Several insurance companies released reserves in their workers' compensation business line in the second quarter as loss ratios among the top U.S. workers' compensation writers improved both year over year and sequentially.

Premium growth

Overall, U.S. workers' compensation premiums grew 8.2% year over year in the second quarter, and the industry's direct loss ratio improved by 2.0 percentage points. Direct premiums earned grew to $13.43 billion in the second quarter from $12.41 billion a year earlier, according to an S&P Global Market Intelligence analysis.

As some of the major impacts of the pandemic seemingly wind down, Piper Sandler analyst Paul Newsome said in an interview that it is hard to determine which factors are contributing to some of the insurers' results in the workers' compensation business line.

However, Newsome believes that ultimately there is likely to be a longer-term trend toward lower workers' compensation claims as the work environment continues to get safer.

Insurers release reserves

All of the top U.S. workers' compensation insurers booked direct loss ratios under 61%, and several major underwriters of the business line reported favorable reserve development in the second quarter.

Newsome noted that in general there had originally been a consensus that the pandemic would have a "much more significant negative impact" on workers' compensation, but that never quite played through and could be part of the reason why some companies are now releasing reserves.

Out of the group of top insurers, Liberty Mutual Holding Co. Inc. logged the highest loss ratio at 60.5%. During the company's second-quarter earnings call, an executive called workers' compensation line the "gift" that has been giving across most portfolios.

However, the Liberty Mutual executive warned that compensation severity is expected to rise and noted workers' compensation medical inflation is picking up as utilization rates appear to return to more normal levels.

The Travelers Cos. Inc. booked a loss ratio of 35.4% in the second quarter and had net favorable prior year development of $202 million in its business insurance line that was driven by better-than-expected loss experience in workers' compensation across a number of accident years, among other factors.

The Hartford Financial Services Group Inc. logged a second-quarter loss ratio of 44.4% and reported a net favorable $58 million property and casualty prior accident year reserve development, citing workers' compensation as the largest contributor.

Market share

Travelers, which has historically been a leader in the workers' compensation space, again had the largest market share in the second quarter with 7.2%, slightly more than Hartford's approximately 6.6%.

Among the group, Amtrust Financial Services Inc (NY), ESOP. saw the largest year-over-year growth in the second quarter at 34.0%.

* Read S&P Global Market Intelligence's workers' compensation rate recap for the second quarter. * Read more about the historic second-quarter property and casualty industry surplus erosion.