Workers’ comp on upswing, but sustainability questionable—Fitch

The ratings firm cites overcapacity in the worker’s compensation market as the reason for a return to losses

Workers Comp

By Allie Sanchez

Underwriting performance for the property/casualty industry’s workers’ compensation line crossed over to profitability in 2015 after years of losses, a new report by Fitch Ratings reveals.

However, the consulting firm said the gains in the sector are expected to be short-lived as competition heats up. Losses can be expected to return in 2017, the report said.

The turnaround is due to premium rate increases, stable loss cost trends, and improved loss reserve experience, Fitch Managing Director Jim Auden said. But overcapacity is expected to turn up the competition, marking an unsustainable growth path, he added.

Fitch further reported that underwriting combined ratio in the segment dropped significantly to 95% in 2015 from a cyclical high of 117% in 2011. Premium average growth reached 3.5% in 2015, but averaged 5% in the past three years.

Weak pricing and significant declines in premium volume in the workers’ compensation segment resulted from the recent economic recession.
 

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