The well of redundant workers' compensation reserves is drying up.

Workers' compensation has benefited from more than a decade of declining claim frequency, favorable reserve development, and strong underwriting profitability. But market conditions are shifting.

Declining rates and premium, rising claim severity, and greater loss concentration in large claims are putting increased pressure on underwriting results, reserves, reinsurance, and capital.

Gallagher Re's new whitepaper examines these changing dynamics and their implications for insurers and reinsurers.

Key findings include:

  • Large claims are becoming more frequent, even as overall claim frequency continues to decline.
  • Medical costs are driving higher severity and are the primary contributor to large-loss severity.
  • Large losses are developing faster, with claims above $1 million substantially more reported at 24 months in Gallagher Re and Paradigm's study than in the referenced NCCI study.
  • Underlying performance is weakening as accident-year results rise and favorable prior-year reserve development wanes.
  • Reserve redundancies may be declining, with Gallagher Re estimating industry redundancy at $7.2 billion versus NCCI's $14.0 billion estimate as of the 2025 annual statement period.

While workers' compensation remains an attractive casualty line, the factors that supported performance over the past decade are fading.

Read the whitepaper for Gallagher Re's full analysis and considerations for navigating the next phase of the workers' compensation cycle.

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