Pricing Improved in 2011 But Workers’ Compensation Still Challenged: A.M. Best

The troubled workers’ compensation line of business got a break in 2011 as employment and payrolls stabilized and overall net premiums written increased by 10 percent, according to an A.M. Best report.

However, A.M. Best expects that profitability for the workers’ comp line will remain a challenge despite a more favorable pricing environment, due to an increasingly competitive operating environment and the cumulative effect of rate increases.

Overall underwriting results for the aggregated workers’ comp line for companies and state funds improved slightly in 2011. The combined ratio declined to 117.8 in 2011, from 118.1 the previous year.

A.M. Best said premium growth of 10 percent outpaced that of U.S. commercial lines, which saw a reported 4 percent increase in net premiums written for the year.

In addition, the rise in net premiums written for the workers’ comp line came after five consecutive years of declines, from 2006 through 2010, when a combination of competitive pricing, a series of consecutive rate increases (often related to statutory reforms), poor employment and challenging macroeconomic conditions put pressure on the sector.

The A.M. Best report also noted: