AM Best & Co. revised its market segment outlook from negative to stable for the US workers’ compensation market on Wednesday, noting several influencing factors.
More importantly, AM Best cites an unexpected “mitigating” effect that the COVID-19 pandemic has had on the balance sheets and operational performance of insurers.
The negative impact of the pandemic on insurers’ turnover is declining and premium levels are returning to pre-pandemic levels, as businesses – especially the hospitality and service sectors – continue to rebound in 2021.
Another factor in stabilizing the market, AM Best says the strong level of risk-adjusted capitalization of the composition segment will withstand the effects of the pandemic. According to the report, this segment remains in a position of redundant loss, although the redundancy is decreasing.
The healthcare products market also continues to show favorable combined ratios thanks to consistent loss ratios. Underwriting results deteriorated only slightly, benefiting from lower fraud, fewer work-related accidents and lower defense costs, the report said.
The researchers also note potential offsetting factors for the market to watch. The possibility of claims latency and the potential long-term health effects of the virus remain concerns, according to AM Best, as well as regulatory and legislative measures that could affect the final cost of some claims.