S&P reports favorable workers’ comp outlook

The outlook for the U.S. workers’ compensation sector in 2006 is good, with the ratings impact for insurers expected to be neutral on the whole, according to a report from Standard & Poor’s Ratings Services.

Underwriting results in 2005 are expected to be strong based on nine-month figures and will continue to be strong through 2006, driven by the reduction of loss trends resulting from multiple state reforms implemented over the past few years and by improving claims frequency.

Partially offsetting these benefits, however, will be expected long-term medical inflation (especially for prescription drugs), increased competition, and improving (though still deficient) reserve adequacy, according to S&P.

Insurers with line-of-business or geographic concentration have higher exposure and the ratings on such insurers are more sensitive to the market’s vagaries. For this reason, S&P’s ratings on workers’ comp specialists are likely to be no higher than the ‘A’ rating category.

The report, titled “State Reforms, Strong Results Point To Good Outlook For U.S. Workers’ Compensation,” maintains that any unexpected rating changes in 2006 stemming from developments in workers’ comp would most likely be the result of larger than expected reserve strengthening by a few insurers for prior year business or better or worse than anticipated conditions in select markets in which a workers’ comp specialty insurer maintains concentration.

Workers’ comp is the second largest line of business in the U.S. P/C insurance market.

Topics Trends USA Workers' Compensation