NU Online News Service, May 10, 3:04 p.m.EDT

Workers' compensation combined ratios remained unsustainablyhigh in 2011, and investment returns were not high enough togenerate sufficient operating returns, but premium growth in thisline indicates that the worst of the recession has passed, and theindustry remains well capitalized for the future, according toNCCI.

NCCI President and CEO Steve Klingel, commenting on thelatest NCCI State of the Line workers' compensationanalysis, says, “NCCI has observed a number of countervailingindicators in current industry conditions. In some ways, we areseeing an improved condition from 2010. By other measures, however,the market remains in a worrisome state. In sum, we see a marketthat is conflicted as to its forward trajectory, and that makes fora challenging environment.”

The analysis shows workers compensation calendar year combinedratio for private carriers was 115 in 2011, the same result as in2010, and the highest combined ratio since 2001, when it was122.

The accident-year combined ratio in 2011 dropped two points from2010 to 114.

NCCI Chief Actuary Dennis Mealy says workers compensationresults continue to be challenged by the economy. “Workerscompensation, because of its direct connection to employment andthe labor markets, has been the property and casualty line mostsignificantly impacted by the continued difficult economicenvironment,” he says.

NCCI notes that, for the third straight year, workerscompensation had the highest combined ratio of all the majorcommercial-insurance lines.

NCCI says the workers' comp private-carrier reserve positiondeteriorated modestly in 2011, for the fourth consecutive year. Thereserve position is currently estimated at an $11 billiondeficiency.

The line did get some positive news in 2011 regarding netwritten premiums, which increased 7.4 percent compared to 2010. Netwritten premiums for both private carriers and state funds was$36.3 billion, compared to $33.8 billion in 2010. For privatecarriers alone, net written premiums were $32.2 billion in 2011, upfrom $29.9 billion in 2010.

Net written premiums had climbed from 1999 until 2005, peakingat $47.8 billion, according to NCCI data. Written premiums thendeclined every year since then until 2011.

Lost-time claim frequency also improved in 2011, dropping 1percent after increasing 3% in 2010. But NCCI says it is stillunclear whether claim frequency is returning to a long-termdownward trend.

NCCI says, “Moving forward, NCCI will continue to closelymonitor trends and developments in claims frequency, an uncertainunderwriting cycle, the as-yet-unknown impact from healthcare andfinancial-services reforms, including the Federal Insurance Office,and new efforts to introduce alternatives to workerscompensation.”