The insurance performance of the compensation is expected to remain strong in 2021, although the line's profitability level is unlikely to be sustainable for long, according to a report on the line released by Fitch Ratings Inc. on Friday.
Workers' compensation has continued to perform well due to reduced claims rates and increased recognition of significant reserve redundancies, leading to the segment showing a third consecutive year with combined key ratios of 90% or lower by 2020, said Fitch analysts. Although the line saw a 10% reduction in annual written premiums in 2020 due to the pandemic-related business closures, the sharp decline in the claims rate offset the losses, and the pandemic-related receivables filed have been manageable.
While Fitch predicts that the line's total ratio will remain around 90% by 2021
The workers' compact line, however, maintains the strongest reserve position for any property / accident line, with a favorable development for the calendar year on average 15% of premiums earned in the last four years. In addition, the line's reserve strength was maintained in 2020 as reported loss ratios probably underestimated the benefits of reducing the frequency of losses incurred. Catalog