Workers' compensation insurersbarely broke even last year, according to figures recently releasedby the National Council on Compensation Insurance (NCCI) in its“State of the Line” market analysis. The firm's projection for the2008 accident year combined ratio is 100. Low interest rates andpoor equity market performance leaves the line with “post-taxreturns that barely meet the industry's cost of capital,” said NCCIpresident and chief executive officer Steve Klingel. Other driversincluded rising medical and indemnity costs, uncertainty aboutpossible state and federal legislation, and other variables. For2007, NCCI had projected a combined ratio of 99–a figure nowrevised to 96. NCCI said the projected calendar-year combined ratiofor 2008 was 101–a figure that would have been 106 had Californiaresults been excluded. The accident-year ratio, however, would beunchanged by leaving out California, according to the analysis.NCCI said the long-term outlook is “cautionary,” as net writtenpremiums for private carriers dropped about $34 billion, or 10percent. In addition, NCCI estimated a private carrier reservedeficiency of $6 billion for 2008, compared with a $2 billiondeficiency the year before. However, the figure is consideredadequate after allowing for discounting of indemnity reserves oflifetime pension cases. Continuing an uninterrupted trend, accidentfrequency declined by 4 percent in 2008, compared with a decline of2.6 percent in 2007. NCCI economists have found that additionalfrequency decreases in a recession are common. The NCCI evaluationalso found that the residual insurance market is depopulatingrapidly. In 2008, premium dropped about 30 percent to about $700million–half of 2004's volume. Klingel said that NCCI wasencouraged by the fact that despite the economic restraints oncompanies in this recession and fears of flu contagion, attendanceat the conference was down by only 2 percent, with 675 peopleregistered. Read NCCI's full “State of the Line” report atwww.ncci.com.