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Signs point to more unprofitable years ahead for the workers compensation insurance industry, according to a Standard & Poor’s Corp. report released Monday.

While pricing for workers comp insurance modestly improved during the latter part of 2011, New York-based S&P said it is uncertain whether the pace of rate increases will be sustainable over the next few years and whether it will sufficiently overcome increased loss costs.“Continued high unemployment in the U.S., a sluggish economic recovery, potential for higher inflation on future claims payments, adverse reserve developments, and a volatile investment environment with historic-low investment yields could add up to many years of unprofitability for the workers compensation industry,” according to the report, “For The U.S. Property/Casualty Industry, Making Workers’ Compensation Profitable May Be Mission Impossible.”

‘Dismal’ underwriting history

S&P also called the workers comp industry’s track record of underwriting results “dismal,” with only three years of underwriting profits being earned during the past two decades. “Although many property/casualty insurers, especially those writing workers compensation, rely on investment incomes to offset underwriting losses, current historically low investment yields could also hinder such dependence going forward,” S&P said.

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