Workers comp brings in profits for second year running

An A.M. Best report reveals workers comp carriers made a profit for the second time in 2012—up from 15-year losses.

Workers Comp


After suffering losses for nearly 15 years running, the workers compensation sector scored a profit for the second year in a row, a special report from A.M. Best reveals. The industry brought in $41bn in written premiums in 2012—up from $37.5bn in 2011.

Best puts the increase down to advancements in technology, which helped carriers react more quickly to negative trends like low investment yields and increasing uncertainty over the impact of the Affordable Care Act.

An improving economy also helped boost written premiums, the ratings agency said in its report.

“Sustained growth in 2012 premium reflects the increasing payroll base as economic conditions improve; ongoing rate increases in an improving pricing environment; and firming market conditions,” Best noted.

However, while premiums were up, the sector’s combined ratio fell for the first time in five years. Best reported a combined ratio of 110.3, a seven-point decrease from the previous year.

Best also estimated that workers comp industry reserves were underfunded by $27.8bn in 2012, an increase from 2011’s $26.7bn, due to “statutory discounting.”

“The ultimate adequacy of the industry’s reserves remains uncertain for accident years when rates were at their low point,” Best noted, while concluding that despite positive signs within workers comp, the sector remains one of the most difficult commercial lines to underwrite.

The top three performing workers comp carriers for 2012 were Liberty Mutual, Travelers and The Hartford, who took in more than $9bn in written premiums together. AIG and the State Insurance Fund of New York rounded out the top five, comprising 36.6% of the market.



Keep up with the latest news and events

Join our mailing list, it’s free!