ORLANDO , FLA.

During the opening session of its Annual Issues Symposium, attendees listening to the NCCI "State of the Line" market analysis learned that the firm's projection for the 2008 accident year combined ratio is 100.

Low interest rates together with dismal equity market performance leaves the line with "post-tax returns that barely meet the industry's cost of capital," NCCI President and Chief Executive Officer Steve Klingel, said in a statement released before the briefing.

For 2007, NCCI had projected a combined ratio of 99--a figure now revised to 96. NCCI said the projected calendar-year combined ratio for 2008 was 101--a figure that would have been 106 had California results been excluded. The accident-year ratio, however, would be unchanged by leaving out California, according to the analysis.

NCCI said that in addition to the factors mentioned by Mr. Klingel, rising medical and indemnity costs, uncertainty about possible state and federal legislation, and other variables have led it to change its short-term view of the line from "optimistic to guarded."

NCCI said the long-term outlook is "cautionary," as net written premiums for private carriers dropped about $34 billion, or 10 percent.

The break-even results for comp insurers are a necessity if they hope to earn a reasonable return on capital, NCCI Chief Actuary Dennis Mealey commented.

NCCI announced that the analysis of the reserve position of private carriers found they have an estimated reserve deficiency of $6 billion for 2008, compared with a $2 billion deficiency the year before. That figure, however, is considered adequate after allowing for discounting of indemnity reserves of lifetime pension cases, the firm noted.

Continuing an uninterrupted trend, accident frequency declined by 4 percent in 2008, compared with a decline of 2.6 percent in 2007. Research by NCCI economists has found that additional frequency decreases in a recession are common.

The NCCI evaluation also found that the residual insurance market is depopulating rapidly. In 2008, premium dropped about 30 percent to about $700 million--half the volume of 2004.

Mr. Klingel said the NCCI was encouraged by the fact that despite the economic restraints on companies in this recession and fears of flu contagion, attendance at the conference was down by only 2 percent, with 675 people registered.

NCCI's full "State of the Line" report is online at www.ncci.com.

Special Reports /

Comp Insurers Just 'Broke Even' In '08, NCCI Says

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