Research
This research examines whether US workers' comp, long the most reliable profit engine in casualty, is finally running out of room to give. We show how a 12-year soft market is testing rate adequacy, why underwriters are turning more selective on the accounts they renew, and how California's cumulative trauma problem is dragging on results that look far healthier without it. It delivers fast insight on where combined ratios and operating gains now sit, why thinning reserve redundancy matters well beyond workers' comp, and what a turn in the line could mean for hardening across auto, general liability and umbrella.
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While US workers' compensation remains a solidly profitable line of business for insurers, there is a growing sense of wariness around rate adequacy and the line's ability to continue propping up broader casualty results, sources told Insurance Insider US.
The caution is driven by the longevity of the soft market in workers’ comp which has entered its 12th year of pricing declines, rather than loss trend which remains stable compared to other liability lines.
Currently, rate changes for workers’ comp are largely flat, according to sources canvassed by this publication, with some citing rate decreases in the single-digit range.
Overall, the market remains competitive with enough excess supply to suppress rates from trending upwards in the near future. Some pockets of the market, depending on the industry or geographic, may be attracting more competition than others.
At the same time, sources pointed to signs of underwriters becoming more vigilant in writing the business, especially when renewing distressed accounts.
This is not a measure grounded in fear that the business will turn unprofitable any time soon but ensuring that it continues to be profitable going forward, sources described.
It’s a subtle development but nonetheless a contrast from a few years ago when more carriers were lifting underwriting guidelines and “buying the business” just to get into workers’ comp.
“Over the last three years, [clients] have been coming to the table, expecting basically a rate decrease,” Bill Chepulis, head of large casualty for Zurich North America, told this publication.
“I would say, going forward, that dynamic will change. There will be plenty of folks who, based on their frequency and results, may see a rate decrease but it’s not going to be necessarily a given.”
Justin Dorman, Burns & Wilcox’s national product manager of workers’ compensation, said there’s been an uptick of workers’ comp business inflow to the wholesale side, mainly in high hazard industry segments, as carriers re-evaluate profitability per account.
“We’re seeing a lot of carriers go through their appetites in what they’re writing and be a little more strict on their guidelines than they were,” he said. “They got to make sure it’s [rate] adequate.”
To be clear, this doesn’t mean carriers are doing “blank non-renewals”. Rather, they’re “picking and choosing what they want, instead of writing everything,” Dorman added.
That is not to say that the sentiment around workers’ comp is gloom and doom. In fact, it’s still viewed in positive light, as one of the very few stable lines of business when other segments like property are losing attractiveness as pricing comes off a hard market peak.
A casualty reinsurance source agreed that carriers had been evaluating their exposures in the past 18 months or so, anecdotally suggesting that “everybody is happy with the book they’ve got, but very wary” of what competitors are doing.
Unlike other liability lines, pain and suffering payouts are a substantially smaller piece in workers’ comp loss costs, which makes it relatively less susceptible to legal system abuse.
But anecdotally, several sources suggested that loss severity seems to be creeping up, which is resulting in underwriters’ vigilance described above, especially given the 10-plus years of rate decreases.
According to the Insurance Insider US research team, claims severity for workers’ comp jumped to 6.4% in 2025, from 0.7% in 2024 and 1.6% in 2023.
There are certain macro factors that could cast a cloud on the business’s performance as well, the ongoing medical inflation being one of them. (For more, read January Loss Costs Lens: What does inflation mean for workers’ comp?)
Commentary from Marsh CEO John Doyle in the firm’s Q1 2026 earnings call, for instance, indicated that the company's global survey estimated US medical costs to rise as much as 7% in 2026, which would have major impacts on workers’ comp if it coincides with states revisiting their Centers for Medicare & Medicaid Services (CMS) rates.
Still profitable, but less
The latest data from the National Council on Compensation Insurance (NCCI) pegged private carriers’ workers’ comp net combined ratio at 91% for 2025, up nearly 5 points from the previous year. By component, the biggest moving piece was the 3.5-point deterioration in the loss ratio to 47.7%.
In terms of accident year net combined ratios, the 2025 figure stood at 102%, up 4 points from a year ago. But this included the caveat of California, which reported an accident year CoR of 129% last year.
California, which accounts for 20% of the US workers’ comp market, has been going through its unique set of challenges, reporting a CoR of 100%+ for six years straight, according to the Workers’ Compensation Insurance Rating Bureau of California (WCIRB).
“How much of your book is in California will determine whether you think workers’ comp is a good line of business,” one source said.
The likely culprit is cumulative trauma (CT) disorder claims, which relates to injuries on tendons, muscles or sensitive nerve tissue, caused by repetitive labor for extended periods.
According to WBIRB, 80% of statewide CT claims involve attorney representation. In 2024, more than 25% of California’s claim counts were CT-related, versus 5% for other NCCI states.
Excluding the Golden State, NCCI’s 2026 AY CoR nationwide would have been closer to 95% instead of 102%, said chief actuary Donna Glenn, who presented the report at the NCCI Annual Insights Symposium last week.
The study also showed that private carriers’ pre-tax operating gain in workers’ comp – which includes underwriting and investment income – was 18% in 2025, down from 23.7% the previous year and the lowest value since 2016. This brings the figure closer to the 20-year average of 15.2%, which includes the soft market years.
Broader implications
An 18% operating gain is far from unprofitable. But the year-on-year slump in trend supports underwriters’ concerns that workers’ comp profitability may be thinning, which could have spillover effects on the performance of other casualty lines.
This is because reserve releases from workers’ comp have been masking adverse development arising from other liability lines such as general liability and commercial auto, as documented by this publication.
For 2025, the NCCI estimated that private carriers have a $14bn reserve redundancy in workers’ comp, which represents 12% of total carried reserves. This was the second consecutive year where the magnitude of overall workers' compensation reserve redundancy decreased.
Because this reserving practice across casualty lines has been going on for a few years now, sources anticipate that the entire casualty ecosystem will take a hit when there’s nothing left to give from the workers’ comp bucket.
“You're getting this build-up of economic pressure because we've been so dependent as an industry on taking work-comp profits and subsidizing liability," said Zurich’s Chepulis.
Another senior carrier source noted that if the [workers’ comp market] turns, “there will be a much greater hardening in auto, GL and umbrella” than the market saw in 2019 to 2020.
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