U.S. workers’ compensation insurers sustain profits as pricing pressure builds

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U.S. workers’ comp insurer profits

Highlights

AM Best reports a workers’ compensation combined ratio of 93.2 in 2025, outperforming other long-tailed casualty lines but facing accelerating price cuts.
Redundancy in reserves is at its lowest since 2021, with profit margins thinning and Q2 2026 direct incurred loss ratio at a five-year high.
The Hartford Group surpasses Travelers Group as top writer in 2025 after a 3.7% book reduction by Travelers, while California accounts for over 20% of national premiums.

Profit drivers and warning signs

As reported by AM Best, its new Best’s Market Segment Report says workers’ compensation insurers generate a combined ratio of 93.2 in 2025, lower than all major long-tailed casualty lines and below the commercial lines segment overall.

The report says favorable loss development from older accident years not only supports underwriting profitability in workers’ compensation, but also exceeds the favorable development seen in any other individual property/casualty line of business. It adds that price cuts appear to be accelerating as carriers compete to retain more profitable accounts.

Christopher Graham, senior industry analyst at AM Best, says the workers’ compensation segment outpaces commercial lines in the aggregate. He says that despite continued favorable underwriting and operating results, rising medical costs and reserve adequacy concerns could begin to force significant changes for insurers.

David Blades, associate director at AM Best, says the line’s reserve position remains redundant after a decade of strength, but that the redundancy is dissipating and is now at its lowest level since 2021. He says the next 12 months should offer significant insight into whether that trend continues.

Competitive shifts and market implications

The report’s data through the second quarter of 2026 suggest profits are thinning. AM Best says the mid-year direct incurred loss ratio is the highest of the past five years, indicating bottom-line results may continue to trend unfavorably.

The competitive landscape also shifts in 2025, with The Hartford Group replacing Travelers Group as the top writer of workers’ compensation after Travelers cuts its book by 3.7%. AM Best says the market has long remained highly competitive, and that pattern continues through 2025.

California remains the largest workers’ compensation market in the country, accounting for more than 20% of all premiums and exceeding the combined total of any other three states. That concentration underscores the state’s importance to insurer strategy as underwriting margins narrow and reserve cushions decline.

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