For Workers' Compensation insurers, profitability is thegreatest near-term challenge as accident-year combined ratiosincrease, and uncertainty in employment and medical-claim trendsweighs on the sector, according to a recent report.
The Moody's Investors Service study, “U.S. Workers' CompensationMarket: Sector Profile,” notes that premiums increased in 2011 and2012, alleviating some of the rate inadequacy affecting thesector—“but further significant strengthening will be required toimprove underwriting margins to earn acceptable operating returnsand to offset the impact of sustained low interestrates.”
There are some positive signs for insurers.Moody's says it expects the accident-year combined-ratiodeterioration to moderate as rate increases outpace loss-costtrends, although the overall impact will vary by company.
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