The line, he opined, was “very profitable indeed.”

The property-casualty sector overall, he said, had its combined ratio helped by workers' comp. This year P-C should see its combined ratio end at 97 or perhaps better.

Helping the P-C sector maintain profitability, despite catastrophes, were returns from reinsurance, Mr. Hartwig said. Reinsurers, he noted, had a combined ratio last year of 145.

The workers' comp sector's investment gain of $59.2 billion, Mr. Hartwig said, is not enough to give underwriters the ability to paper-over “stupid underwriting.”

He said workers' comp insurers' struggle with their current accumulation of capital will mean the market can expect to see more company share buybacks and dividends.

Workers' comp sector operating gains have improved and lost-time claim frequency was down 4.5 percent last year. Medical costs, however, have continued to increase.

Since 1985 the medical share of workers' comp claim payments climbed from 44 percent to 58 percent. Mr. Hartwig forecasted that number will hit 75 percent in five or six years.

Susan Doyle, Wausau Insurance executive vice president and general field operations manager, said the medical cost issue “goes well beyond workers' compensation…This is an overall health care issue, and we will be swept along.”

Workers' comp insurers, she said, should work to “stimulate movement to improve the overall health care situation.”

John Santulli, PMA Insurance Group senior vice president for marketing and field operations, said there are tools to help workers' comp insurers keep costs down.

He mentioned getting accident reports in on a timely basis, checking the effectiveness of network treatment systems, working to control prescription plan costs and preventing improperly upcoded provider bills.

Mr. Santulli noted that the erosion of care provided by worker health care plans makes it more difficult to settle comp claims, because “workers are not willing to give up medical care.”

Unless the workers' comp system puts more controls on health treatment utilization, there will be more acceleration in medical costs, he said.

Vern Steiner, CNA vice president for workers' compensation claims, said while claimant fraud has not increased, there are now more attempts to tie all of a worker's ailments “to work-related woes.”

Mr. Steiner also voiced concern that as more states institute utilization controls there could be the kind of reaction seen against health maintenance organizations, restricting treatments.

Medical treatment, he said, “isn't black and white,” and if utilization controls are too restrictive there could be “a public backlash and reforms might be undone.”

Mr. Hartwig also voiced alarm over how workers' comp insurers would fare if the Terrorism Risk Insurance Act is allowed to expire in 2007.

The way to lobby the issue, he noted, is by involving local Chamber of Commerce members. At this point, however, he said local business people are not thinking about the issue of terrorism insurance and “hardly a neuron fires on the TRIA issue.”