Comp Outlook 'Cautionary': NCCI
NU Online News Service, May 6, 9:40 a.m. EDT ?The workers' compensation insurance line continued in the red last year despite a three-point improvement in the combined ratio to 108, the largest service organization for the industry announced today in Orlando, Fla.[@@]
This was the second consecutive year that the National Council on Compensation Insurance has recorded a better ratio for the calendar-year. Still, the Boca Raton, Fla.-based NCCI said terrorism risks and other factors make the workers' comp industry outlook "cautionary."
However, the workers' comp sector was found by NCCI to have made a modest profit, with a pretax operating gain of 5 percent.
The data was discussed at the NCCI Holdings Inc. annual conference by Dennis Mealy, NCCI's chief actuary, delivering his "2003 State of the Line" report.
On the positive side, NCCI noted that claims frequency continued to decline, while the combined ratio for the accident year had improved to 101.
The combined ratio is the percentage of each premium dollar that goes towards claims and expenses; when it exceeds 100, it indicates an underwriting loss. The accident year matches losses occurring against premium earned in that period, while the calendar year matches losses that have been incurred but did not necessarily happen in the period.
NCCI said that it was concerned that interest rates remained low, and comp insurers' investment income was 13 percent of net premium.
The organization said that besides terrorism exposures and doubts whether the federal backstop program under the Terrorism Risk Insurance Act would be continued past 2005, the comp sector remains troubled by medical inflation and reserving issues.
To read an expanded story with more details read the May 10 edition of National Underwriter
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