A.M. Best Co. Inc. on Wednesday reported that Worker's Compensation insurers' underwriting results are likely to weaken further before improving and “conditions appear grim over the near term."
According to Best's Market Review, the combined ratio for the workers comp line is projected to reach 121.5% for 2011, up from 118.1% in 2010, a year in which the “business deteriorated sharply” and the industry's combined ratio rose to the highest level since 2000.
However, premium growth for 2011 is on track to be positive for the first time since 2005, after declining more than 30% over the previous five years, Best said. While net premiums written declined for most insurers in 2010, a number of companies did experience increases.
Several factors are responsible, including competitive market conditions, a weak economy, growing medical costs and an upturn in claims frequency, Best said.
“Furthermore, the economic downturn and slow recovery continue to have a major influence on the manufacturing and contracting sectors, which tend to be significant contributors to premium volume in the workers comp line,” Best said in the report.
As a result, net written premiums for the line declined 3.6% to $34.1 billion during 2010.