Low investment yields, deteriorating underwriting results and a record low interest rate, combined with other unknown factors, will make for a challenging 2010 for workers’ comp providers, according to NCCI Holdings Inc.
The provider of data and statistics to the workers’ comp market released its annual State of the Line market analysis. This year’s report indicates that the workers compensation calendar year combined ratio was 110 in 2009—up 9 points from 101 in 2008. However, 3 points of the increase in the combined ratio was due to a single carrier adding about $1 billion to excess workers’ compensation reserves for Accident Years 2000 and prior. This reserve strengthening was almost 90% of the prior year reserve strengthening for the entire industry. Excluding that, reserve addition would lower the industry’s combined ratio to 107, still a significant deterioration from 2008. The 107 would make the recent pattern of combined ratios since 2006 almost identical to that experienced from 1995 to 1998, which were similar points in the last cycle, NCCI reports.
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