Workers compensation insurance stands out as the most profitable major U.S. commercial insurance product line over the last five years, bolstered by relative claims stability and enduring loss reserve strength.

Executive Summary

Workers comp produced a combined ratio of 87 across the industry in 2022, Fitch Ratings Analyst James Auden reports in this summary of key drivers of underwriting profit for the line. He notes that lower reported reserve redundancies and more market competition will likely reduce underwriting profits in 2023 and 2024. But it would take more pronounced price softening together with an unfavorable shift in loss costs to push the combined ratios above 95.

Segment results remain persistently favorable despite recent negative pricing trends that run counter to a broader U.S. commercial lines hardening market cycle for the last four years.

Recent increases in medical claims severity that may continue in a more fragile economic environment represent the greatest threat to future segment performance if left unchecked by a corresponding pricing response.

Workers compensation is one of the largest individual commercial product lines in U.S. P/C insurance, with over $47 billion in 2022 net written premiums. The product is offered by a large number of insurers, and segment market share is less concentrated than personal lines or most other major commercial products as the top 10 carriers hold only 42 percent of 2022 market share led by large multiline writers: Travelers (7.3 percent market share), Hartford (7.2 percent) and Chubb (4.7 percent).

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