WC Reinsurers Faces Headwinds: Swiss Re

A decade of extended profitability for the U.S. workers’ compensation reinsurance market could be coming under threat, analysis by Swiss Re shows, with the assessment showing the following:
Despite significant reserve redundancy, reserve releases in recent years have masked underlying deterioration of Accident Year combined ratios.
Tough competition, including in California, has led to significant premium rate reductions and a softer market, raising pricing concerns and increasing loss ratios.
Medical inflation is on the increase, fueled by hospital costs.
A tight job market with low unemployment often results in hiring less experienced workers, potentially resulting in more first-year injuries in select industries.
Safety gains that have reduced the frequency of workplace injuries in recent decades may be moderating, potentially tamping future upside in this area.
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Massachusetts’s fifth consecutive rate cut – a 14.6% decrease – on annual workers compensation premiums went into effect on July 1.
The state’s Workers’ Compensation Rating and Inspection Bureau originally sought half of that, a 7.6% reduction, according to the state’s website.
“The outcome of this hearing has a significant positive impact for Massachusetts businesses,” said Acting Insurance Commissioner Kevin Beagan. “The Division’s State Rating Bureau worked hard to demonstrate that workers’ compensation rates could be reduced further,” he said.
Massachusetts employers should see the reduction on their next policy renewal.
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Transportation and material moving occupations in private industry experienced the highest number of nonfatal cases that resulted in a day away from work, job transfer, or restriction among major occupation groups, according to analysis out last week from the Bureau of Labor Statistics.
There were 835,040 cases in the two-year period 2021-22.

Among those cases, most were due to overexertion and bodily reaction (329,150 cases), half (165,690) resulted in one or more days away from work, with a median of 21 days away.
The other half (163,460) involved at least one day of job transfer or restriction only, with a median of 20 days of restriction or transfer.
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Montana is reminding local employers that any additional workers compensation costs incurred by hiring students for summer jobs will be reimbursed.
The state Department of Labor and Industry said it is unlikely that hiring students as interns, apprentices, full-time workers, and seasonal employees will increase their WC rates.
“In the rare case that workers’ compensation rates increase by hiring a student, Montana DLI is able to reimburse these additional costs,” according to a posting on the official state website.
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Zacks Investment Research sees several trends in workers compensation insurance as weighing on its outlook on the shares of Aflac, Unum Group and Trupanion.
Pricing pressure is expected to continue, fueled by higher inflation and rising medical costs. However, Zacks cited research showing that WC insurance pricing will increase at a five-year (thru 2026) CAGR of 5.3%.
Adoption of safety measures and improving working conditions are lowering claims, according to Zacks.
Artificial intelligence could reduce WC claim expenses by about 45%, according to Zacks. However, higher technology spending could escalate expense ratios.
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