged going forward despite a more favorable pricing environment, due
to an increasingly competitive operating environment and the cumulative effect
of rate increases. Details in the report also include:
*Despite the 10% increase in NPW in 2011, premium volume remains 23.8%
lower than its peak of $49.2 billion in 2005.
*The largest workers’ comp insurers remained unchanged for a third straight
year, with Liberty Mutual Insurance Cos. retaining its top market
position, followed by American International Group.
*Direct premiums written (DPW) increased in all but three jurisdictions,
excluding those with monopolistic state funds. California, with the
highest DPW in the United States, posted a 10.1% increase in 2011. Of the
largest 10 states, New York has the highest percentage increase in DPW, at
14.8% in 2011.
*For the A.M. Best workers’ comp composite, which consists of companies
that write predominantly workers’ comp insurance and includes state funds
and experience for non-workers’ comp lines of insurance, the combined
ratio deteriorated slightly to 123.6 in 2011 from 122.2 in 2010, the
highest recorded combined ratio for the composite over the past 10 years.
To access a copy of this special report, please visit
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Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Jennifer Marshall, 908-439-2200, ext. 5327
Managing Senior Financial Analyst
Gordon McLean, 908-439-2200, ext. 5304
Senior Financial Analyst
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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