Continuing economic weakness and an unsettled labor market may make it difficult for producers betting on workers’ compensation revenue streams to help them turn a profit this year.
According to a new report from Standard & Poor’s Ratings Services, revenues for the US workers’ comp sector will likely decline in 2014. The report identifies the continued high unemployment rate, coupled with potential gridlock in Washington over the reauthorization of the Terrorism Risk insurance Program Reauthorization Act, as the main drivers behind this trend.
Remaining uncertainty about the effects of the Affordable Care Act may also decrease demand for well-rounded workers’ comp programs.
“We remain pessimistic about the near-term profitability prospects for the US workers’ compensation market despite improved pricing in the past couple of years,” wrote S&P credit analyst Siddhartha Ghosh.
“We base our cautious view of the industry on such factors as continuing high unemployment levels and economic uncertainty, potential adverse reverse development, higher health care costs, and emerging risks like the expiration of Terrorism Risk Insurance Program Reauthorization Act in 2014 and significant uncertainty regarding the ACA,” Ghosh continued.
S&P said failure by Congress to reauthorize TRIA is of particular concern to the agency, as “most workers’ compensation insurance carriers would be hurt, as early as 2015.” The ratings agency also hinted it may downgrade ratings on workers’ comp insurers if the bill is not passed.
The Risk and Insurance Management Society (RIMS) has already identified uncertainty over the reauthorization of TRIA as a potential disturber of workers’ comp sales—particularly for producers representing companies in major metropolitan areas.
RIMS recommended identifying peak times of employee traffic, as well as which workers telecommute, and work on different campuses in an effort to lower workers’ comp rates and keep sales afloat through 2014.