Insurance - NCCI Report Shows Pressure on Workers’ Comp Accident Year Results, Still-High Reserve Cushion

Research evidence excerpt

Insurance - NCCI Report Shows Pressure on Workers’ Comp Accident Year Results, Still-High Reserve Cushion

years,

NCCI sees six points of likely redundancy in 2024, for instance, with every year through

2016 likewise expected to develop favorably.

The calendar year combined ratio – including reserve gains – increased five

points to 91% in 2025 from 86% in 2024, boosted by the increase in accident year

losses along with a tapering in reserve gains, to 11 points last year from 13 points the

prior year (Figure 3). For context, the P&C industry combined ratio for all lines declined

four points in 2025 to 93%, driven largely by improvement in homeowners, which

dropped to 88% from 100% the prior year. All other major lines showed improvement

or at least remained steady, while workers’ compensation increased.

Industrywide workers’ comp reserves are modestly less redundant. NCCI’s

independent actuaries say private workers’ compensation carriers had a $14 billion

reserve cushion at the start of the year – this equated to 12% of carried reserves –

down from $16 billion at this time last year. This was the second annual drop following

a six-year run (2018-2023) of increasingly redundant reserves (Figure 4). Given the

combination of higher accident year losses and lower reserves, we assume carrier

reserve gains should slow moderately in calendar 2026.

The data suggests the competitive backdrop intensified as the impact of schedule

rating, dividends, and rate/loss cost departure was a -0.4%, the first such negative

result since 2016. To be clear, these numbers capture discounting activity as carriers

depart from their filed rates in order to procure new business. This data is consistent

with the uptick in market share in 2025 at leading players such as Hartford (HIG, Not