Profitability for the United States workmans' compensation market in 2008 experienced a downward spiral due to challenging market conditions, the financial crisis and the recession and the impact is expected to linger through 2009 and well into 2010, according to A.M. Best Company. Meanwhile, changing regulatory issues and reforms are continuing to affect workers' compensation, bringing turmoil in terms of pricing, competition, loss costs, frequency, severity and profitability. 1. A.M. Best's workers' compensation composite, consisting of 103 groups and unaffiliated single companies (including state funds), saw net income deteriorate by $1.4 billion, or 62%, to $0.9 billion in 2008. 2. This drop in earnings reflected both the fall in the financial markets and sharply reduced premium volume due to persistent soft pricing, competition, legislative reforms, the recession, rising unemployment and shrinking payrolls. 3. The composite's 2008 net premiums written (NPW) fell to its lowest level since 2000, down approximately 30% from its high of $20.9 billion in 2004. 4. After posting relatively strong underwriting results in 2005 and 2006, the composite recorded underwriting losses of $1.2 billion and $1.5 billion in 2007 and 2008, respectively, with combined ratios of 106.5 and 110.8 for the same periods. 5. NPW in the workers' comp line of business fell for the third consecutive year in 2008, declining about 12.0% – far faster than the 2.0% decrease for the overall U.S. P/C industry. 6. The workers' compensation line reported a calendar-year combined ratio of 104.4 in 2008, up only slightly from 103.6 in 2007, but up sharply from the low of 98.5 reported in 2006. (workersxzcompxzkit) BestWeek subscribers can download a PDF copy of all special reports as well as the associated spreadsheet data. Non-subscribers can access an excerpt of each special report and purchase individual reports and spreadsheet data. For more information: http://www.ambest.com/.
Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers' Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.
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