A top reinsurer is saying that despite a decade of extended profitability, the workers compensation reinsurance market in the United States could see a reversal due to a number of factors, according to an analysis released Saturday by Swiss Re Ltd.
The reinsurer’s analysis of market conditions calls for a “heightened level of diligence” as a “variety of potential headwinds and risks have surfaced, or in some instances, re-surfaced, meriting caution and scrutiny.”
Swiss Re said market reserve releases in recent years have masked “underlying deterioration of Accident Year combined ratios” and insurer competition in states such as California has led to “significant premium rate reductions and a softer market, raising pricing concerns and increasing loss ratios.”
Also contributing are medical inflation in the hospital space and a tight job market with low unemployment, which “often results in hiring less experienced workers, potentially resulting in more first-year injuries in select industries,” Swiss Re said.
The report also said that safer workplaces have “buoyed the market in recent decades by reducing frequency of workplace injuries” but that issue “may be moderating, potentially limiting future upside in this area.”