For workers' compensation insurers, profitability is the greatest near-term challenge, as accident-year combined ratios increase, and uncertainty in employment and medical-claim trends weighs on the sector, according to a recent report.
The Moody's Investors Service report, "U.S. Workers' Compensation Market: Sector Profile," notes that premiums have increased in 2011 and 2012, alleviating some of the rate inadequacy affecting the sector, "but further significant strengthening will be required to improve underwriting margins to earn acceptable operating returns and to offset the impact of sustained low interest rates."
There are some positive signs for insurers. Moody's says it expects the accident-year combined-ratio deterioration to moderate as rate increases outpace loss-cost trends, although the overall impact will vary by company depending on mix of business.
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