Fitch: WC Line Poised for Another Profitable Year

17 Jul, 2019 Nancy Grover

                               

Sarasota, FL (WorkersCompensation.com) – Underwriting profits are once again in the offing for the workers’ compensation market, according to Fitch Ratings Inc. A new report says 2019 is likely to be the fifth consecutive year of underwriting profits.

However, the “unprecedented level of underwriting success,” will undoubtedly end at some point. “…all  good things eventually come to an end, and these (favorable) underwriting profits are not sustainable in the long term in light of competitive forces, recent price deterioration and potential for future claims trend deterioration," said Fitch Director of Insurance Gerry Glombicki in a statement accompanying the report.

Recent regulatory rate filings show underwriters are reducing prices in most states. Information from the Council of Insurance Agents & Brokers indicate renewal rates have declined for the last 17 consecutive quarters.

Among other highlights of the report are:

  • Combined ratio of 86 percent in 2018, down from 92.3 percent in 2017. The combined ratio has been below 100 percent since 2015. While underwriting profits are expected to continue into 2020, combined ratios may rise a bit each year, according to Fitch analysts.
  • Greater reserve redundancies have contributed to the positive results. Favorable reserve development as a percentage of earned premium reached 15 percent of earned premium in 2018. “…conservatism in loss reporting for recent accident years portends continued segment favorable reserve development in the future, but at a lower magnitude than recent figures,” the company said.
  • Favorable underwriting profits reported by most large underwriters during the past five years, with Berkshire Hathaway Inc. and Chubb Ltd. leading the way.
  • Advanced technology is helping some companies reduce operating expenses, improve risk selection and pricing, and optimize claims outcomes. Smaller insurers that cannot keep pace with technology may be at risk of acquisition, however.

“Several factors can promote a sudden deterioration in performance including an increase in claims frequency or severity, and new regulatory developments in key states,” the statement said. “Fitch believes these issues are not a near term threat but bear close monitoring.”

 


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    About The Author

    • Nancy Grover

      Nancy Grover is a freelance writer having recently retired as the Director, Media Services for WorkersCompensation.com. She comes to our company with more than 35 years as a broadcast journalist and communications consultant. Grover’s specialties include insurance, workers’ compensation, financial services, substance abuse, healthcare and disability. For 12 years she served as the Program Chair of the National Workers’ Compensation and Disability Conference® & Expo. A journalism/speech graduate of Ohio Wesleyan University, Grover also holds an MBA from Palm Beach Atlantic University.

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